Conversion of LLC to a Joint-Stock Company
The conversion of a Limited Liability Company (LLC) into a Joint-Stock Company (JSC) in Iraq is a recognized form of corporate restructuring used by companies seeking to expand ownership, attract institutional capital, or participate in regulated or large-scale commercial activities. While an LLC offers flexible management and simpler compliance requirements, the JSC structure provides a formal corporate governance framework, a transferable share system, and the ability to raise capital from multiple shareholders.
Under Iraqi law, conversion does not create a new legal entity the converted company maintains legal continuity with respect to its assets, liabilities, contracts, licenses, and regulatory approvals but adopts the corporate form and obligations applicable to JSCs.
Strategic Drivers for Conversion
Companies in Iraq typically pursue conversion to a JSC for reasons including:
- Shareholder base expansion & institutional participation: Enables admission of investors such as banks, funds, strategic partners, and industrial groups.
- Eligibility for regulated tenders & public sector contracting: Certain tenders, ministries, and state-owned entities require bidders to be JSCs.
- Preparation for capital raising or capital markets activity: The JSC structure is a prerequisite for listings and capital market instruments.
- Foreign investor participation: Conversion facilitates structured participation of foreign shareholders through share issuance, ownership rights, and dividend mechanisms.
- Corporate governance enhancement: JSCs follow formal board and audit requirements aligned with best practices.
Legal & Regulatory Basis
The conversion process is governed by the Iraqi Companies Law and implementing regulations. Additional supervisory oversight may apply for sectors such as:
- Banking & financial services
- Insurance
- Telecommunications
- Energy & utilities
- Aviation & logistics
- Infrastructure & construction
Sector regulators may require separate approvals or notifications for the converted entity to continue operations under the new form.
Procedural Steps for Conversion
The core steps include:
- Shareholder Resolution: Adoption of a formal resolution approving the conversion, capital restructuring, and governance changes.
- Capital Restructuring & Share Issuance: Transition from member quotas to registered shares, including share classes, nominal value, and ownership percentages.
- Board Composition & Governance Setup: Appointment of a board of directors and establishment of governance bodies (audit, general assembly procedures, etc.).
- Amendments to Corporate Documents: Updating the articles of association, bylaws, and statutory filings to reflect the JSC form.
- Regulatory Filings & Re-Registration: Submission to the Registrar of Companies for approval and re-registration under the new corporate form.
- Publication & Disclosure: Certain corporate announcements may be required depending on sector and regulatory scope.
Capital & Shareholding Considerations
Capital planning is a significant component of JSC conversion:
- Minimum capital thresholds for JSCs exceed those required for LLCs
- Paid-in capital must typically be demonstrated
- In-kind contributions may be permissible subject to valuation
- Share classes may be structured for investor rights coordination
- Dividend & exit mechanisms are regulated under the JSC model
These features make the structure more attractive for foreign investors and institutional shareholders.
Post-Conversion Compliance Obligations
Once converted, the company becomes subject to ongoing JSC compliance including:
- General assembly (annual & extraordinary) procedures
- Board governance & reporting requirements
- Financial audit requirements
- Disclosure & transparency obligations
- Related-party & conflict-of-interest controls
Industries Where Conversion Is Common
In Iraq, LLC-to-JSC conversions are frequent in sectors requiring scale, long-term investment, or regulatory scrutiny, such as:
- Financial services & banking
- Construction & EPC contracting
- Energy, oilfield services & engineering
- Telecommunications & ICT
- Industrial manufacturing
- Infrastructure & transportation
Benefits of Conversion
Key advantages include:
- Eligibility for larger tenders and regulated sectors
- Access to capital markets and institutional investors
- Enhanced transparency & corporate governance
- Improved valuation & exit opportunities for shareholders
- Stronger compliance credentials with regulators and partners
How Etihad Can Assist
Etihad Law advises on the end-to-end conversion process including:
- Feasibility assessment & structuring strategy
- Corporate governance & capital planning
- Shareholder documentation & resolutions
- Filing & re-registration with regulatory authorities
- Coordination with auditors, valuation experts & sector regulators
- Post-conversion compliance & board advisory