On 13 October 2022, the Libyan Minister of Economy issued Decree No. 944 of 2022 (“Decree No. 944”), which has repealed the prior regulatory regime applicable to the so-called “Commercial Law Regime” for doing business in Libya and provides some significant advantages for non-Libyan entities. For example, it raises the permissible level of foreign ownership in joint companies to 75-89% (from 49% previously) and gives foreigners the right to establish limited liability companies in Libya.
Article 375 of Law No. 23 of 2010 on Commercial Activity (the Commercial Law) authorises the Minister of Economy to issue regulatory decrees to determine the permissible levels of foreign ownership and the permissible areas of activity for non-Libyan legal and natural persons in the Libyan economy. To date, these matters were regulated by Minister of Economy Decree No. 207 of 2012 (as amended by Minister of Economy Decree No. 22 of 2013), both of which have been repealed and replaced as of 13 October 2022 by Decree No. 944.
Decree No. 944 regulates the participation of non-Libyan entities in activities under the Commercial Law only (i.e., the commercial licence regime). Therefore, it does not affect the rights and obligations of foreign or Libyan investors established under Investment Promotion Law No. 9 of 2010 (i.e., the investment licence regime). Further, the provisions of Decree No. 944 do not apply to entities that were established before its date of issuance.
Decree No. 944: summary of significant provisions
Set out below is a summary of the most significant provisions of Decree No. 944:
- It creates new forms of entities authorized to operate under the Commercial Law, including temporary branches, international cooperation companies, and limited liability joint companies.
- It increases the permissible maximum level of non-Libyan ownership in joint companies to 75%, and potentially as high as 89% if specifically approved by the Minister of Economy (up from 49% previously).
- It establishes a “Black List” of foreign companies that have violated Libyan law and, consequently, are barred from conducting further business in Libya.
- It prohibits non-Libyans from conducting non-profit activities in Libya.
- It obligates branches and joint companies to submit annual reports to the Libyan Company Register.
- It clarifies that non-Libyan persons enjoy the same rights as Libyan persons except for the right to own real estate.
- It states that branches may conduct business in, at maximum, two areas of the permitted activities that are enumerated in the Decree.
- It states that the maximum duration of a temporary branch is 18 months, and that such a branch may not be a party to more than three contracts or memorandums of understanding.
- It permits the conversion of branches to joint companies.
- It increases the level of minimum capital required to open a branch to 2,000,000 LYD from LYD 250,000.
- It adds new areas of activities that are open to branches of foreign companies, including air transport and international cooperation.
- It establishes a committee charged with assessing penalties and fines for violations of Decree No. 944.
- It states that the operation of Decree No. 944 will be reviewed in December of each year.
Compared to the prior Decree No. 207 regime (now repealed), Decree No. 944 provides some significant advantages for non-Libyan entities. For example, it raises the permissible level of foreign ownership in joint companies to 75-89% (from 49% previously) and gives foreigners the right to establish limited liability companies in Libya. In addition, Decree No. 944 establishes new types of legal entities, such as “temporary branches” and “international cooperation company,” which may be of interest to non-Libyan entities.
As a cautionary note, Itkan Law believes that certain aspects of Decree No. 944 may have exceeded the authority delegated to the Minister of Economy by Article 375 of the Commercial Law – which only authorizes the Minister to regulate levels of permissible foreign ownership and to determine the commercial activities open to non-Libyan entities acting through the entities established in the Commercial Law. Accordingly, clients should be aware that the provisions of Decree No. 944 establishing a new type of legal entity (i.e., international cooperation companies) and may be subject to challenge before the Libyan administrative courts and to the issuance of an adverse legal opinion by the Law Department of the Ministry of Justice.