Company director duties in Iraq require careful attention when oversight is exercised from abroad. Overseas supervision of an Iraqi subsidiary often relies on reports, approval emails and periodic meetings. These arrangements can support effective control, but they do not by themselves establish that the subsidiary’s decisions have been lawfully taken. The legal position depends on the decision-maker’s actual role, the company’s form and the quality of the information available when approval was given.
The Companies Law No. 21 of 1997, as amended, provides the principal governance framework in Federal Iraq. It allocates powers between company organs and imposes duties concerning lawful management and conflicts of interest. The Civil Code No. 40 of 1951 is also relevant where representatives act under powers of attorney or other agency arrangements.
Identifying the director’s actual capacity
A foreign individual may be a director of the overseas parent, a member of an Iraqi joint-stock company’s board, a shareholder representative or an adviser to local management. These roles should not be treated as interchangeable. Appointment to the parent’s board does not automatically confer authority to sign for the Iraqi subsidiary.
The subsidiary’s legal form must also be considered. A management committee used by an Iraqi limited liability company should not simply be assumed to possess the statutory powers of a joint-stock company’s board. The company’s constitution, appointment records and delegations should identify the competent decision-maker for the matter under review.
Where one person holds several roles, the documents should show the capacity in which that person acts. This is particularly important when the individual represents a shareholder at a general assembly while also supervising the subsidiary’s management.
Information supporting a valid decision
The Companies Law requires directors and managers, within the applicable provisions, to manage company interests properly and lawfully with the required standard of care. An approval record should therefore do more than confirm that the parent has no objection. It should identify the proposed commitment, the subsidiary’s exposure and the material issues considered.
For a significant contract, useful information may include the counterparty, payment obligations, guarantees, termination exposure, licensing position and any existing dispute. Financial information should distinguish an approved budget from cash actually available to meet the obligation. Where a report contains assumptions or unresolved issues, those limitations should be visible to the approving body.
Etihad’s corporate governance practice can support the local legal analysis accompanying an overseas approval request. This helps ensure that group decision-makers assess the Iraqi transaction on its actual legal terms.
Meetings and representation
An overseas discussion should be distinguished from a legally constituted meeting of the Iraqi company. The Companies Law contains requirements concerning invitations, representation, quorum, voting and meeting location. A video conference or email exchange should not automatically be treated as satisfying those requirements for every company decision.
Where a shareholder acts through a representative, the authority should cover attendance, discussion and voting as required. The representative must also be able to act on the matters listed in the agenda. A general commercial authorisation may not resolve every issue concerning representation in a corporate meeting.
The appropriate procedure should be settled in advance. This avoids a situation in which the commercial decision has been approved overseas but the Iraqi company lacks the resolution needed by the Registrar, a bank or a counterparty.
Conflicts involving the wider group
Foreign directors may be asked to approve transactions with the parent or another group company. The fact that the entities share ownership does not remove the need to assess conflicts and the subsidiary’s own position. The Companies Law addresses direct and indirect interests in company transactions and requires the applicable disclosure and approval procedures to be respected.
The record should explain the relationship, the material terms and the basis for concluding that the transaction is acceptable for the subsidiary. Where a director or manager has a relevant interest, the company should apply the statutory participation and approval rules rather than rely solely on a general group conflicts policy.
Accounting and tax treatment also require attention. A properly approved service agreement does not, by itself, establish that every charge is deductible or adequately supported. The commercial evidence should remain consistent with the financial reporting.
Supervision after approval
Approval is often conditional on a price limit, licence, guarantee release or other requirement. The company should assign responsibility for verifying those conditions and reporting material changes. If the contract changes significantly during negotiation, the original approval may no longer cover the commitment ultimately proposed.
An effective supervision record should address:
- Conditions that must be satisfied before signature or performance.
- Matters that require renewed approval.
- Reporting of defaults, disputes and regulatory notices.
- Responsibility for recording and implementing the decision.
Delegation should make those responsibilities clear without suggesting that the approving body has transferred away every duty of supervision. Equally, local managers need sufficient lawful authority to perform ordinary operations within the approved limits.
A defensible oversight record
Minutes, supporting papers and implementation reports should be retained together. A later dispute may turn on what was known at the time, which interests were disclosed and whether the final transaction remained within the approval given.
Etihad Law Firm can coordinate governance advice with its dispute resolution team where the quality of the decision record may become material to a claim. Informed oversight depends on a clear legal role, adequate information and a traceable connection between approval and the action ultimately taken in Iraq.