This article considers the legal issues a German industrial group faces when it exits Iraq by selling its machinery and premises while continuing to own the technology used in production and while customer warranties remain open. An asset sale does not automatically end the group’s Iraqi obligations, and the exit documents must show what transfers, what survives and which consents are needed.
The framework includes the Companies Law No. 21 of 1997, which governs corporate approvals, capital changes and liquidation; the Iraqi Civil Code No. 40 of 1951 on sale, assignment and assumption of obligations; the Labour Law No. 37 of 2015 and the Retirement and Social Security for Workers Law No. 18 of 2023; the Income Tax Law No. 113 of 1982, under which tax clearance is commonly required; the Competition and Antitrust Law No. 14 of 2010; and the Copyright Protection Law No. 3 of 1971, Patents and Industrial Designs Law No. 65 of 1970 and Trademark Law No. 21 of 1957 for technology and brands.
Separating the asset transfer from release of obligations
The transaction may involve shares, individual assets or a wider business transfer, and each structure affects contracts, employees, licences and liabilities differently. They should not be treated as interchangeable routes to the same outcome.
Under the Civil Code, a debtor is not released simply because a buyer promises to assume its obligations; transfer of a debt generally requires the creditor’s acceptance. The seller therefore remains exposed to customers unless they agree to a novation or a new contract. The sale agreement should distinguish the cost allocation between buyer and seller from any legally effective release by the customer.
Defining the technology rights that survive
The buyer needs a precise statement of what it may continue to use. Know-how, drawings, software, patents, trademarks and third-party licences should each be dealt with separately. Owning machinery does not confer an unrestricted right to copy its embedded software or manufacture products using designs owned by the seller’s group.
The technology schedule should identify:
- Permitted products, facilities and uses after completion.
- Access to technical files, updates and specialist service tools.
- Whether subcontractors and future operators may use the material.
- Restrictions on transfer, copying and disclosure.
- The duration of each licence and the consequences of termination.
Where the seller does not own the relevant rights, third-party consent or an agreed alternative is needed. A broad warranty in the sale agreement cannot expand another licensor’s grant. Trademark licences should be recorded where registration is required to rely on them against third parties.
Continuity for existing customers
Outstanding warranties, maintenance contracts and supply commitments should be mapped to the equipment concerned. The parties should agree who receives claims after completion and who may approve repairs. Spare stock, technical records and service personnel also need a transition plan, including a lawful basis for transferring customer information.
Public customers may need formal approval before accepting a new contractor or service provider, and their practical acceptance of the buyer is not a legal release of the original supplier. Customer communications should accurately describe the new arrangement and any obligations the German group retains.
Employees and social security
In an asset sale, employees do not simply follow the assets as a matter of contract, and the position under the Labour Law on transfer of an enterprise should be assessed for the specific transaction. Many exits are structured through termination with full settlement of statutory entitlements followed by re-employment by the buyer. Whatever route is chosen, salaries, end-of-service entitlements and social security contributions must be settled and documented to avoid continuing claims against the seller.
Approvals, tax clearance and creditors
Operating permissions, industrial approvals and premises rights should be checked against the transaction structure, as some require notification, amendment or a fresh application. Merger control under the Competition Law should be assessed in light of the Competition and Antitrust Council’s more active approach. Corporate approvals and registration formalities must be completed before closing.
Tax clearance is frequently needed for deregistration, release of guarantees and transfer of certain assets, and outstanding audits can delay closure by months. Where machinery is pledged or subject to third-party ownership, a release or consent must be obtained rather than relying on a general statement that assets are sold free of claims.
Closing the local entity
If the group intends to liquidate its Iraqi company or close its branch after the sale, the Companies Law liquidation process requires creditor notices, settlement of liabilities and final registration steps. Obligations that survive the asset sale, such as warranties retained by the seller, must be dealt with before liquidation can be completed.
Restrictive covenants and post-exit competition
Buyers of Iraqi industrial businesses often ask the seller not to compete in Iraq for a period after completion, while sellers may want the buyer to stay within an agreed product range or territory under the technology licence. Such restrictions should be reasonable in scope, duration and geography, and they should be assessed under the Competition and Antitrust Law, which prohibits agreements that restrict competition in the Iraqi market. Non-compete obligations tied to a genuine transfer of goodwill are more defensible than broad restrictions with no clear link to the transaction. The technology licence and the sale agreement should be drafted consistently so that the restrictions in one do not conflict with the rights granted in the other.
Conclusion & how Etihad Law Firm can help
A well-managed exit separates what is sold from what is retained and closes each obligation properly. Providing Iraq market exit legal services for German businesses, Etihad Law Firm structures asset and share sales, drafts technology and transition arrangements, handles employee settlements and tax clearance, and manages liquidation formalities, so that German sellers can conclude their Iraqi involvement with clarity.