AGN-SERHAL NASSAR & CO.
Predominant characteristics of Lebanese Holding Companies
A study based on Law No. 45 of 24.06.83 as modified by laws No. 89 of 07.09.91, 409 of 07.01.95 and No. 772 of 11.11.06
The following brief covers only the major characteristics of the Lebanese holding companies and might not address all legal and other aspects of the Lebanese holding companies (LHC). For a comprehensive text of the law, please refer to the Lebanese Code of Commerce and its amendments.
1. Formation of the Holding Company in Lebanon
1.1 Capital: A minimum of thirty million Lebanese Pounds or their equivalent in foreign currencies (U$20,000 as at June 5, 2012).
1.2. Number of Shareholders: A minimum of three shareholders.
1.3. Registration of the company’s by-laws (articles of incorporation) at the Special Registry of Holding Companies.
1.4. Shares: Minimum nominal value of one share L.L.1,000 or their equivalent in foreign currencies.
1.5. Board of Directors
-3 to a maximum of 12 members
-All directors may be foreign individuals or companies except for the Chairman of the Board of Directors who should be a natural person but could be a foreign national.
-The Chairman of the Board of Directors does not need a work permit if he is a foreigner not residing in Lebanon.
2. Object of the Lebanese Holding Company.
2.1. The acquisition of shares and/or quotas in joint-stock or limited liabilities companies domiciled in Lebanon or outside Lebanese territories as well as the participation in the formation of such companies.
2.2. The management of companies where the holding company owns quotas or shares in accordance with Para. 2.1.
2.3. To give loans to companies in which the holding owns quotas or shares. For this purpose the holding company may contract loans with banks and issue bonds in accordance with the provisions of Articles 122 and subsequent articles of the Code of Commerce. The total amount of these issued bonds shall not exceed at any time whatsoever fivefold the value of the capital of the holding company plus the reserves as shown in the last approved balance sheet.
2.4. To grant loans to companies operating in Lebanon if its share in their capital is more than twenty percent.
2.5. To acquire patents, licenses, trademarks and similar rights and denominations.
2.6. To lease the rights mentioned in paragraph 2.5 above to natural persons and/or legal entities domiciled in Lebanon or outside Lebanese territories.
2.7. The holding company has the right to acquire movable and immovable properties provided they are exclusively used to carry out the activities listed in paragraphs 2.1 to 2.6 here above.
3. Activities prohibited to Lebanese Holding Companies.
3.1 The Lebanese holding companies shall not have the right to carry out any activities other than those mentioned in section (2) here-above and detailed in Article 2 of Law No. 45 of 24.06.83.
4. Taxation regime of the holding
4.1. The holding company is exempted from tax on profits and consequently the 15% tax does not apply to the profits realized by the holding company.
4.2. Dividends distributed by the holding company are exempted from withholding taxes.
4.3. The holding company does not pay any tax on the interests collected by legal entities domiciled in Lebanon or by Lebanese companies when such interests result from loans given for a period superior to three years.
4.4. The Lebanese holding companies are not subject to tax on added value resulting from the transfer of shares or quotas coming from legal entities not domiciled in Lebanon.
4.5. The Lebanese holding companies are not subject to tax on added value resulting from the transfer of shares or quotas of legal entities domiciled in Lebanon, when they are held by the company for a period superior to two years.
4.6. The holding company has the right to collect from its affiliates domiciled in Lebanon management fees. Such fees are subject to a tax of 5% provided that these expenses do not exceed 2% of the turnover of each affiliate.
4.7. The management and services expenses as well as the other expenses collected by the holding company from its affiliates not domiciled in Lebanon are exempt from any tax.
4.8. The royalties collected by the holding company for the lease to foreign entities of patents, franchises or other similar rights are not subject to any tax.
4.9. The revenues from the above patents and intangible fixed assets to Lebanese companies is subject to a 10% tax.
5. Lump Sum Tax
5.1. The Lebanese holding company must pay an annual lump sum tax based on its capital and reserve funds.
5.2. The ceiling of the lump sum tax is L.L.5,000,000, equivalent to US$3,330 per fiscal year.
6. Various Provisions
6.1. Lebanese Holding Companies are prohibited from acquiring directly more than 40% of two legal entities operating in the same field in Lebanon, when such participation contravene the provisions of Article 1 of Legislative Decree No. 32 of 15 August 1962.
6.2. The capital of the Holding Company may be denominated in a foreign currency.
6.3. The accounts of the holding company may be stated in a foreign currency.
6.4. The financial statements of the holding company may be written in a foreign currency.
6.5. General Assemblies meetings may take place outside Lebanese territories.
This overview does not constitute an exhaustive study of all aspects of Lebanese Holdings Companies operating in Lebanon, but only describes briefly the main characteristics of the Lebanese Holdings at date of this briefing.
For more details, please do not hesitate to contact our offices:
AGN-Serhal Nassar & Co.
St. Nicholas Tower - A2
Achrafieh - Beirut
Tel: ++ (961) 1-338448
GSM: ++ (961) 3-278650