This article examines how US groups using matrix management can resolve conflicting instructions from regional sales, finance and the registered manager of an Iraqi subsidiary. A regional sales executive may approve a discount, finance may block the related payment, and the registered manager in Baghdad may receive both instructions at once. The legal question is who can bind the Iraqi company and which corporate process governs the decision. A matrix reporting chart organises business functions, but it does not replace authority under Iraqi company law.
The governing framework is the Companies Law No. 21 of 1997, which sets out the powers of the manager, board and general assembly and the manager’s liability; the Iraqi Civil Code No. 40 of 1951, which governs agency, apparent authority and ratification; the Notaries Public Law No. 33 of 1998 for powers of attorney; and the Labour Law No. 37 of 2015 for internal employment consequences. The Companies Registration Directorate maintains the official record of the subsidiary’s manager and corporate changes.
Starting with the Iraqi company’s decision structure
The subsidiary’s articles of association, registered manager appointment and properly adopted resolutions should be reviewed first. The Companies Law determines which decisions belong to the manager and which require approval from the shareholders or board. These rules apply regardless of how the US group organises reporting lines internally.
A review of corporate governance in Iraq should distinguish the parent’s commercial expectations from the subsidiary’s legal obligations. A regional officer may shape strategy without having power to sign the subsidiary’s contracts. Conversely, a registered manager who disregards valid shareholder instructions may face internal responsibility, even though the external effect of a signed contract is a separate question.
Mapping instructions to the acts they authorise
An authority schedule should list decisions, approval thresholds and the person who executes each resulting act. Approval of a commercial proposal should be separated from authority to sign a contract, issue a guarantee or acknowledge a debt. A regional email should never leave counterparties unsure whether they have a binding commitment or a proposal pending local approval.
The schedule should address:
- Pricing, discounts and credit terms for customers.
- Supplier commitments and expenditure approval.
- Banking instructions, borrowing and guarantees.
- Employee decisions and settlement of disputes.
- Matters requiring formal corporate action or registration.
Bank mandates and powers of attorney should match the schedule. A restriction that exists only in an internal approval system may not have the same effect as one written into the relevant authority document, and quotations and order confirmations should use consistent wording about who has approved them.
Apparent authority and the counterparty’s view
Under the Civil Code, a company may be bound by a person who appears to have authority where the counterparty reasonably relied on that appearance. If US regional executives routinely negotiate and confirm deals directly with Iraqi customers, a court may treat them as having apparent authority, even if group policy says otherwise. Clear communication to customers about who signs, and consistent practice, reduces this risk.
Creating a lawful route for conflicting instructions
The governance framework should specify who resolves a conflict and what the manager must do in the meantime. Urgent action within existing powers should remain possible, while unauthorised commitments are prevented. The issue, the competing instructions and the final decision should be recorded through the proper corporate channel.
The manager should never be required to carry out an instruction that breaches Iraqi law or the company’s obligations. A review of commercial obligations in Iraq may show that withholding payment, refusing delivery or changing a customer’s terms would breach an existing contract. An internal disagreement does not excuse that breach as against the counterparty, and the subsidiary will bear the consequences.
Preserving evidence of authority and later approval
Approvals and executed documents should be kept together. If a commitment is made outside the intended process, the analysis should consider the signatory’s actual powers, the counterparty’s knowledge and any later conduct amounting to ratification under the Civil Code. An internal policy breach does not automatically make the contract ineffective.
Corrective decisions should reflect what actually happened. Minutes must not be backdated to suggest that approval preceded the transaction. Where the company adopts a commitment or renegotiates it, the decision should be documented by the authorised body and the failed control updated.
Keeping the structure current as personnel change
Departures, regional reorganisations and new financial limits should trigger review of mandates, powers of attorney and registered records. Revoked powers should be cancelled formally before the notary, and access to email and approval systems should be withdrawn so that former staff cannot continue issuing apparent instructions.
Conclusion & how Etihad Law Firm can help
Matrix management works in Iraq when it operates through the subsidiary’s legal decision-making structure rather than alongside it. Clear authority schedules and consistent documents protect both the company and its manager.
As Iraq corporate legal counsel for American companies, Etihad Law Firm reviews articles, management appointments and bank mandates, drafts authority schedules and powers of attorney, and advises when commitments are disputed, helping US groups align their reporting structures with Iraqi company law.