Corporate delegation of authority becomes particularly important when a shareholder leaves an Iraqi company. The departure can expose an Iraqi company to an immediate banking problem: the person leaving may still hold signing rights, electronic access or authority under a power of attorney. Resolving that problem requires separate attention to ownership, management and the bank’s account mandate. A completed share transfer does not, by itself, provide a complete record of who may operate the account.
In Federal Iraq, the Companies Law No. 21 of 1997, as amended, governs the company’s organs and management powers. The Civil Code No. 40 of 1951 is relevant to agency arrangements, while the Anti-Money Laundering and Counter-Terrorism Financing Law No. 39 of 2015 informs the bank’s identification and due diligence obligations. These frameworks interact, but each addresses a different part of the transition.
Ownership and signing authority
The first question is which capacities the departing person actually holds. A shareholder may also be the managing director, an account signatory, a guarantor or an attorney. The documents ending one role may leave another role unresolved. The company should therefore review the share-transfer evidence, management appointment, powers of attorney and account-opening documents together.
This distinction has practical consequences. Removing a person from an internal ownership schedule does not prove that the legal transfer has been completed. Equally, a shareholder who never held management or banking authority does not acquire a right to withdraw company funds merely because an exit payment is due. The company remains the account holder, and its funds must be applied through lawful corporate decisions.
Corporate decisions supporting the new mandate
Under the Companies Law, the body competent to appoint and determine the powers of a managing director depends on the company’s legal form. In a joint-stock company, the board has the relevant role; in other company forms, the general assembly or applicable owner procedure must be considered. A direction from an individual shareholder should not be treated as a substitute for the required decision.
The resulting resolution should identify the persons authorised to operate each account, whether signatures are individual or joint, and any transaction limits. If borrowing, guarantees or security are involved, the underlying corporate approval must also cover those commitments. A general authority to make routine payments may be insufficient for a materially different financing transaction.
Etihad’s corporate services can support the preparation of a consistent authority record, particularly where the shareholder’s departure coincides with a management replacement or amendment to the constitution.
Implementing changes with the bank
A resolution should be presented through the bank’s recognised update process, accompanied by the documents it requires to verify the company and the new signatories. The company should establish when the bank has actually implemented the change. Sending a request and receiving confirmation of the revised mandate are different stages.
The transition commonly requires attention to:
- Specimen signatures and the authorised signatory list.
- Electronic banking users, tokens and approval permissions.
- Outstanding cheques and payment instructions.
- Direct debits, payroll files and recurring payments.
- Facilities, guarantees and security documents linked to the departing person.
Access should be withdrawn or replaced through authorised procedures. Sharing a former signatory’s credentials does not establish lawful authority and can undermine the evidence needed to resolve a disputed payment. Where continuity is urgent, the company should ask the bank what temporary arrangement it can recognise on the available corporate documents.
Updating ownership information
The bank may require updated information on direct shareholders and ultimate beneficial owners. This is separate from changing account signatories: the person entitled to sign is not necessarily the person who ultimately owns or controls the customer.
Where an overseas holding structure is involved, the evidence may need to extend beyond the Iraqi company’s immediate shareholder register. Ownership charts, foreign corporate extracts and supporting identity documents should tell the same story as the completed transaction. A proposed transfer should not be presented as an effective change before the relevant legal steps have occurred.
Exit payments and continuing liabilities
An agreed exit price does not determine whether the company itself may fund it. The parties should distinguish a purchase by another shareholder from a payment made by the company, and assess the legal basis for any distribution, repayment or asset transfer. The Companies Law restricts misuse of ownership powers to harm the company, other owners or creditors.
Personal guarantees also require separate treatment. The departing shareholder should not assume that removal from the mandate releases an existing guarantee. Release depends on the guarantee terms and the creditor’s legally effective agreement. Conversely, retaining a guarantee does not automatically preserve authority to instruct the account.
Disputed instructions and completion evidence
If competing parties send contradictory instructions, the company should identify the valid authority record and communicate the dispute accurately. A shareholder complaint does not automatically freeze the account, and an internal resolution does not override a court order or the bank’s legal obligations. Urgent protection requires assessment of the available legal process and supporting evidence.
Etihad Law Firm’s banking and finance practice can coordinate the corporate decisions, mandate amendments and treatment of outstanding facilities. A completed transition should leave a clear record of who may act, when the bank recognised the change and which obligations continue after the shareholder’s exit.