Capital Requirements
Capital requirements are an essential element of company formation in Iraq and vary depending on the legal form of the entity and the type of commercial activities it intends to perform. At the foundational level, capital represents the financial resource contributed by shareholders or partners to fund the company’s operations and provides a measure of financial adequacy for regulatory and commercial purposes. In several sectors, capitalization levels may also influence licensing approvals, operational capabilities, and market credibility.
Legal Capital Requirements by Company Type
Under Iraqi company law, capital levels differ by legal structure:
- Limited Liability Company (LLC)
LLCs have a relatively flexible capital model and may be incorporated with lower minimum capital thresholds. Capital must be fully subscribed by the members at formation. - Joint-Stock Company (JSC)
JSCs require higher minimum capital and more rigid compliance obligations. Part of the capital must be paid in upon formation, with the remainder paid according to statutory rules. Public JSCs and banking/financial JSCs are subject to stricter capitalization standards. - Branch of a Foreign Company
Branches do not have formal minimum capital requirements but must demonstrate financial capacity through parent guarantees, internal funding, or banking arrangements to operate in Iraq.
Capital requirements may also vary depending on whether the business operates in regulated sectors such as banking, insurance, telecom, aviation, financial services, or oil and gas services where prudential or licensing-based capital requirements are imposed separately by sectoral authorities.
Core Capital Considerations for Investors
Investors typically evaluate:
- Minimum statutory capital required for registration
- Paid-in vs. authorized capital treatment
- Cash vs. in-kind capital contributions, including equipment or technology
- Valuation of in-kind contributions (subject to independent verification where applicable)
- Capital increase or reduction procedures during restructuring phases
- Proof of capital for tax, regulatory, and operational purposes
- Impact on foreign investors, particularly where parent funding is required
Capital adequacy becomes particularly relevant for projects dependent on government contracting, importation of goods, or large-scale operational requirements.
Practical Implications of Capital Planning
Proper capital planning directly influences regulatory and commercial outcomes, including:
- Faster company registration and licensing
- Improved credibility with suppliers, banks and regulators
- Compliance with sector-specific approvals
- Availability of working capital for Iraq-based operations
- Audit and reporting consistency for tax filings
- Banking onboarding and account operations
- Alignment with future expansion, M&A or restructuring strategies
Undercapitalization can result in delayed approvals, compliance issues, or inability to meet contract or tender qualifications particularly in oilfield services, EPC contracting, logistics, and industrial sectors.
How Etihad Can Assist
Etihad Law supports investors in Iraq by providing:
- Guidance on capital thresholds based on company type and sector
- Advisory on paid-in capital documentation and structuring
- Support with capital registration filings with relevant authorities
- Assistance during capital increases or reductions for restructuring
- Coordination with tax advisors and auditors for capital verification and reporting