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Home > Current events > Law > Libyan law > The obligation for foreign companies which execute contracts in Libya to create a "mushtaraka"

The obligation for foreign companies which execute a contract in Libya to create a

According to the Decision of the General Peoples Committee (GPC) n°443/2006 of 14 November 2006, which stipulates that any foreigners wishing to undertake projects and activity defined in article 2 of the Decision, may only to do so in this form of the joint company created according to the legislation in force, and in the form of a new type of company called Mushtaraka.

The position General People's Committee for Economy, Trade & Investment (GPCETI) varied as regards the implementation of decision 443/2006.

In a first time GPCETI has refused to register branches, and then starting from July 2007 the GPCETI has accepted applications to establish Libyan branches of foreign companies to perform business in the oil sector.

Since the beginning of April 2008, the GPCETI consider that regarding companies of the oil sector, only drilling companies can now create branches in Libya.

Branches may also be formed by companies registering under Investment and Tourism Law, and companies granted exemption by the GPC (major infrastructure projects). 

There is a list of 'allowed activities' that encompasses numerous other activities, but the GPCETIrefuses to register companies seeking to undertake activities other than as noted above.

So, except in specific circumstances, any company which executes a contrat in Libya should now consider only the creation of a Joint Venture in Libya in the form of a new type of company called "Musharaka".

A Mushtaraka is a joint stock company which presents certain specificities.

Its regime is defined in the Libyan Commercial Code of 1954, and in the Decision of the GPC No. 171 / 1374 (2006) pertaining to the implementation of the regulations of Law No. 21 / 1369 (2001) on the exercise of commercial activities.3

Pursuant to Articles 18, paragraph 2, 53 and 54 of the GPC Decision 1374/171 a joint venture, in the mandatory form of a mushtaraka can be formed between Libyan and foreign:

-- Legal entities (companies)
-- natural persons (individuals)
-- Legal entities and natural persons 

If the joint venture in the form of mushtaraka includes natural persons, the number of these natural persons should be at least ten (10) (ten being a minimum), furthermore none of these natural persons should have more than ten per cent (10%) of the share capital.

Under Article 54 of the Decision No. 1374/171 the participation of Libyan partner in the capital of a Mushtaraka should be not less than 35% and this minimum participation of the local partner must be maintained throughout the duration of the company.

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