Commentary | Law Offices of Naoum Farah

Middle East Regional Insight

| Lebanon Commentary

Law Offices of Naoum Farah (“LONF”) was founded in 1975 and has grown dynamically. It is an independent and well-established law firm in Beirut serving a niche of clients by offering a wide range of customized legal services. LONF is reputed for its professionalism and excellence in the quality of its service topped with a timely follow-up, highest dedication, insight and expertise in addressing complex legal issues. It is considered as one of the leading multidisciplinary law firms in Lebanon.

LONF has developed worldwide distinguished relationships with key firms in all of the major jurisdictions. Its close collaboration with firms established in the Middle East enables it to provide widespread and bespoke legal services for local and international clients throughout the region.

LONF is ranked by the Legal 500 “editorial and ranking” among the first leading firms in dispute resolution and Commercial, Corporate and M&A fields.

LONF’s notable professional and long-standing relationships with prominent law firms in the Arab countries especially in Syria, Iraq, Jordan and the Gulf qualifies it significantly to represent and advise the most important international enterprises that will be shortly involved in the reconstruction venture of Syria and Iraq. Thanks to its geographical position, Lebanon has always been a gate to the hinterland. This makes of Beirut, its capital, an ideal and strategic hub through which the future reconstruction projects will start and transit. In this endeavor, Lebanon’s privileged location is solidly backed up by his advantageous taxation system and his solid and resilient banking system – and banking secrecy – which has survived all the political and security turmoil and surrounding blows.

MEMBERS

Naoum Farah, Founder and Managing Partner: He was the adviser of the late President Elect of Lebanon Mr. Bashir Gemayel and the former President Amine Gemayel; he was the former Secretary General of the Association for the Constitution and Liberty in Lebanon, and he is the President and co-founder of “Memoria” association (collects and archives documents referencing the Lebanese contemporary war). He is a member of the International Arbitration Institute (Paris)- IAI and the International Bar Association (IBA). He acted repeatedly as member of arbitral ad hoc tribunals in domestic arbitration and counseled on ad hoc arbitrations.

LONF groups (10) members, all of whom provide legal services in Arabic, English and French. They have extensive experience in dispute resolution, corporate and commercial and are well versed in drafting contracts and providing diversified legal opinions.

OVERVIEW: LEBANON

The business and economic environment in Lebanon became more challenging in 2019. Factors such as the armed conflict in Syria, continued turmoil in the region, mass influx of Syrian refugees to Lebanon, high fiscal deficit and high level of public debt have heavily affected the Lebanese economy, its infrastructure and social services. Unprecedented cross-sectarian demonstrations have gripped Lebanon since 17 October 2019, demanding a complete overhaul of a political system deemed incompetent and corrupt. The anti-government protests that have paralysed the country for more than three weeks and have led to the resignation of the cabinet, a key demand of the protesters requesting the formation of a new cabinet of technocrats, anticipated parliamentary elections and the recovery of looted state funds.

The government is more than ever facing many challenges on various levels, predominantly political, economic and social, which are urging Lebanon to implement and apply a tangible policy of dissociation from regional conflicts. Reforms have to be introduced as a pre-requisite for Lebanon to be able to benefit from the offerings of an ‘international conference in support of Lebanon Development and Reforms’ (CEDRE) hosted in Paris in 2018. Nearly 50 states and international organizations participated in CEDRE, as well as representatives from the private sector and civil society. The objective of CEDRE was to support the development and the strengthening of the Lebanese economy as part of a comprehensive plan for reform and infrastructure investments. In particular, targeting national debt is of primary concern: Lebanon is one of the world’s most indebted countries, with public debt estimated at 141% of GDP in 2018, according to credit ratings agency Moody’s.

In parallel, in October 2017, the government had requested for McKinsey to conduct a study of a future for Lebanon’s Economy under the title Lebanon Economic Vision.

In order to meet the commitments made at CEDRE and in line with the McKinsey plan to stimulate Lebanon’s stagnant economy, the House of Deputies ratified the 2019 state budget, which contains a string of austerity measures, including cuts to public spending and tax hikes designed to slash the deficit, a key demand of the international community and donors.

The Budget Law adopted a range of measures aiming to fight tax evasion by establishing a new exhaustive definition of tax evasion (article 57) which was introduced among the definitions of the Code of Tax Procedures (Law Nº 44/2008) and instituting an obligation upon Municipalities to conduct field surveys of businesses and professionals in order to compile tax information and transmit it to the Ministry of Finances.

Under international pressure and popular demands backed by academics and intellectuals, Lebanon is urged to enact radical and adequate reforms by adopting key economic, social financial, fiscal and administrative reforms to bolster its weak economy and to fight corruption. Such reforms are deemed a prerequisite to unlocking over $11bn in grants and soft loans pledged by international donors at CEDRE, including the World Bank, which pledged $4bn in soft loans to Lebanon, making it the biggest single donor at the conference.

The government is also urged to continue on working to implement the two major CEDRE commitments it has made: the fiscal and the energy sector reforms.

Lebanon has indeed promised to reduce its deficit-to-GDP ratio by at least 1 percentage point per year for five years, and to make structural reforms in the government and sectors including electricity. In this respect, the government committed to forming the National Electricity Regulatory Authority. The body mandated by Law 462/2002 was never formed.

On the other hand, the House of Deputies enacted three Laws to create an ecosystem where companies and startups can prosper, develop and attract foreign investments:

    1. Law Nº 81/2018 on electronic transactions and personal data, covering, among others, the legal requirements on electronic documents and evidence and the electronic commerce.

 

2. A legislative effort was also carried out to modernize the corporate law, which has led to the enactment of:

 

      • Law Nº 85/2018 which updated the Decree N. 46/83 on off shore companies: this law has ratified the establishment of a single shareholder off-shore company, being either an individual person or a legal entity. The single shareholder manages the company or appoints one or more directors.

 

      • Law Nº 126/2019, the main innovation that came into force on 1/7/2019, reformed and amended a large portion of the Lebanese code of commerce as follows:

 

        • Some formalities were reformed, including electronic means for the registration of a company. Such electronic formalities will be mandatory two years after the entry into force of law (1/7/2019).

 

        • Several amendments for joint stock companies (SAL) were enacted, including decreasing the minimum number of Lebanese members in the board of directors to one third instead of the majority. The law also allowed splitting the role of the chairperson and the general manager, while allowing the appointment of directors from outside the pool of shareholders.

 

        • The law adopted regulations pertaining to preferred shares and Global Depositary Receipts (GDR) in addition to detailed regulations concerning mergers and demergers.

 

      • In addition, the Law Nº 126/2019 requires the declaration to the commercial register of beneficial owners of the companies.
    • Furthermore, the Law Nº 126/2019 introduced the ability for an individual person to establish a single partner limited liability company.

5 November 2019