This article considers how a corporate reorganisation in Iraq can be structured without interrupting the rights and arrangements on which an operating business depends. Moving a business into a different entity, combining companies or changing a group’s ownership may be commercially sensible, but the proposed structure must work for the counterparties, authorities and employees affected by it.
The relevant federal framework includes the Companies Law No. 21 of 1997, as amended; the Iraqi Civil Code No. 40 of 1951; the Income Tax Law No. 113 of 1982, as amended; and the Competition and Antitrust Law No. 14 of 2010. The Labour Law No. 37 of 2015 and the Workers Retirement and Social Security Law No. 18 of 2023 require separate attention where operations or personnel move. Investment-licensed projects also require review under the Investment Law No. 13 of 2006, as amended. Regional operations in Kurdistan Region need their own assessment.
Defining what will change legally
A reorganisation should begin with a comparison of the current business and the proposed structure. The review should address three separate questions:
- Which entity holds each operating right? Identify the employer, owner of equipment, licence holder, customer contracting party and borrower. A shareholder chart alone may overlook an essential asset or permission held elsewhere in the group.
- What legal mechanism will implement the change? A share transfer generally leaves the operating company in place, an asset transfer moves selected assets, and a statutory merger follows its own procedure. The steps and consequences should be assessed for the chosen route.
- Which arrangements depend on the existing structure? Identify guarantees, shared premises, systems and personnel supplied by another entity. Record whether each arrangement can continue and what documentation or consent would be needed if it changes.
Early corporate structuring advice in Iraq should connect these findings to an implementation plan. This allows management to compare the cost and timing of different structures before committing to one.
Testing licences against the proposed structure
Licences should be reviewed individually for their holder, activity, location, expiry and conditions concerning ownership or control. A licence issued to one group company should not be treated as available to another without examining the applicable rules and obtaining any required approval. Even where the licensed company remains unchanged, a change in ownership or management may trigger a consent or notification requirement.
For an investment-licensed project, the project documents and the competent investment commission’s requirements should be checked before implementing the reorganisation. Any restriction on transferring the project, its assets or associated rights needs to be resolved through the relevant procedure. A corporate filing does not establish that a separate licensing authority has accepted the new arrangements.
Preserving contractual performance
The contract review should distinguish restrictions on assignment from restrictions on a change of control. It should also identify guarantees, exclusivity rights and provisions allowing termination if a particular group relationship ends. Where obligations move to a new company, a carefully documented replacement or assumption arrangement may be needed with the counterparty.
Transition services require equally clear treatment. The transferring company may continue supplying premises, staff, procurement support or software while the receiving company becomes operational. The agreement should specify the service period, charges, access permissions and responsibility for failures. Commercial contract advice in Iraq should be coordinated with the reorganisation timetable so that essential services do not depend on informal group cooperation.
Securing lender consent and releasing security
Financing documents may restrict disposals, mergers, additional borrowing or changes in ownership. A transaction within the same group can still fall within those restrictions. The review should cover both the borrower and any guarantor whose assets, ownership or business will change.
A lender’s consent to the reorganisation does not necessarily release an existing guarantee or transfer security to a replacement asset. Those consequences should be expressly addressed in the financing documents and any required registrations. Payment arrangements should also be tested with the relevant banks before the proposed closing date, particularly where international funding must pass through several entities.
Reconciling tax and employee obligations
An internal transfer should be examined for its own tax consequences. Common ownership does not, by itself, establish an exemption or permit balances to disappear from the local accounts. The parties should reconcile intercompany debt, accrued income and the records supporting asset values with their tax advisers.
Employee rights require separate treatment. Under the federal Labour Law, specified transfers of an enterprise can carry employer obligations to the successor, with continuing responsibility for the previous employer in relation to relevant earlier obligations. The implementation plan should therefore address payroll records, accrued rights and social security files instead of assuming that a corporate transfer resets service history.
Completing the reorganisation in a controlled sequence
The implementation plan should show how the business will continue operating while individual steps are completed:
- Set the order of legally dependent actions. If a licence must remain with the existing entity until a replacement is issued, the timetable and payment arrangements should respect that restriction. Interim operations need their own lawful basis.
- Define completion evidence for each step. Signed documents, official confirmations and records of delivery serve different purposes. Identify who must obtain each item and who will check that it covers the transaction actually implemented.
- Reconcile the position after completion. Record the holder of every material right, the liabilities remaining with each entity and any outstanding releases or notifications. Assign responsibility and deadlines for unfinished work.
Illustrative example. A group proposes to transfer a warehouse business to a new subsidiary. The equipment can be identified, but the premises lease, operating permission and bank guarantee remain with the existing company. Transferring the equipment first could leave the new subsidiary unable to use it as intended. The group should examine the requirements for each remaining arrangement and coordinate the transfer date with those outcomes. If some steps must occur later, any temporary services or occupation arrangement should identify the responsible entity, payment terms and permitted activities. Completion should be judged against that operating position, not only the signed transfer document.
Conclusion & how Etihad Law Firm can help
A workable reorganisation preserves the business’s ability to operate throughout the transition. Its success depends on aligning corporate steps with the specific contracts, licences and financing arrangements affected by each change.
Etihad Law Firm assists local and international groups with Iraqi reorganisations, approval planning and transaction documents. Our tax advisory services in Iraq can be coordinated with the corporate review to identify financial consequences before the structure is implemented.