An Iraqi subsidiary has its own legal personality, corporate bodies and obligations. Its relationship with a foreign parent or investor must therefore be implemented through lawful ownership, corporate approvals and enforceable agreements. Group management practice alone does not determine who may bind the Iraqi company.
Corporate governance in Iraq becomes particularly important where strategic decisions are made abroad but contracts, staff and banking are managed locally. The documents should make that division workable while preserving the responsibilities imposed on the Iraqi company’s shareholders and management.
Define what parent control means legally
The term subsidiary is often used broadly within international groups. Before incorporation, the investor should establish whether the proposed relationship arises from share ownership, contractual approval rights or another lawful control arrangement.
For federal Iraqi limited liability and joint-stock companies, the general statutory ownership position requires Iraqi participation of at least 51% of capital. An investor should not assume that an ordinary federal subsidiary may be wholly foreign-owned without an applicable legal basis supporting that result.
Any special investment or sector framework should be assessed on its own terms. The agreed governance structure must also be consistent with the ownership and beneficial ownership information disclosed to the relevant authorities.
Use the correct company body for each decision
The Companies Law allocates powers among the general assembly, the board where the company form requires one, and the managing director. A group organisation chart does not replace this allocation.
For an Iraqi joint-stock company, the board appoints the managing director and determines the relevant powers and remuneration. In other company forms, the appropriate general assembly or owner process must be used. The distinction matters when foreign group documents refer to a local board that does not have the statutory role assumed by the template.
The incorporation and governance documents should identify which body approves the business plan, appoints management and authorises matters reserved by law. Parent approval may be an additional contractual requirement, but the necessary Iraqi corporate decision must still occur.
Record the managing director’s actual authority
The managing director manages the company’s business within the powers and instructions established by the appointing body. The appointment should therefore do more than identify a name and job title.
It should address signing contracts, operating bank accounts, dealing with public authorities, hiring staff and appointing representatives. Borrowing, guarantees, security and significant asset transactions deserve separate attention because their approval requirements and consequences differ from routine purchasing.
A clear mandate should also identify financial limits, any joint-signature requirements and the process for seeking additional approval. Where a bank or counterparty relies on formal authority documents, those documents must be consistent with the intended arrangement.
Connect reserved matters to a usable approval process
Investors commonly reserve decisions concerning major expenditure, new borrowing, related-party contracts and changes to the business. These protections are useful only if the company can identify when they apply and obtain approval through a valid process.
The documents should specify:
- The decisions requiring shareholder or other corporate approval.
- Any additional consent promised under a shareholders agreement.
- The evidence needed before management signs the transaction.
- The person responsible for recording and retaining approval.
- The route for resolving a refusal or disagreement.
A private consent requirement should not be assumed to invalidate every transaction entered without it. The legal consequences depend on the company’s powers, the manager’s authority, the relevant documents and the counterparty’s position. This is why internal controls and formal authority must be designed together.
Document services provided by the parent
The parent may supply technology, management support, equipment or personnel. Those arrangements should be documented between the correct legal entities, identifying the service, price, payment terms and allocation of responsibilities.
An intercompany invoice should correspond to an actual agreement and supporting performance records. The existence of common ownership does not remove the need to establish why the Iraqi company incurred the expense or what it received.
The tax and accounting treatment should be considered alongside the contract. Etihad’s tax practice in Iraq can support the review of intercompany charges and funding so that the legal structure and financial records describe the same arrangements.
Preserve local accountability for group decisions
A managing director should not treat an instruction from the parent as sufficient justification for any action. Company powers must be exercised within the law, the constitution and the valid instructions of the appointing body.
Iraqi company law also restricts the use of ownership powers to harm the company or other shareholders for private benefit, or to prejudice creditors through improper capital withdrawal or asset transfers. A group transaction therefore requires attention to the Iraqi company’s own position.
Where a proposed arrangement creates a conflict of interest, the relevant disclosure and approval rules should be followed. The record should identify the interested parties and explain the commercial basis for the transaction, rather than merely referring to group policy.
Keep financial support separate from equity control
Money provided by the parent may be capital, debt or payment for a defined obligation. The legal character should be agreed before funds are transferred. A loan does not automatically give the lender shareholder voting rights, and an additional payment does not automatically increase registered capital.
If the investor expects funding to convert into shares, the necessary corporate approvals, ownership eligibility and capital procedures must be incorporated into the arrangement. The documents should explain what happens if conversion cannot lawfully be completed.
Guarantees also require separate treatment. A shareholder’s limited liability does not remove obligations it has independently accepted under a guarantee or other contract.
Build continuity into the governance documents
The company should be able to continue operating when a group executive changes role, a local manager leaves or the shareholders disagree. Valid replacement procedures, accessible records and carefully framed delegations reduce dependence on one individual.
Etihad’s corporate governance services connect the incorporation record with shareholder arrangements, managerial authority and continuing corporate decisions. This allows the group to exercise its lawful rights through documents that work in Iraqi operations.
Effective parent control is evidenced by valid decisions and consistent records. It should leave the Iraqi subsidiary with a clear legal identity, an accountable management structure and the authority required to perform its own obligations.