On 15 January 2013, the Libyan Ministry of Economy issued Decree No 22 of 2013 (Decree No 22) amending Decree No. 207 of 2012 (Decree No 207). By way of background, under Decree No 207 foreign investors are generally only entitled to take minority shareholdings in a company, with at least 51% of the shares required to be owned by Libyan nationals. Foreign shareholdings may be increased to 60% only with the approval of the Minister of Economy if special or technical considerations are satisfied. Decree 207 specified that these regulations must be complied with within 6 months of promulgation (i.e. by January 2013).
Under Decree No 22, an extension has been granted to joint ventures that have been established prior to Decree No 207 (that is, July 2012) allowing them to amend their share participation to comply with Decree No 207 (i.e. 49% -51%). It is stated that the extension expires when all laws and decrees relating to business activities have been reviewed. At this stage, however, no time frame has been set for commencement or completion of such a review.
The key change introduced by Decree No. 22 is the prohibition of formation of limited liability companies. Arguably, this means that the default option for a foreign investor to set up a company in Libya appears to be through forming a joint stock company (JSC). In this respect, it should be noted that under existing regulations:
- a JSC may only be established with a minimum of 10 shareholders; and
- the minimum capital required for this form of corporate structure is 1 million Libyan Dinars.
It is also important to note that rules introduced under Decree No 207 and the subsequent amendments under Decree No 22 must be read in conjunction with other legacy decrees and laws as there are currently considerable uncertainties as to the scope of application of the recent decrees and what has to be done by companies set up under various laws in order to comply with them.
We will update this Client Alert by providing additional details on those legacy issues in the near future.
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