Midterm (Comapany & Types) Flashcards
What is Company?
A company is a binding contract between two or more persons.
Each person shall subscribe to the economic project by a quota of the capital or service in order to share the resulting profit or loss.
The Companies Law recognizes two types of companies:
private sector companies, in which the public sector does not participate or its participation does not exceed 25% of the capital; and
mixed companies, jointly established by private persons and public sector entities with the public sector entity holding at least 25% of the share capital.
Joint companies
Joint companies only take the form of limited liability companies “LLC” or joint stock companies.
Private companies
Private companies may take the form of an LLC, joint stock companies, general partnerships, individual enterprises, or simple companies.
 Types of Companies (1/4)
1) Joint-Stock Company
A joint stock company is a company whose capital is divided into shares and the liability of shareholders is limited to the par value of the shares.
A joint stock company must have at least five shareholders.
Joint-Stock Company can be mixed or private.
The Capital
Joint stock companies must have a minimum capital of IQD 2,000,000. The clerk of the Commercial Register may order the founders to increase the capital to an amount sufficient for the corporate purpose.
Cash contributions must be paid into an account in a bank authorized.
The capital of a joint stock company is divided into shares of equal value. At least some part of the shares must be offered for public subscription.
Types of Companies (2/4) limited liability company
Limited liability company (mixed or private) shall be formed by no more than 25 natural or juridical persons, who will subscribe to its
shares and will be responsible for the company’s debts in so far as the nominal value of the shares to which they subscribed.
An LLC may be established by a single shareholder.
The law prohibits any public subscription of shares in an LLC.
The Capital
The nominal value of each share is (1)one IQD. The Law prohibits the issue of shares with a higher or lower value.
The share capital must be fully paid when the company is established. Cash contributions must be paid into an account with a bank authorized to operate in Iraq
Types of Companies (3/4) Sole ownership enterprise
The Sole Owner Enterprise
The sole owner enterprise is a company formed by one person, who owns the one quota in it and assumes personal and unlimited responsibility for all of its obligations.
The minimal capital to form a sole owner enterprise is (50,000) IQD
Types of companies (4/4) Partnerships “simple company”
The simple company shall consist of several partners, who are not less than two and not more than five and who have contributed shares to the capital. In such a company, one or more may contribute services, and others funds.
The simple company’s contract must be notarized by the public notary. A copy of the contract must be deposited with the Registrar
The contract shall specify the share of each partner in the simple company’s capital. Otherwise, the shares shall be considered equal.
Membership in the Company
A juridical or natural person, foreign or domestic, has the right to acquire membership in the companies stipulated in the law as founder, shareholder, or partner, unless such person is banned from such membership under the law or court order.
Requirements of a Company Establishment
The founders shall prepare a contract for the company. The contract shall contain at a minimum:
1) The company’s name, with the word “mixed” added if it is a mixed sector company.
2) The company’s head office, which must be in Iraq.
3) The purposes for which the company is established and the general nature of the business to be transacted.
4) The company’s capital divided into shares.
5) The method of distributing profits and losses.
6) The number of elected members on the board of directors.
7) The names of the founders and their nationalities, professions, permanent addresses, and the number of shares they own as well as their percentage of the capital.
8) The founders shall deposit the amounts of the company’s capital specified with one or more banks authorized to operate in Iraq.
Establishment of a Joint-Stock Company
In addition to the earlier requirements, the members (founders) must form a “Founders Committee” to undertake the following duties:
a) Conclude a contract and a feasibility study of the business.
b) Follow up on the procedures for establishing the company with the Registrar of Companies.
c) Open a joint account in the name of the Committee with a bank authorized to operate in Iraq.
d) Obtain a license for the project and conclude the necessary contracts for its establishment.
