The Law No.126 of 29/03/2019 (here below), published in the Official Gazette No 18 dated April 1, 2019, has amended the Lebanese Code of Commerce to meet local and international standards and evolutions. These amendments introduce new legal concepts resulting from the development of business in Lebanon. Hereinafter, a glimpse of the main changes and additions:
- Limited Liability Company (SARL)- Single Partner:
These amendments extended the concept of Limited Liability Company by allowing a physical person to incorporate a one-person (Single Partner) limited liability company in accordance with the following principle: “The limited liability company is set up by one or more people who only bear the losses up to the amount of their contributions.”
- Amendments concerning the Lebanese Joint Stock Company (SAL):
- Concerning the Board of Directors of the SAL, this new law provides that 1/3 of the members of the Board must Lebanese instead of the half (1/2) currently. In addition, this law allows the Chairman-General Manager to be a foreign national (work permit not required) and the Chairman-General Manager of a company can only perform this function in six companies. Regarding the cumulating of the directors’ mandate, it has been modified from six to eight (concerning physical persons).
- Concerning the General Manager of a company, he can only perform this function in three other companies. This law brings an innovation compared to our current situation: it no longer prohibits a person over 70 years old to be a director of more than two companies.
- In addition, the mandate of the Principal Auditor may no longer be renewed for more than five years.
- This law provided a separation between the chairman of the board of directors of the company and the general director. It also admitted the separation between shareholders and board members since the latter may not be shareholders (the qualifying shares having been cancelled).
- Regarding certain formalities and procedures:
- This law gives the possibility to the members of the board of directors to use electronic means within the framework of the transactions of deposit and registration of the company before the Trade Register according to a mechanism to be determined by the Minister of Justice. This innovation aims to facilitate the incorporation of companies in the Trade Register.
- This law also allows the founders of a company to recover the amounts deposited in a bank account (which represents their subscription to the capital of the company), in case the company is not established within six months the date of signature of the articles of association of the company with the notary.
- In addition, in the context of a total transparency, this law put at the expense of the members of the board of directors, an obligation which is to publish before the trade register or by an electronic way, the obligatory declarations (بيانات إلزامية ) and periodical reports and thus, after the meeting of the general meeting approving the annual accounts of the fiscal year.
- Moreover, this law also innovates by exempting a company to obtain the quitus (discharge) issued by the National Social Security Fund for the completion of any deposit or formality in connection with the yearly reports and ordinary general meetings adopting the accounts and thus, in order to facilitate the access of third parties information relating to the financial situation of the company.
- Other various modifications and new provisions:
- Regarding the transformation of a company:
Confirmation of the court’s tendency aiming to consider that the transformation of the form of a company does not entail the extinction of its moral personality and the emergence of a new one.
- Repartition between the bare ownership and the usufruct:
The legislator has also officially established and recognized the mechanism of repartition between the bare ownership and the usufruct in the shares by distributing the rights relating to each of the bare owner and the usufructuary. Thus, and without prejudice to cases of delegation and representation between bare owner and usufructuary or mutually consented repartition adopted by virtue of side written agreements notified to the Company, the attendance and vote in the Ordinary General Meetings belong to the beneficiary of the usufruct of the share; and the votes in the Extraordinary General Meeting belong to the owner of the share (bare owner).
- Regarding bankruptcy:
This law broadened the circle of responsibility of persons in the event of bankruptcy of the company, namely the members of the board of directors and the general manager and any person responsible for the management or control of the company. Thus, the responsibility of the auditor can be engaged in case of bankruptcy and the directors of the company cannot release themselves from their responsibility unless they prove that they acted as diligent and active professionals.
The same law introduces a new amendment protecting the estate of the spouse of the bankrupt in order to promote equality between men and women.
- Adoption and regulation of the Preferred Shares (article 212 of the Code) and of the Global Depositary Receipts (GDR).
- Adoption and regulation of the mergers and demergers of companies.