Structuring a Business Presence in Libya

The rapid pace of change in Libya creates significant opportunities, challenges and complex decisions for economic operators and investors. To benefit from these opportunities it is necessary to follow the fast changes of the Libyan law and in particular the requirements regarding the a business presence of a foreign company in Libya.
Until November 2006 foreign companies could have a presence in Libya in the form of:
- Branch offices,
- Joint ventures (in the form of a join-stock company with 51% Libyan participation unless the investment is made under the umbrella of the Investment Law No.5, and its special provisions)
- Contractual Joint ventures
On November 4. 2006, the General Peoples Committee (Prime Minister) issued a Decision n 443/2006 which calls into question, among others, the ability of foreign companies to establish contractual joint venture in order to execute contracts in Libya.
According to the Decision of the General Peoples Committee n443/2006 of 4 November 2006 any foreigners may undertake certain projects and activities defined in article 2 of the Decision No. 443 only by means of creating a company in the form of a Mushtaraka. The Mushtaraka is special form of Join Stock Company
The article 2 of the Decision No. 443, inter alia, includes all civil works activities.
Legal status of a Mushtaraka is defined (i) in the Libyan Commercial Code of 1954 and (ii) in the Decision of the GPC No. 171 / 1374 (2006) implementing regulations of Law No. 21 / 1369 (2001) on the exercise of commercial activities
Pursuant to Articles 18, paragraph 2, 53 and 54 of the GPC Decision 1374/171 a joint venture, in the mandatory form of a Mushtaraka can be formed between Libyan and foreign:
-- Legal entities (companies)
-- natural persons (individuals)
-- Legal entities and natural persons
If the joint venture in the form of Mushtaraka includes natural persons, the number of these natural persons should be at least ten (10) (ten being a minimum), furthermore none of these natural persons should have more than ten per cent (10%) of the share capital.
Under Article 54 of the Decision No. 1374/171 the participation of Libyan partner in the capital of a Mushtaraka should be not less than 35% and this minimum participation of the local partner must be maintained throughout the duration of the company.
In case of a joint venture between a foreign company and Libyan natural persons. since the Libyan shareholders must have 35% of the shares and since a Libyan shareholder cannot possess more than 10% of a Libyan company, it follows that the number of the Libyan natural person should be at least four (4).
The article 3 of the Decision No. 443 stipulates however that exceptions to this obligation to set up a Joint Stock company under Libyan law with a Libyan partner, mentioned in Article 1 and 3 of this Decision could be made for the execution of certain projects, given their site, specifications or requirements for execution.
In practice, only foreign companies engaged in construction and infrastructure projects may authorised by Secretariat of the General Peoples Committee to set up a branch of a foreign company in Libya, and these authorisation remain exceptional.
ABOUT THE AUTHOR: Dr. D. Ben Abderrahmane
Ben Abderrahmane and Partners is an independent international law firm specialising in the Maghrib and the Middle East. The firm is one of the very first independent international law firms specialising almost exclusively in the laws of the Maghrib countries (particularly Algeria, Libya and Morocco) and the Middle East (especially Saudi Arabia and the Gulf States) as well as in the law of economic relations with those countries.