Concerns over Proposed Law on Foreign Firms

London's Financial Times reports that lawyers are concerned that a draft law governing foreign companies in Libya is more restrictive than under the previous regime.

The law, which requires approval by parliament, keeps the limit for foreign ownership at 49 per cent – a change brought in 2012 – compared with the 65 per cent rule introduced in 2006 under Gaddafi.

While 49 per cent is similar to foreign ownership levels in the Gulf, unlike Libya, many of the Gulf countries have active free zones where companies can operate outside of the country’s broader legal system. Libya has created similar zones, including one in Misurata, but they are not active, business people say.

Leopold Zentner (pictured), legal director at Clyde & Co, said the business community hoped for a new draft that relaxed the provisions.

There are other ways for companies to enter the Libyan market. Some foreign companies can use an investment licence that allows 100 per cent foreign ownership, but that requires a minimum capital of LD5m ($3.9m).

The new draft law only allows for the creation of joint stock companies and lawyers point to other problematic areas such as the minimum capital requirement of LD1m ($780,000), which is considered a high barrier to entry for small businesses, they say.

A further worry to foreign investors is the ban on foreign companies that do not have 10 years of experience, which could rule out the use of special purpose vehicles – a common practice for operating in unfamiliar markets.

(Source: FT)

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