For foreign companies planning a lasting presence in Iraq, the choice of legal vehicle shapes almost everything that follows. It affects liability, governance, tax registration and the ability to contract with Iraqi partners. The Companies Law sets the rules for forming and running Iraqi companies. A poorly chosen structure, or one not maintained in line with the law, can lead to penalties, blocked transactions and personal exposure for managers.
Legal Framework
The Companies Law No. 21 of 1997 governs the formation, management, transformation and dissolution of companies in Iraq. It replaced the Companies Law No. 36 of 1983. It was substantially amended by Coalition Provisional Authority Order No. 64 of 2004, which opened company ownership to foreign investors.
The law is administered by the Companies Registration Department at the Ministry of Trade, often called the Registrar of Companies. It works alongside the Commercial Law, tax legislation and the Investment Law. Branches of foreign companies are not Iraqi companies and are governed by a separate regulation.
Key Points for Foreign Companies
Available Company Forms
The law distinguishes mixed companies, with state participation, from private companies. The main private forms are:
- the joint stock company;
- the limited liability company;
- the joint liability company;
- the sole proprietorship;
- the simple company.
Most foreign investors choose the limited liability company. The joint stock company is used for larger ventures or where shares may be offered to the public.
Foreign Ownership
Following the 2004 amendments, foreign persons can generally be shareholders in Iraqi companies. Sector-specific laws may still impose restrictions or licensing conditions. Investors should check these before choosing a structure, especially in regulated sectors.
Formation and Registration
A company is formed by filing a founding contract and supporting documents with the Registrar. Foreign shareholders must provide corporate documents that are legalised and translated into Arabic. The company acquires legal personality on the issue of its certificate of incorporation. Capital requirements are set by the law and its amendments and should be confirmed at the time of filing.
Governance and Management
Each company form has its own governance structure. Joint stock companies have a general assembly and a board of directors. Limited liability companies are typically run by a manager under the authority of the general assembly. Key decisions, such as amending the founding contract, require approvals and filings set by the law.
Liability of Shareholders
In joint stock and limited liability companies, shareholders’ liability is generally limited to their contribution to capital. In the joint liability company, partners are personally and jointly liable for company debts. This difference makes the choice of form a fundamental risk decision.
Accounts and Audit
Companies must keep proper accounting records and prepare annual financial statements. These must be audited by a licensed Iraqi auditor and submitted as required. Failure to file can block tax clearance and other dealings with government authorities.
Changes, Mergers and Dissolution
Capital increases, share transfers, changes of activity and mergers must follow the procedures in the law. Most require a shareholder resolution and registration with the Registrar. Dissolution and liquidation also follow a formal procedure. A company that simply stops operating remains subject to its legal obligations.
Kurdistan
Companies in Kurdistan are registered with the Kurdistan registration authority rather than the federal Registrar. The federal Companies Law is broadly applied, but procedures and practice can differ. Investors operating in both areas should plan registrations accordingly.
Practical Recommendations
- Choose the company form based on liability, governance and sector needs before preparing documents.
- Start legalising and translating foreign corporate documents early, as this often causes delay.
- Check sector-specific restrictions on foreign ownership before committing to a structure.
- Appoint a licensed Iraqi auditor and diarise annual filing obligations from the start.
- Record every change to capital, shareholders or management with the Registrar promptly.
Conclusion
The Companies Law offers foreign investors several workable structures for operating in Iraq. Choosing the right form and maintaining it properly protects shareholders and keeps the company in good standing. Early legal advice can prevent costly restructuring later.
This article provides general information only and does not constitute legal advice. For advice on company formation and corporate governance in Iraq, contact Etihad Law team.