What is the main source of law authorising this entity form?

The Lebanese Code of Commerce (“LCC”)

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

Yes, a JSC in Lebanon does possess separate legal personality.

(Maximum) period of existence

The maximum period of existence for a JSC is set at 99 years.

Governing document(s)

The JSC is governed by its articles of association and the LCC.

Liability of incorporators / shareholders

The liability of founders, shareholders, or members of a JSC is limited to their contributions to the company's capital.

(Governing) bodies

The management of a JSC is entrusted to a Board of Directors, which must consist of a minimum of three members. They are elected by the shareholders and are responsible for the strategic management of the company.

Other particularities

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

Yes, a JSC in Lebanon can be involved in international transactions and restructurings.

JSC can merge with or acquire foreign companies, subject to Lebanese regulatory requirements and approvals.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

Yes, a JSC can be publicly listed or and its securities can be issued to members of the public. The JSC is designed to facilitate raising capital from the public and can be listed on the Beirut Stock Exchange.

Please note that the Beirut Stock Exchange is considered a smaller and less developed exchange compared to major global financial markets.

Can this type of entity be used for a non-profit or charitable organization?

JSC is typically used for commercial purposes and is not designed to serve as a non-profit or charitable organization. Non-profit and charitable organizations in Lebanon usually take different legal forms, such as associations, which are governed by the Law of Associations.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

The Articles of Association which contains the object and scope of business of the company.

The minutes of meetings of the Constituent General Assembly

The initial Board of Directors that elects the Chairman-General Manager.

Proof of Business Premises.

Shareholders Identification.

As part of the incorporation process, companies are required to open a bank account in Lebanon. This account will be used for depositing the subscribed share capital and managing financial transactions related to the company's operations.

Ultimate Beneficial Owner form provided by the Lebanese Commercial Register.

Involvement of notary, company register, governmental authorities

The Articles of Association must be notarized by a notary public and registered at the Lebanese Commercial Register.

All the other required documents shall be registered at the Lebanese Commercial Register.

Timing (estimate)

The registration process at the Lebanese Commercial Register usually takes 1-2 days.

Main costs, including registration and similar fees (excluding legal fees)

Approximately USD 1000 based on the current situation in Lebanon.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

As specified above, the Articles of Association must contain the object and scope of business of the company therefore a description of the anticipated business or purpose of the entity is required for incorporation

Minimum number of incorporators / shareholders and residency requirements

A JSC is formed by three or more people.

Minimum number of directors (or other applicable officers) and residency requirements

The Board of Directors shall be formed of at least 3 persons.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The minimum authorized capital is LBP 30 million. Given the current devaluation of the Lebanese Pound, where 1 USD equals approximately 90,000 LBP as of July 10, 2024, this amount is approximately equivalent to USD 333.33. This capital can be contributed in cash and/or in kind. The JSC’s capital must be subscribed to in full upon incorporation and at least one quarter of the capital must be liberated upon the call for subscription to the shares.

Furthermore, it is required that the JSC’s capital and financial statements be denominated in Lebanese Pounds to comply with legal and accounting standards in Lebanon.

The JSC is required to open a bank account in Lebanon. This account will be used for depositing the subscribed share capital.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

In Lebanon, the physical presence of incorporators, directors, or shareholders is generally not required for the incorporation, formation, or organization of a company. The process can typically be facilitated through legal representatives or attorneys who can act on behalf of the parties involved.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

After incorporation, the JSC must apply for a tax identification number from the Lebanese tax authorities, specifically from the Direction Générale des Finances Publiques (DGFP).

What is the title of the applicable company registry?

The applicable company registry is known as the "Lebanese Commercial Register" (Registre du Commerce). It is a governmental agency under the Ministry of Justice and is responsible for registering commercial entities, maintaining records related to their incorporation, and ensuring compliance with commercial laws and regulations.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The documents to be filed at the commercial register are as enumerated above under question 8. Furthermore, the commercial register in Lebanon is public. It serves as an official registry where various types of information about companies, including JSCs, are recorded and made accessible to the public.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The executive body is known as the “Board of Directors”, which includes the Chairman and Directors, with a General Manager (or CEO) often appointed for day-to-day operations. The Board of Directors is responsible for strategic planning, governance, financial oversight, risk management, policy making, executive appointments, shareholder relations, and major corporate decisions.

How are the members of the executive body appointed, dismissed and replaced?

The first directors of JSC are generally appointed in the minutes of meetings of the Constituent General Assembly. Subsequently, the members of the executive body, such as the Board of Directors, are typically appointed, dismissed, and replaced according to the company's Articles of Association.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, it is possible to appoint an entity as a director in a JSC provided that this entity is represented by a natural person who attends and participates in the board of directors’ meetings on behalf of the entity.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, it is not a requirement to have non-executive directors.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The title of the body of owners/shareholders/members is referred to as “General Assembly of Shareholders” الجمعية العمومية للمساهمين and the main tasks/responsibilities/powers of that body are as follows: The Constituent Assembly adopts resolutions regarding the formation of the JSC. The Ordinary Assembly is held every year after the end of the financial year to take decisions related to the distribution of dividends, appointment of new auditors, and appointment of members of the board of directors when their mandate expires. It can also be held during the financial year when unexpected circumstances occur, as long as the goal is not to amend the JSC’s Articles of Association. The Extraordinary General Assembly’s responsibilities include amending the JSC’s Articles of Association provided that it does not change the nationality of the JSC, does not increase the obligations of the shareholders and does not affect the rights of others.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Constituent Assembly

• The deliberations of the Constituent Assembly are only legal if the number of shareholders constituting it represents at least two-thirds of the JSC’s capital.
• If this quorum is not met on that first call, a new assembly may be convened through an invitation published in the Official Gazette, an economic newspaper and a local daily newspaper. The discussions of this second assembly are legal if the number of shareholders constituting it represents at least half of the company's capital.
• If this quorum is not met, a third assembly may be convened, needing only shareholders representing at least one-third of the company's capital.
• Decisions are taken by two-thirds of the votes of the present or represented shareholders.

Ordinary General Assembly

• The Ordinary General Assembly should consist of shareholders representing at least one third of the JSC’s capital.
• If this quorum is not met, a second assembly is held, and no quorum is required on that second call.
• Decisions are taken by an absolute majority of the number of votes of the shareholders present.

Extraordinary General Assembly

• The quorum is of at least three quarters of the JSC’s capital for decisions changing the subject or the form of the JSC.
• For other matters, the quorum is of two thirds of the JSC’s capital on the first call, half on the second call, and one third for the third call.
• Decisions are taken by two thirds of the majority votes of the shareholders present.

The above-mentioned quorums may be varied in the JSC’s Articles of Association. The Articles of Association may stipulate higher, but not lower, quorum requirements.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Lebanon does not have specific corporate governance requirements that vary based on a company's size or whether it is listed on the Beirut Stock Exchange.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Members of the Board of Directors must deposit with the Commercial Registry Office annually, and within two months from the date of the General Assembly's approval of the financial statements, and not later than the thirty-first of December of the current year, the following documents:

• Report of the auditors, including the individual financial statements for the past year prepared in accordance with applicable accounting standards, especially the balance sheet, income statement, statement of changes in shareholders' equity, and explanations concerning the financial data.
• Report of the auditors, including consolidated financial statements for the past year prepared in accordance with applicable accounting standards.

Is the entity permitted to determine its own financial year?

Yes, in principle, a JSC can set its financial year according to its business cycle and operational requirements. However, in Lebanon, the taxation period follows the Gregorian calendar year from January to December. Therefore, even if a JSC opts for a different financial year, it must still file tax returns based on the calendar year.

Is the entity subject to any statutory (external) auditor obligations?

The Constituent Assembly and the ordinary assemblies that follow it must appoint one or more auditors for a period of one year, renewable for a period of five consecutive years at most.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

The board of directors appoints a chairman for the JSC, responsible for overseeing its operations. The chairman can be chosen from shareholders or non-shareholders. The roles of chairman and general manager can be separate. The Chairman, or the general manager if different, may propose to the board of directors the appointment of one or more individuals as assistant general manager(s), who would act on behalf of and under the authority of the chairman or general manager.

There are no specific residency requirements for executive officers in Lebanon.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

The “ownership interests” in a JSC are typically referred to as shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Yes, there are different classes of shares:

• Ordinary shares which are the common type of shares issued by a JSC.
• Preferred shares confer upon their holder privileges, rights, financial benefits, priorities and the same rights as the holders of common shares, with the exception of the right to deliberate and vote at general assemblies, the right to be elected as a board member and the right to share the Company’s assets.

What documentation is required for the transfer of ownership interests?

Each shareholder of the JSC may freely transfer his shares to another person (shareholder or third party). This transfer is subject to the right of first refusal of the other shareholders of the JSC as stipulated in the JSC’s Articles of Association or shareholders’ agreement.

A transfer form signed by both the seller and the purchaser of the shares is required for such transfer process. This form would include details such as the name of the names of the seller and purchaser, number of shares, price and other relevant terms.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

There are not additional formal requirements for the transfer of shares in a JSC. Such transfer is exempt from taxes and stamp duties. The notarization of the transfer form is not mandatory.

Are there any applicable stamp duties imposed when transferring ownership interests?

There are no applicable stamp duties imposed when transferring shares.

How are shares issued? (including information on payment obligations, registration requirements)

When a JSC is formed, its initial shares are issued during the incorporation process. The founders of the JSC subscribe to the initial share capital in full. Payment can be made in cash or in kind. The JSC must register with the commercial register providing details of the issued shares, shareholders. The JSC can issue shares after incorporation through a capital increase. This typically requires the approval of the shareholders.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Non-cash payments for shares are permissible and are known as “in-kind” contributions. The value of such in-kind contributions is established through a valuation process.

No, partially paid shares are not permitted.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Any requirements with respect to distributions to shareholders?

Normally distributions to shareholders are governed by the company’s Articles of Association. In the absence of it, decisions related to the distribution are taken by the ordinary general assembly. The dividends should only be distributed from the company’s net profit, deduced from the company’s budget for the previous fiscal year.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, the shareholders can adopt a shareholders’ agreement as long as it does not contradict the JSC’s Articles of Association.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Since each JSC must appoint an auditor and a legal counsel, fees must be paid to such auditor and legal counsel who will ensure the legal good standing of the JSC.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The general corporate tax rate for a joint stock company is 17% payable on the net taxable profit.

Summary of any specific matters, e.g. recent or prospective major legal developments