Trading and business in the land between the Tigris and the Euphrates is thousands of years old. The laws for setting up a business in modern-day Iraq are subject to a developing legal framework and business environment consisting of established laws and administrative practices. The primary law regulating establishing companies in Iraq is the Companies Law No. 21 of 1997, as amended by the Coalition Provisional Authority’s Order No. 64 of 2004 (the Companies Law) and its associated regulations (Regulations).

Under the Companies Law, all economic projects must take the form of a company

The Companies Law provides a detailed framework for entities and individuals, both Iraqi and foreign, to conduct lawfully commercial activities in Iraq. Similar to other jurisdictions, the applicable laws require individuals and entities conducting business in Iraq to be legally registered in the country.

Under the Companies Law, all economic projects must take the form of a company. The Companies Law provides for a range of incorporation options for setting up a business in Iraq. Options available include a joint stock, joint liability or simple company, or a sole owner enterprise. However, the most common options adopted by non-Iraqi foreign investors doing business in Iraq are:

• Representative Trade Office (RTO)
• Foreign branch office (branch)
• Limited liability company (LLC)

Anyone who carries out business in Iraq without first registering and obtaining a licence from the Registrar of Companies at the Ministry of Trade in Iraq (Registrar of Companies) is in breach of Iraqi law and subject to a fine, with the amount dependent on the severity of the violation. Similar fines are also enforced against any person carrying on business in the name of a branch of a foreign company or economic establishment without obtaining the requisite licence. Failure to rectify the violation of the Companies Law may also lead the authorities to take other measures.

Representative Trade Office

An RTO is the easiest way to register a commercial entity in Iraq. However, an RTO is only permitted to engage in business ‘development activities’ so as to secure work in Iraq. Once an RTO either secures a contract with the government of Iraq on behalf of its foreign parent company or begins to engage in commercial activities, it must convert itself to one of the other recognised commercial entities in Iraq.

Approval to open an RTO must be obtained from the Registrar of Companies, which reviews all applications submitted by foreign companies for completeness. A fee is payable. Three scenarios may occur after turning in an application:

• An application may be deemed to be incomplete. In this instance, any fee that has been submitted will be returned to the applicant. An explanation of why it is incomplete will be given and the application may be resubmitted once it has been completed.
• An application is completed and accepted. In this case, the Registrar of Companies will provide a signed checklist to the applicant showing that all required documentation has been received. On approval, the Registrar of Companies will issue the applicant with a registration licence. This has a permanent and unique identification number.

Each LLC shareholder’s liability is limited to an amount equal to their capital contribution

An application is complete, but is rejected for some reason, in which case the applicant is notified in writing, with the reason for the rejection. The applicant then has the right to petition the Minister of Trade for a review of the application within 30 days of the date of the rejection. A review is carried out within 30 days of the submission date of the appeal. If the minister upholds the rejection, the applicant has the right to appeal this outcome at the competent court of law within 30 days of the decision.

Foreign Branch Office

To establish a branch in Iraq, the regulations require the foreign company to have a contract in place with the government of Iraq (or be a subcontractor of a company that has a contract with the government). Moreover, the regulations require that such a contract be of both a minimum duration and amount to enable the foreign company to register in Iraq.

Forming a foreign branch office has the benefit of allowing the parent company to use its brand name

Forming a foreign branch office has the benefit of allowing the foreign parent company to use its brand name in Iraq, rather than being required to conform to strict Iraqi entity naming guidelines. However, a branch does not limit its parent company’s potential liability exposure to the amount of the capital contribution by the shareholders, unlike an LLC.

Setting up a branch requires the applicant to file an application with the Registrar of Companies using the appropriate ministry form. The following supporting documents are also required:

• Authenticated copies of the applicant company’s constitutional documents
• Authenticated copy of the power of attorney appointing the branch office manager
• Authenticated copy of the applicant company’s accounts for the previous year
• Authenticated copy of a power of attorney appointing a locally licensed lawyer to process the foreign branch office registration with the local authorities
• Authenticated copy of the branch manager appointment letter
• Authenticated and legalised undertaking signed by the applicant company to bear legal and financial responsibilities of the foreign branch office in Iraq
• A letter of support from the contracting government party addressed to the Ministry of Trade in Iraq to allow the registration of the foreign branch office.

The registration of a branch, similar to all non-Iraqi applications, is subject to obtaining a no objection letter from the Ministry of Interior. The no objection letter is addressed to the Registrar of Companies, which, pursuant to obtaining the letter, will complete the registration and issue the relevant registration certificates. 

Following the registration of the branch, the locally registered branch office is required to fulfil a number of criteria, from entering into a lease agreement for office space within a commercially designated area to appointing a locally licensed accountant and lawyer. 

Branches are required to display their full names and office addresses in Iraq on all papers and documents they issue. 

Limited Liability Company

Under Iraqi law, the general rule is that a company is a contract binding two or more persons, and an LLC is established between a minimum of two and a maximum of 25 shareholders. However, the Companies Law does provide an exception to the general rule and permits a single person, natural or judicial, whether foreign or local, to form an LLC.

As with most common law jurisdictions, each LLC shareholder’s liability is limited to an amount equal to their capital contribution in the company. There is no requirement under Iraqi law to distribute equally the shares between multiple shareholders, although each shareholder should hold shares proportional to their capital contribution in the company. 

An LLC must have as its foundation document a Memorandum of Association (MoA) between its shareholders. In the case of an LLC formed by one founder, the Companies Law requires the founder to prepare a statement, which is deemed to be, and subject to the same requirements as, the MoA. The Companies Law requires the following items to be included in the MoA:

• The name of the proposed company along with the form of the company, which in this case is limited liability company
• The location of the proposed company’s head office, which must be in Iraq
• The purpose of the proposed company and the nature of its business activities
• The proposed company’s capital, including the number of shares and the value of each share
• The names of the founders along with their nationalities, professions, permanent addresses, and the number of shares and percentage of capital each owns.

The MoA must indicate the company’s capital. The Companies Law has minimum share capital requirements that must be paid in full with shares in equal, indivisible and nominal values of one Iraqi dinar.

Establishing an LLC in Iraq requires an applicant to complete a particular registration process and to satisfy certain requirements. According to the applicable law, including the Companies Law and certain ministerial instructions, an applicant must:

• Obtain approval from the Baghdad Chamber of Commerce for the proposed name of the LLC
• Deposit the share capital of the proposed LLC in an Iraqi bank; obtain a receipt letter for the deposit; submit the receipt to the Ministry of Trade; and obtain a deposit letter from the Ministry of Trade
• Obtain no objection letters from the tax authority and the Ministry of Interior addressed to the Registrar of Companies
• Submit the following documents to the Registrar of Companies: the MoA, duly signed by the founder(s) of the proposed LLC; and the completed application to create an LLC, on the form prescribed by the Registrar of Companies.

If the founder is a company, the application must include the following information in respect of the founding company:

• Resolution of the shareholders/board of directors of the founding company resolving to establish the LLC in Iraq
• Copy of the founder’s constitutional documents
• Copy of the title deed or lease agreement of the proposed LLC’s head office in Iraq
• Letter issued by the Iraqi bank that holds the share capital declaring that the share capital has been received and deposited at that bank
• Tax clearance letter in respect of the founder(s)
• Power of attorney issued by the founder(s) appointing a local lawyer to undertake the procedure of establishing the LLC.

All foreign documents must be in Arabic or translated into Arabic by translators officially recognised by the Iraqi authorities. They must then be legalised by a notary public in the country of origin, certified by the Ministry of Foreign Affairs and consularised by the Iraqi Embassy or consulate.

On submission of all of the required documentation, the Companies Law requires the Registrar of Companies to review and either accept or reject the application within 10 days of receipt of the completed application. 

If the Registrar of Companies rejects the application, then the Companies Law requires it to state in writing the provisions of the law violated and the reasons giving rise to each violation. The applicant has the right to contest the rejection before the minister of trade within 30 days from the date of notification of such rejection. The Companies Law provides for a review of the appeal by the minister of trade within 30 days of its submission. 

If the minister of trade also rejects the application, then the applicant has the right to appeal the minister’s decision before a court of competent jurisdiction within 30 days from the date of notification of the rejection.