Civil Law.

The Lebanese legal framework offers a variety of legal entities tailored to meet the needs of the investors. Amongst those, 8 primary legal entities that would serve as vehicles to conduct commercial activities in Lebanon:

– General partnership (“GP”).

– Limited partnership (“LP”).

– Partnership limited by shares (“PLS”).

– Limited liability company (“LLC”).

– Joint stock company (“JSC”).

– Branch of foreign company (“Branch”).

– Holding company (“Holding”).

– Offshore company (“Offshore”).

In addition, representative office (“REP”) and civil company may serve as vehicles with a limited spectrum of business activities.

Non-domestic entities may operate through joint ventures in Lebanon or enter into any contractual relationship, without incorporating an entity or acquiring equity into already existing legal entities.

Branches, civil companies, GPs, and LPs do not require any specific capital. On the other hand, LLCs, JSCs, Holdings and Offshores are subject to specific capital requirement:

• LLC: LBP /5,000,000/ (approximately USD 57)¹
• JSC: LBP /30,000,000/ (approximately USD 337)
• Holding: LBP /30,000,000/ (approximately USD 337)
• Offshore: LBP /30,000,000/ (approximately USD 337)

Footnote(s):

¹ The current exchange rate for Lebanese pounds to United States Dollars is set as per BDL platform at LBP /89,500/.

In order to be legally existing and operational within the Lebanese legal framework, all types of vehicles in Lebanon require the filing of certain documentation before the competent authorities, and departments:

The most prevalent entities would include:

• Branch.
• REP.
• LLC.
• JSC.

However, it is worth noting that, recently, there was an increase in the formation of LLCs and JSCs.

Operation and management of LLCs and JSCs are as follows:

1) LLC

Management of a LLC may be entrusted to 1 or more managers. There is no obligation for managers to be partners, but they must be natural persons. Managers are appointed for a limited or an unlimited term by the articles of association or by any subsequent deeds or general assembly resolutions. There are no restrictions on the nationality of the manager, but a residing foreign manager should obtain work and residency permits from the relevant authorities.

Decision-making within a LLC is subject to the provisions set forth in the Lebanese Code of Commerce along with its amendments, the latest dated April 2019 (“CC”) and the articles of association. Generally, decisions are taken either by (i) the manager(s) or (ii) the general assembly of partners.

• The manager(s) is, in principle, entrusted with all the powers to take decisions regarding the overall management of the LLC, unless otherwise granted to general assembly of partners.
• The general assembly of partners decides on all matters reserved to the latter by law or the articles of association.

2) JSC

The management of a JSC is entrusted to a board of directors (“BoD”) formed by a minimum of 3 and a maximum of 12 members, who may be natural persons or legal entities. After the latest amendment to the CC in 2019, it is not mandatory for a person to hold shares in the JSC to be director. The BoD may elect from amongst its members a chairman and a general manager, who both must be natural persons, to serve for the entire term of the BoD, unless they opted to appoint 1 person to serve as a chairman and general manager.

In case the 2 positions are separated, then the chairman of the board of directors shall have the power of general supervision over the operation of the JSC without interfering in its day-to-day business activities. On the other hand, the general manager shall have all powers to represent the JSC before third parties, implement the decisions of the BoD, and conduct the day-to-day business activities.

Moreover, the chairman/general manager or the general manager (in case the 2 positions are separated), may propose to the BoD the appointment of 1 or more deputy general manager(s) from outside the BoD, provided they are natural persons.

Decision-making within a JSC is subject to the provisions set forth in both the CC and the company’s articles of association. Generally, decisions are taken either by (i) the BoD, (ii) chairman/general manager (or the general manager in case the two positions are separated) or (iii) the general assembly of shareholders:

• The BoD decides on all matters relating to the overall management of the JSC, which do not fall within the powers of the general assembly of the shareholders. The BoD holds also the right to delegate specific powers to the chairman/general manager and other officers.
• The chairman/general manager (or the general manager in case in case the two positions are separated) is empowered by law to take decisions in certain matters which are considered to be part of the daily business activities of the JSC.
• The general assembly of the shareholders decides on all matters reserved to the latter by law or the articles of association.

There are basically no restrictions on foreign management or ownership of equity participation in legal entities in Lebanon except where otherwise stated under specific laws. However, the below considerations should be taken into account:

1) Considerations based on the legal structure of the LLC and JSC (most used entities)

– LLC

• Number of partners may range from 1 to 20, or up to 30 in case of inheritance, who may be Lebanese or foreign natural or legal entities.
• All partners may be Lebanese or foreign natural or legal entities.
• Management is entrusted to 1 or more managers provided they are natural persons.
• There are no restrictions on the nationality of managers. However, foreign managers residing in Lebanon should obtain work and residency permits.

– JSC

• Minimum number of shareholders is 3 who may be Lebanese or foreign natural or legal entities.
• Management is entrusted to a BoD formed by a minimum of 3 and a maximum of 12 members, who may be natural or legal entities, shareholders or non-shareholders.
• The chairman and the general manager are elected from amongst the members of the BoD and must be natural entities.
• 1/3 of the members of the BoD should be Lebanese unless otherwise stipulated in certain laws.
• Any foreigner may serve as chairman and/or general manager provided the latter holds a valid work and residency permits.

2) Considerations based on the purpose of the legal entity

– Acquisition of realty by foreign nationals

LLCs and JSCs whose shares/parts are not entirely held by Lebanese natural persons or fully owned by Lebanese companies, and whose articles of association do not prohibit the transfers of shares/parts to non-Lebanese natural or legal entities, are considered to be as foreign entities under the real estate legislative decree No. 11614/1969, and are prohibited from acquiring any property in Lebanon without a license issued by the Council of Ministers, unless the acquisition involves less than 3,000 square meters of land.

– Commercial representation

Except for foreign companies established before 12 February 1957 as commercial representatives in Lebanon, and foreign companies established in countries where Lebanese persons are entitled to act as commercial representatives, LLCs or JSCs seeking to act as commercial representative in Lebanon must meet the following criteria:

• The majority of partners and authorised signatory of the LLC must be Lebanese nationals and the majority of the capital held must be Lebanese nationals.
• The majority of the capital of the JSC must be owned by Lebanese nationals, also must be Lebanese nationals (i) 2/3 of the BoD members, (ii) chairman/general manager, (iii) deputy general manager, and (iv) any delegated person for management duties.

– Media

All the shares in a JSC which purpose is to invest in the media and television sector must be held by Lebanese nationals or Lebanese companies.

– Aviation

Both the chairman and the majority of the members of the BoD of a JSC incorporated in Lebanon and willing to perform certain aviation activities must be Lebanese nationals.

– Financial institutions

At least 1/3 of the shares of financial institutions, financial brokerage institutions, and leasing companies must be held by Lebanese nationals or Lebanese companies. It is worth noting that there is no restriction on foreign ownership in Lebanese banks.

– Exploitation of public utilities

At least 1/3 of the capital of a JSC which purpose is the exploitation of public utilities should be formed of nominal shares owned by Lebanese shareholders. Such shares may only be transferred to Lebanese shareholders and all transfers in violation of this provision shall be considered null and void.

– Shipping agency activities

50% of the capital of JSCs and 51% of the capital of LLCs carrying out shipping agency activities must be held by Lebanese persons.

In principle, there are no limitations on expanding business activities in Lebanon. The Lebanese legal framework offers several options, such as:

• Investing in existing companies.
• Participating in joint ventures.
• Entering into any type of agreements (e.g. commercial representation agreements, agency agreements, etc.).

It is worth noting that depending on the opted option, certain rules would need to be observed.

Despite the absence of a formal and mandatory governance code in Lebanon, many efforts were deployed throughout the years to incorporate corporate governance rules at the level of privately owned companies.

These efforts started in the mid-2000s, leading to the publication of “The Lebanese Code of Corporate Governance” in 2006, setting out governance guidelines for Lebanese companies (“Code”). The Code emphasizes amongst others on shareholders’ rights, such as:

• Right to secure, reliable, and accurate records of ownership.
• Right to information in a timely manner and on a regular basis.
• Right to the free transferability of shares subject to reasonable restrictions.
• Right to due convocation to the meetings.
• Right to place items on the agenda.
• Right to a timely convocation.
• Right to question the submitted company’s accounts and reports.
• Right to equitable treatment
• Right to minority shareholders with respect to board composition.

The Code also tackles matters relating to the structure, responsibility, and prerogatives of the BoD, more specifically, the fiduciary and various duties of BoD members, the monitoring of the BoD functions and accountability to shareholders, the remuneration of the BoD members, and the relationship of the BoD with other stakeholders.

The Code shed lights on the importance of internal and external audits and gives special attention to family-owned businesses.

The latest amendments to CC in April 2019 marked advancement in promoting good governance practices within private companies. It introduced several guidelines aimed at enhancing corporate governance standards. Notably, it restricts the renewal of the auditor’s mandate to a maximum of 5 years, ensuring periodic review and accountability, it introduces measures to ensure a clear separation between the chairmanship of the BoD and the executive management of the company. It also encourages diversity at the level of the BoD allowing the introduction of independent BoD members.

At the level of the banking sector, and according to Banque du Liban (“BDL“) Basic Decision No. 9382/2006, all Lebanese banks must adopt their own corporate governance guides including but not limited to (i) an administrative organizational chart (ii)  the approach adopted by the bank to implement Corporate Governance principles (iii) the BoD size, role, responsibility and composition, (iv) criteria adopted to compute the compensation of the BoD and senior management’s members, (v) nature and work charter of each of the BoD committees (vi) rules adopted to assess the performance of both the senior management and the BoD regarding their compliance with good governance procedures (vii) succession plan to be adopted for selecting the BoD and senior management’s members (viii) a summary of the code of conduct (ix) disclosure policy adopted, notably for preparing financial statements and addressing any conflict of interest.

The Capital Markets Authority, which is an independent, autonomous regulatory body established by the Capital Markets Law No. 161/2011 (“CMA“), goes in the same direction with respect to financial institutions. In its Series 2000 issued in 2017, it imposes as a pre-requisite for registration, that a financial institution proves having established sufficient systems, policies and procedures covering corporate governance, finance, risk management, compliance, etc.

It is noteworthy, that in the absence of mandatory laws on corporate governance, private companies have the ability to draw their own guidance rules, adapted to their business, while being inspired both by the Code, international standards and best practices.

The main options are as follows:

• Capital increase either in cash, in-kind or through the provision of services.
• Capital increase by issuance of shares, bonds or debentures.
• Shareholders loans or inter-companies’ loans.
• Conversion of reserves into equity.
• Loans from banks and financial institutions.

Companies would return proceeds to their shareholders in several ways:

• Distribution of dividends and interim dividends.
• Purchase by a company of its own shares from a selling shareholder.
• Capital reduction.
• Repayment of shareholders loan.
• Liquidation quota (subject to the completion of the liquidation process).

There are 2 types of resolutions which may be put to a general meeting:

• Ordinary resolutions, which generally require a simple majority of shareholders attending votes.
• Special resolutions (i.e. taken by the extraordinary general assembly), which generally require 2/3 of shareholders to attend votes.

However, the CC and/or the articles of association of the company may impose higher percentages, requiring in certain cases a unanimous vote of all shareholders/partners for specific resolutions.

Ordinary resolutions are generally taken at any shareholders’ meeting. While “special” resolutions are required by the law and if specified in the articles of association of the company for specific actions, such as:

• Amending the articles of association.
• Increasing/decreasing the capital.
• Dissolving or merging the company.
• Changing the legal structure of the company.

Specific quorum is to be met for each type of resolution, depending on whether the resolution is passed at the first, second or third meeting of the general assembly of the shareholders/partners, as stipulated in the CC and the articles of association of the company.

The general assembly of the shareholders/partners is considered the highest corporate body in the company, and as such the BoD/manager(s) must comply with and execute shareholders/partners resolutions.

Consequently, if the management body fails to fulfill its duties and obligations, then the shareholders/partners would take necessary actions in accordance with the CC, the applicable Lebanese laws and the articles of association of the company.

The Labor Law provides that the employer may terminate the employment contract at any time. The legal dismissal of an employee differs depending on whether the contract is for limited or unlimited term. However, in either case, the contract should be automatically terminated for any of following events:

• Death of employee. The employment contract does not end with the death of the employer.
• Resignation.
• Parties’ mutual will.
• Employee reaches the age of retirement (64 years).
• Other cases stipulated by law.

According to the Labor Law and other applicable laws, is considered null any contract by which a person promises to engage its services, for a period that is binding until death. Accordingly, with respect to contracts with unlimited term, the Labor Law allows both the employee and the employer to terminate the contract at anytime. In case of termination by either party, prior notice should be duly served to the other party (with exceptions detailed in question 14).

However, in case the employer and /or the employee terminates the contract without a serious violation or default from the other party, compensation for unfair termination/dismissal may be claimed by the employer and/or the employee.

The termination of employment by the employer is deemed abusive in instances where prior notice is not duly served when required. Additionally, it is considered abusive in such cases:

• When the reason for termination is unacceptable or irrelevant to the employee’s performance or behavior at the workplace, or to the effective management and operation of business.
• In case of employee’s affiliation or non-affiliation with a certain professional syndicate or performance of legitimate syndicate activities.
• If the employee is running for election or has been elected as a member of a syndicate office or as a representative of the employer’s workforce during their tenure.
• When the employee files a complaint in good faith with the competent authorities regarding the application of Labor Law and related regulations, and subsequently initiates legal action against the employer.
• If termination occurs due to the employee exercising their personal or public freedoms.

The Labor Law provides that in the case of contracts for unlimited term, the amount of the compensation for abusive/unfair termination ranges between 2 to 12 months’ salary in favor of the employee, and between 2 to 4 months’ salary in favor of the employer, when the evidence is made for the abusive termination. The abuse should be based on the absence of valid reason, serious error, or negligence to cause the said termination.

The assessment of the compensation should take into consideration:

• Nature of the work.
• Employee’s age.
• Duration of employment.
• Employee’s health and family status.
• Value of the damage.

In addition to the above, the Labor Law provides that employees may terminate the contract anytime without prior notice or compensation in case employer:

• Commits an act of misrepresentation, in the terms and conditions of employment at the time of concluding the employment contract, provided that the employee files a complaint within 30 days of such incident.
• Fails to meet his obligations according to the provisions of the Labor Law.
• Commits an act of immorality against the employee or a member of his family.
• Physically assaults the employee.

As a note, there is no prior notice or compensation required during the probation period for the termination of both employment contracts whether with limited and unlimited term.

The employer may also terminate all or part of employee’s contracts in case of a “force majeure” or for technical or economic circumstances, such as reducing the capacity of its business, substitution of a production system by another, or definitive cease of business, which are considered as collective dismissals. In such case, the employer should notify the Ministry of Labor of his intention to terminate the contracts 1 month prior to the same. The employer should also consult with the ministry to draw up the final program for such termination whereby the seniority of the employees, specialization, ages, social and family status should be taken into consideration.

Any party may claim before the arbitral labor council (“Arbitral Labor Council”) abusive termination and request compensation for the damage suffered, within 1 month from the date of termination.

The Arbitral Labor Council instituted a system of employee/worker representation as well as employer. It is the competent court to consider disputes resulting from any employment contract and arising between employees/workers and employers, comprising a judge appointed by decree, alongside two representatives—one advocating for employee/worker interests and the other for employer interests. To ensure continuous representation, two additional members are appointed to represent employers and employees/workers in the absence of the primary representatives.

It’s worth noting that, specific syndicates exist for several professions as well as a main syndicate for employees/workers, in addition to the established employee/worker representation system through the Arbitral Labor Council.

Since 2005, Lebanon is taking several measures and adopting several laws to fight corruption. In 2005 and 2009, Lebanon ratified respectively the United Nations Convention on Organized Crime and the United Nations Convention Against Corruption. In 2018, the Lebanese Parliament approved Law No. 83/2018 on the protection of whistleblowers, by virtue of which the act of reporting suspicions of corruption does not constitute a breach of professional confidentiality, covering all individual holding public office. In addition, the Lebanese Parliament adopted Law No. 175/2020 on “Combating Corruption in the Public Sector” which established the National Anti-Corruption Commission. This commission is mainly responsible for monitoring corruption, conducting studies and research in relation to transparency, integrity, and anti-corruption. Furthermore, the Lebanese Parliament adopted Law No. 189/2020 on financial disclosure and punishment of illicit enrichment. This law set a comprehensive system for assets and interests declaration that applies to most of the public sector.

The LCC also criminalizes bribery of domestic public officials. Both legal entities and individuals are liable for giving and receiving a bribe. Similarly, the LCC prohibits private sector employees from accepting gifts or benefits in order to reveal confidential information or to act with the intention of harming their employer.

While the above-mentioned laws do not explicitly address extraterritorial jurisdiction, the LCC stipulates that all crimes committed by Lebanese nationals abroad may still be punishable under Lebanese laws if they are also considered crimes in the foreign state where they occurred. Therefore, crimes such as bribery, corruption, and other financial crimes committed outside Lebanese soil by Lebanese nationals are subject to prosecution in Lebanon.

Economic crimes, also known as financial crimes, are regulated in Lebanon by several laws. The LCC condemns a wide range of economic crimes mainly bribery, corruption, fraudulent bankruptcy. In 2017, several laws were adopted in this regard, particularly in relation to access to information, whistleblower protection, illicit enrichment, and tax evasion. In addition, following the amendments to CC in 2019, new financial crimes were introduced in the corporate industry, notably crimes related to the misuse of the company’s assets.

In 2001, the Lebanese Parliament adopted Law No. 318/2001 on Anti-Money Laundering and Combatting The Financing Of Terrorism (“AML/CFT“) which was subsequently amended by Law No. 44/2015.

Law No. 318/2001 aimed to conform with international anti-money laundering standards by imposing transparency without getting rid of banking secrecy, by establishing the Special Investigation Commission as an independent legal entity with judicial status (“SIC”). SIC is empowered to lift banking secrecy as a temporary and preventive measure in order to investigate money laundering crimes.

Law No. 44/2015 extended anti-money laundering crimes to corruption, tax evasion, embezzlement, and illicit enrichment. Said law clearly states that all institutions under the supervision of BDL and entities operating in other sectors such as insurance companies, casinos, real estate dealers, merchants of valuables, lawyers and auditors are required to report any suspicious transactions related to money laundering or terrorist financing to official authorities while performing their duties.

The Lebanese Parliament also adopted Law No. 55/2016 on exchange of information for tax purposes to notably reflect the Common Reporting Standard and other international tax reporting standards. The primary objective of said law is to implement international treaties signed with foreign governments and facilitating the exchange of tax-related information to fight against tax evasion.

Moreover, Law No. 83/2018 encourages whistleblowers disclosing any information related to financial crimes, guaranteeing the secrecy of the whistleblower’s identity, and protecting the latter from any prosecution or harm.

Money laundering and terrorist financing are regulated by international conventions and Lebanese laws. In 1999 and 2019, Lebanon ratified respectively the Arab Convention on Combating Terrorism and the International Convention for the Suppression of the Financing of Terrorism, demonstrating its commitment to combat all kind of financial crimes.

In November 2015, Lebanon further strengthened its anti-money laundering framework with the enactment of a series of laws. In this respect, Law No. 42/2015 on Declaration of Cross-Border Transportation of Money, by virtue of which all persons transporting in or out of the border currency and negotiable instruments exceeding USD 15,000, must submit a written declaration to the customs authorities. Law No. 43/2015 on Exchange of Tax Information, grants Minister of Finance the right to conclude and join bilateral or multilateral agreements to exchange information on tax evasion or tax fraud. Law No.44 on AML/CFT is the main regulatory framework governing money laundering in Lebanon. Said law expanded the list of primary crimes to money laundering, including corruption. It also subjected financial institutions to stricter policies.

Moreover, the recent amendments to the Lebanese Banking Secrecy Law No. 1/1956, which was introduced under Law No. 306/2022 mark a fundamental step towards the ongoing effort to combat money laundering and terrorist financing. These amendments lifted the banking secrecy for various categories of individuals, including: (i) public officials, their spouse, their minor children and beneficial right owners, (ii) presidents of associations and administrative bodies engaged in political activities, civil society bodies, their spouse and minor children as well as candidates for parliamentary and municipal elections, (iii) chairpersons and board members of banks along with their current and former auditors and (iv) presidents and board members of media, audiovisual and electronic media companies. Said exemptions apply for 5 years following the resignation of the persons listed above, the termination of their service or their retirement.

Moreover, Law No. 306/2022 broadened the access to banking information, banks are now compelled to submit any requested information upon receiving a request from the following bodies:

• Competent authorities with respect to lawsuits related to corruption, money laundering and illicit enrichment.
• Special Investigation Commission.
• National Anti-Corruption Commission.
• The Lebanese Tax Administration combatting tax evasion.
• BDL, Banking Control Commission of Lebanon and the National Institute for the Guarantee of Deposits responsible for restructuring the banking sector.

Lebanon does not have any legislation comparable to the UK Modern Slavery Act, the Dutch wet kinderarbeid, or the French loi de vigilance that specifically regulates compliance in the supply chain.

However, Lebanon is party to various international conventions and treaties aimed at protecting human rights and labor standards. These conventions include, but are not limited to, the International Labor Organization conventions, which address issues such as forced labor, child labor, and discrimination in employment.

Furthermore, the Labor Law and other relevant laws contain provisions related to child and woman labor, employment rights, working conditions, and the protection of employees. While these laws may not directly address supply chain compliance in the same way as the mentioned acts and laws in other countries, they serve as foundation for promoting ethical and fair labor practices within the country.

Indeed, the Labor Law prohibits the employment of children under 13 years old and prohibits employing any child under the age of 16 in certain types of work deemed harmful. The Labor Law also stipulates that fixed hours of rest should be observed. Night work is also completely prohibited from 7 pm until 7am.

Employers are also prohibited from hiring women to work in certain jobs, including but not limited to:

• Underground work in mines, quarries, and all stone extraction work.
• Oven work for melting, refining, and firing of mineral products.
• Silvering mirrors by the quicksilver process.
• Production and handling explosives.
• Glass melting and firing.
• Oxyacetylene welding.
• Production of alcohol and all other alcoholic drinks.
• Duco painting.
• Handing, treatment, or reduction of ashes containing lead, and de-silvering lead.
• Production of welding material or alloys with more than 10% lead content, etc.

JSCs and LLCs are required to prepare and approve their annual financial statements and accounts at the end of each fiscal year. According to Lebanese Ministerial Order No. 1/6258, said companies must adhere to the International Financial Reporting Standards (“IFRS”) when preparing their annual financial statements.

While JSCs are required to disclose and submit to the registry of commerce their annual financial statements and accounts; Offshores, Holdings and LLCs are exempt from such disclosure.

Furthermore, all JSCs are required to have their annual financial statements audited by a licensed auditor that must be replaced every 5 years. Conversely, LLCs are exempt from such appointment, unless:

• Number of partners exceeds 20;
• Company’s capital exceeds LBP /30.000.000/; or
• Request to appoint auditor is initiated by 1 or more partners representing at least 20% of the capital.

Within the Lebanese legal framework, certain legal entities must adhere to compliance requirements, including the appointment of an auditor/attorney, approval and disclosure of financial accounts and beneficial owners, convening annual general assemblies, etc. Such requirements may also be reinforced by the articles of association of said legal entity (for further details please refer to questions 21, 23 and 24).

At least 1 shareholders’ meeting must be convened per fiscal year, during which annual accounts, management reports and auditors’ reports will be discussed and submitted to the shareholders/partners’ approval. Furthermore, discharge will be requested for the management body in recognition of the fulfillment of their duties, in line with the general strategy of the company.

The annual meeting of the company may include additional matters, such as election or re-election of the management body, appointment or reappointment of auditors, and other matters as deemed necessary.

Since 2001 and based on Law No.318/2001 on AML/CFT, Lebanon imposed on banks and other natural and legal entities special requirements with respect to the identification of the ultimate beneficial owner (“UBO”). In fact, as per the law, every entity is compelled to control all operations with its clients to avoid involvement in money laundering operations. In this perspective, BDL issued Basic Circular No. 83/2001 prohibiting banks from entering into or establishing a relation with a correspondent bank abroad or from opening bank accounts for natural or legal entities prior to conducting due diligence.

To be aligned with international standards, additional laws, circulars, and decisions were introduced to the Lebanese legal framework:

• Law No.44/2015 extended UBO and customer due diligence requirements to other entities, such as lawyers, notaries public, certified accountants, etc.
• Law No.75/2016 abolished the notion of bearer shares and shares to order, thus imposing the disclosure of shareholder identity.
• BDL Intermediate Circular No. 498/2018, SIC Circular No.24/2018, and Minister of Finance Decision No. 1472/1/2018 introduced the definition of UBO and the identification process for legal entities.
• The latest amendment to CC in 2019, imposed on all companies incorporated in Lebanon, to submit the identification document of the UBO.

The UBO is considered as any natural person who ultimately owns or exercises ultimate effective control, whether directly or indirectly, over the related natural person. Indirect ownership and/or control is exercised through a chain of ownership or by means of control other than direct control. Additionally, with respect to legal entities, the UBO shall be identified as follows:

• Each natural person holding, whether directly or indirectly, 20% or more of the capital of the legal entity.
• Each natural person exercising control over the legal entity by holding a majority of voting rights or the rights to appoint or dismiss the majority of the administrative or regulatory body at affiliated entities, etc.

When no natural person is identified pursuant to the above, reasonable measures shall be taken in order to identify and verify the identity of the persons holding senior management positions.

UBO information must be declared before the CR, the Ministry of Finance, banks and entities mentioned in articles 4 and 5 of Law no. 44/2015.

JSCs and LLCs are subject to corporate income tax fixed at 17% on all accumulated net profits and withholding taxes on dividend distributions fixed at 10%.

However, it should be noted that Holdings and Offshores, having the form of joint stock companies, are exempt from taxes on income and dividend distribution. Instead, they are subject to an annual lump sum tax fixed at LBP 50,000,000 (approximately USD 555).

Lebanon offers several incentives and favorable tax regimes in strategic sectors, mainly:

• Double tax treaties: various double tax treaties were concluded by Lebanon with foreign countries facilitating and regulating tax flaws related to operations and transactions between Lebanese and foreign entities.
• Free trade zones: As per 2022 Budget Law No. 10/2022 (“2022 Budget Law”), companies established after the issuance of 2022 Budget Law and until 31 December 2024 operating in specific Lebanese areas, as defined by the Lebanese State, benefit from tax reduction for 7 years following the initiation of their activities. To benefit from said tax exemption, certain requirements must be met.
• Newly incorporated companies: Newly incorporated companies or companies whose term was extended after the issuance of the 2022 Budget Law are exempt from certain stamp duty fees.
• Reinvestment incentives: Industrial companies shall benefit from a 50% reduction from its due income tax on profits of their Lebanese-origin industrial exports. These incentives apply when the export earnings are either invested in Lebanese banks or entirely reinvested in industrial activities within the Lebanese soil.
• Investment Development Authority of Lebanon (“IDAL”): Under Law No. 360/2001 IDAL grants investors willing to implement a project in Lebanon a combination of customized incentives, exemptions, and tax reductions, which include corporate income tax, project dividends taxes, exemption from land registration fees, reductions on permit fees, etc.

In Lebanon, there are no restrictions on foreign exchange nor any capital control. However, withholding taxes are levied on certain transactions, such as:

• Distribution of dividends: Residents and non-resident shareholders/partners are subject to a 10% withholding tax on distribution of dividends.
• Interests: Residents and non-residents entities are subject to a 7% withholding tax on incomes, revenues, and interests earned from accounts opened with Lebanese banks and from treasury bonds.
• Sale of materials and equipment: Non-resident entities are subject to a 3.4% withholding tax on revenues generated from the sale of materials and equipment.
• Sale of services: Non-residents entities are subject to a 8.5% withholding tax on revenues generated from the sale of services.

1) Stamp Duty

All deeds (including those for transfer of shares), contracts and other documents involving specific payments or monetary sums are subject to 2 kind of stamp duty fees:

• Proportionate stamp duty of 0.4%.
• Fixed stamp duty determined according to the schedules outlined in Legislative Decree No. 67/1967.

2) Transfer Taxes/Registration Fees

Below are the significant applicable taxes on transfer of shares and real estate in Lebanon.

According to Law No.64/2017 as amended by Law No.324/2024, gain on disposal of real estate properties realized by natural and legal entities that are not subject to income tax, or benefit from permanent, special or exceptional exemptions from said tax or persons subject to income tax but the real estate property is not part of their profession, are subject to capital gain tax fixed at the rate of 1%. However, said transfer tax does not apply to capital gains realized from the transfer of a natural person’s primary residence, with a maximum limit of two residences. In addition, a registration fee is imposed on the disposal of real estate properties fixed at 3% for residents and 5% for non-residents.

While transfers of shares are generally exempt from transfer taxes, the 2022 Budget Law imposed a transfer tax of 3% for resident shareholder and 5% for non-resident shareholders on capital gains realized by the disposal of shares in the following JSCs:

• Whose primary activity is the acquisition of built and unbuilt properties.
• Who engage in the trading and development of built and unbuilt properties.
• Who have more than 50% of their fixed assets as real estate properties.

A 50% discount is granted if the transfer of shares in said JSCs is concluded between shareholders or with their direct relatives (lineal ancestors or descendants).

With respect to LLCs, the Ministry of Finance has the discretionary right to reevaluate the value of the transferred parts and may impose a certain tax on the balance between the actual nominal value of the transferred parts and their selling price.

Public takeover in Lebanon is regulated and supervised by several laws and bodies. In particular, according to Law No.161/2011, the CMA sets all regulations concerning large purchase operations of shares in public companies or issuing entities, and those concerning the execution of acquisition and merger bids, without prejudice to the provisions of Law No.192/1993 and its amendments on facilitation of mergers between banks.

At the level of JSCs and LLCs, the CC clearly states the procedures and steps that must be followed for the merger of any of said companies.  As to the merger of banks, the process is regulated by Law No.192/1993 and is subject to the approval of the Central Council of BDL.

According to the Lebanese Code of Contracts and Obligations and its interpretation, any individual who acts in bad faith during the negotiation phase of an agreement may be held liable.

There are no legal requirements of consultation with employees or syndicates whenever a company is acquired by another entity whether a share deal or asset is involved. In fact, the change of employer does not affect any of the employment agreements that remain valid and in force.

On another note, should the new employer choose to terminate any or all employment agreements, then the regular legal process should be followed, and rights of employees should be respected as per the Labor Law which include prior notification to the Ministry of Labor as well as mediation and consultation sessions between employers and employees.

Regarding banks, article 4 of Law No. 192/1993, stipulates that the laid-off employees are entitled to all rights and benefits prescribed by applicable laws and regulations in force, as well as those specified in collective work contracts concluded between the Lebanese Association of Banks and the Union of the Syndicates of Banks’ Employees.

There are no laws regulating foreign investment in Lebanon or requiring foreign investors to obtain any approval before investing. Nevertheless, certain restrictions, notifications, or approvals may be required for certain activities and sectors such as weapons, media, aviation, insurance, public utilities, real estate, etc. (please refer to question 7).

The Lebanese exchange market provides free currency convertibility and free movement of capital.

JSCs and LLCs may be liquidated in the following events:

• Upon expiration of the specified term in the articles of association.
• Occurrence of a triggering event leading to the dissolution of the company as per the articles of association (e.g., achieving/failure to achieve its purpose).
• Voluntarily dissolution before the expiry of the term.
• Loss of 3/4 of the capital, in accordance with the CC and the articles of association.

The standard liquidation process of JSCs/LLCs involves the following steps:

• Resolving the dissolution of the company by the extraordinary general assembly of partners/shareholders and appointment of the liquidator.
• Carrying out the liquidation activities by the appointed liquidator and issuance of the liquidation report and other ancillary documents.
• Confirming the liquidation process by the ordinary general assembly of partners/shareholders and releasing the appointed liquidator from any liability in connection with his assignment.

Following the completion of the liquidation process along with the needed publication as per the CC and articles of association, the liquidation of the company shall be final. An official certificate shall be obtained evidencing the de-registration of the company from the records of the competent authorities in Lebanon.

As for Branches and REPs, the liquidation process entails the issuance by the mother company a resolution in this respect and the appointement of a liquidator. The liquidation process requires serval steps and involves different authorities and departments, such as Ministry of Foreign Affairs, Ministry of Economy and Trade, CR, offical gazette etc.