Starting a business in Lebanon

A limited liability company is governed by Legislative Decree No. 35 of August 5, 1967 and is generally referred to in Lebanon as S.A.R.L. (this is the French equivalent of L.L.C.). An S.A.R.L. is founded by at least three partners with a maximum of 20 persons. As the name suggests, the partners of the company have limited liability, limited to the amount of their contribution to the company.

In addition, partners are not considered traders and are therefore not subject to the regulations applicable to traders, including the provisions of the Lebanese Commercial Code. The subject matter of an S.A.R.L may not be associated with insurance, business, supplies, organized air freight, banking or finance.

An S.A.R.L must have a minimum capital of five million Lebanese pounds (approx. USD 3,333), although it should be noted that contributions can be made in kind or in cash. Shares in limited liability companies (referred to as "parts") are not freely tradable. Although the transfer of parts between partners is generally free of charge, the transfer of parts to non-partners requires the prior consent of the partners representing three quarters of the company's share capital. An S.A.R.L may not issue "negotiable instruments" such as shares or bonds and may not require public subscription of its share capital.

The shareholders of the company meet at general meetings. In contrast to JSCs, S.A.R.L does not have a board of directors. Management is delegated to one or more managers, who may or may not be partners.

In general, there are no restrictions on foreign participation in limited liability companies, with the exception of certain regulated sectors where there are specific requirements on the shareholding of Lebanese nationals. The company must necessarily appoint an attorney with annual retainer fees.

A Lebanese joint stock company consists of shareholders who are only liable to the extent of their contribution and subscribe to negotiable instruments known as "shares". Lebanese joint stock companies must necessarily have Lebanese nationality and must under all circumstances have their registered office in Lebanon.

At least three shareholders are required to establish a JSC in Lebanon. The minimum initial capital is LBP 30,000,000 (approx. USD 20,000). This can be in cash and / or in the form of contributions in kind. The Inkind-contributions must be paid in full at the time of incorporation. However, full payment of the cash capital at the time of incorporation is not required. In fact, the law provides that only a quarter of the cash capital can be paid in accordance with the company's articles of association.

The company may be open to public subscription and issue financial instruments or bonds. The shareholders first meet at a "General Meeting" and elect a Board of Directors. The number of board members must be between three and twelve. All board members must hold a minimum number of shares in the company (in accordance with the company's articles of association) and the majority must be Lebanese nationals. The Board of Directors elects a Chairman who represents the company and executes the decisions of the Board of Directors. By law, the chairman is also necessarily the managing director of the company.

There are no restrictions on foreign participation in public limited companies, with the exception of certain restricted sectors (mainly public sector, media, commercial agency, real estate and other specially regulated industries).

There are no restrictions on foreign participation in public limited companies, with the exception of certain restricted sectors (mainly public sector, media, commercial agency, real estate and other specially regulated industries).

A holding company is a special type of corporation that has a limited purpose and benefits from special tax treatment and other provisions.

The object of the holding company is strictly limited to the following:

1. Purchase and subscription of shares in Lebanese or foreign joint stock companies or limited liability companies.
2. Management of the companies mentioned.
3. Lending money to companies in which it holds at least 20% of the shares or granting such companies to third parties. The holding company may take out loans from banks and issue bonds for this purpose, provided that the total value of the bonds issued does not exceed five times its capital and reserves.
4. Holding and leasing patents, concessions and trademarks.
5. Acquisition of movable assets or real estate required for the holding company's business activities.

The holding company has the same characteristics as described under stock corporations, with the following exceptions:

• The holding company is exempt from the requirement to have Lebanese nationals or companies on its board of directors, noting that the non-Lebanese chairman of a holding company is exempt from the work permit requirements.
• The minimum capital requirement is the same as for public limited companies, but may be denominated in a foreign currency. The company name must always be followed by the term "Holding S.A.L".
• The holding company enjoys tax advantages: it is exempt from income tax on its profits and on the distribution of dividends. However, the holding company is still subject to other tax regulations, including a flat tax (which varies depending on the company's capital and reserves) of a maximum of LBP 5,000,000 per year.
• Similar to public limited companies, the holding company must appoint an auditor and a lawyer with annual reserve fees. The holding company is exempt from the obligation to appoint an additional auditor.

An offshore company is a special type of joint stock company (issued by Decree No. 46 of June 24, 1983, amended by Law No. 19 of September 5, 2008) that is to be incorporated in Lebanon but may only operate in the Lebanese Free State of Zones and/or outside the Lebanese territory.

The object of the offshore company is strictly limited to the following:

1. Negotiating and signing contracts and agreements related to operations and transactions conducted outside the Lebanese territory and using assets located abroad or in the free customs area.
2. To manage from Lebanon business and corporate activities carried out exclusively outside Lebanon; to export professional, administrative and regular services as well as computer services and programs of all kinds to companies based outside Lebanon at the request of these companies.
3. Concluding foreign or multi-part commercial transactions outside Lebanon. For this purpose, offshore companies can negotiate, sign contracts, ship goods, issue invoices for business and transactions outside Lebanon or to/from free customs territories in Lebanon. This includes the use of facilities available in the free customs territories of Lebanon for the storage of imported goods for re-export.
4. to take over maritime transportation business activities.
5. Own actions, shares, bonds and partnerships in foreign non-resident companies and corporations; grant loans to non-resident corporations in which offshore companies hold more than 20% of their capital.
6. To own and/or benefit from rights attributable to agencies of materials and goods, and to represent foreign companies in foreign markets.
7. Open representative offices and offices abroad.
8. Construction, investment, management and ownership of all economic projects with the exception of prohibited transactions (see below).
9. To open credits and loans to finance the above transactions and activities from banks and financial companies based in Lebanon or abroad.
10. rent office space in Lebanon and own real estate needed for their activities, provided that the law on real estate ownership by foreigners in Lebanon is complied with.

Offshore companies are prohibited from carrying out any type of insurance business, transactions and services of banks, financial companies and all companies under the control of the Lebanese Central Bank. In addition, they are prohibited from carrying out commercial activities in Lebanon other than those mentioned above and from deriving profits, benefits or income from movable or immovable assets in Lebanon (with the exception of income from interest on bank deposits and Lebanese treasury bills). Finally, offshore companies are not allowed to provide services to Lebanese resident companies.

The offshore company has the same characteristics as joint stock companies, with the following exceptions:

• The board of directors can be entirely composed of non-Lebanese. The non-Lebanese chairman of the company and all foreign employees are exempt from the work permit, provided that the company's "total assets" exceed LBP
  1 billion. Decree 7861 of March 24, 2012 defines what is meant by the term "balance sheet total" the balance sheet total. Thus, the above exemption applies to the year following the financial year in which the LBP 1 billion threshold was reached.
• The minimum capital requirement is the same as for public limited companies, but may be denominated in foreign currency. The offshore enjoys tax advantages and is subject to an annual flat tax of LBP 1 million.
• According to Article 7 of Law 19/2008, salaries and benefits paid to employees of offshore companies operating abroad are exempt from income tax. In this context, the companies concerned are obliged to declare the salaries of all their employees, including those employed abroad.
• The offshore company must appoint an auditor. However, it is exempt from the obligation to appoint an additional auditor. The appointment of a lawyer is mandatory if the capital exceeds LBP 50 million.

In order for a foreign trading company to operate in Lebanon, it must register as a branch or representative office.

According to the law, a Lebanese branch of a foreign company must have the same object as the parent company. In addition, it is authorized to conduct regular commercial activities or own local business units.

If the head office is a joint stock company, a limited liability company or a partnership, the branch office must first be registered with the Ministry of Economy and Trade.

In contrast to a regular branch office, a representative office (Representative Office, Liaison Office, Scientific Office) may not engage in any commercial activities, but must limit itself to observing the market and production opportunities. A representative office may therefore not engage in any commercial activities in Lebanon.

In the absence of commercial activities, the representative office is also not subject to taxation. However, taxes and social security contributions for employees must be withheld and paid within the legal deadlines. After registering the representative office, the office manager receives the residence permit, which in turn is a prerequisite for the work permit.