“This resolution gives very good privileges to foreign partners and foreign companies”: Dr Mohammed Tumi

Tripoli, 23 May:

Last week, the Libyan Ministry of Economy passed a new decree adjusting the areas of activities and the percentage . . .[restrict]that foreign investors could own in Libyan companies. Libya Herald invited Dr Mohammed Tumi, of Tumi Law Firm, to make some comments on this new decree. The following were his comments:

Resolution no. 103/2012, issued by the Minister of Economy, concerning the participation of foreigners in Joint Venture companies, Branches and Representative offices, from a legal point of view, gives very good privileges to foreign partners and foreign companies who wish to conduct business in Libya.

The privileges can be summarized in the following points:

1. This resolution gives the right to local and foreign partners to establish Limited Liabilities companies with a capital LD 50,000.
2. Article 3 clearly stipulates that the minimum participation is 35 percent and the maximum for a foreigner is 65 percent. On the other hand, for certain reasons, related to the nature of the work to be carried out, the Minister of Economy is authorised to give permission to the foreign partner to participate up to 80 percent. Moreover, the participation on the Board of Directors, has to be in accordance with the percentage of the share ownership.
3. Article 8 regarding the opening of the Branch Office, has raised the capital for establishing the Branch to a minimum of LD 250,000.-
4. Article 9 has enlarged and added more fields of participation for branches of foreign companies.

In general, this resolution is very well balanced from a business interest point of view. In other words, this resolution has opened the business doors for both Libyans and foreigners on very just and fair grounds and the conditions are less conservative. The capital required for all JV, BO and Rep Office, is quite acceptable for both local and foreign parties.

This resolution will attract foreign companies to conduct business in very fair and just legal environment, and will increase newcomers in the coming future. By comparison, this new resolution is much better regulated than the previous one, because it lifted the restriction on the services to be rendered in the oil sector, by JV companies. The old Law required 100 shareholders of the Libyan company in order to be able to get into JV with a foreign company to provide and render the oil services. This is not valid anymore.

In conclusion, resolution 103/2012 after due revision, proves to be very well balanced, except the hereunder following reservations:

1.  I highly recommend that foreigners should participate in the retail and wholesale trade;
2. I also recommend that foreigners should participate by forming JVs with nationals in catering business;
3. I recommend that also foreigners should participate in the form of JV in legal and financial audit services. Generally speaking, I would like to see foreign participation in the form of JV in the services sector, because we still need some experience in the above said activities.

We hope that we have highlighted the main points regarding the above resolution.

Dr Mohammed A. Tumi is Managing Partner at Tumi Law firm, one of the leading law firms in Libya. For full contact details kindly visit: www.tumilawfirm.com [/restrict]