By Othman Al-Juboori, Iraqi lawyer, expert in Iraqi labour law, Member of the Iraqi Bar Association, founder and Managing Director of Al-Taswia Legal Services Company.
Opening a foreign branch in Iraq gets much attention; closing it gets little, yet a proper exit protects the parent from obligations that outlive its departure. Foreign Company Branches Regulation No. 2 of 2017, as amended, provides two ways for a branch to end: liquidation requested by the company, and cancellation of the registration licence by the Companies Registrar.
Requesting liquidation. The foreign company applies to the Registrar if it is declared bankrupt, loses its legal personality through a merger, or decides to wind up the branch and end its business in Iraq. The application is due within 60 working days of the Iraqi mission in the home country authenticating the supporting documents (Art. 12, First).
The sequence. The company appoints one or more liquidators to pursue the liquidation. The Registrar issues the liquidation decision within 15 working days of the application. The liquidator publishes it once in two local newspapers, and the Registrar notifies the relevant Iraqi bodies within 7 working days of the decision. The branch must finish liquidation and file final liquidation accounts within two years of the decision; the Registrar then strikes the branch off within 7 working days of the end of liquidation, publishes the decision in its internal bulletin and informs the relevant bodies (Art. 12, Second to Ninth).
If liquidation is not completed. The Registrar must cancel the registration and strikes the branch off, and the foreign company remains liable for the branch's legal and financial obligations incurred while it operated in Iraq (Art. 12, Eighth). Deregistration does not erase debts or employee rights.
Cancellation by the Registrar. Under Art. 11, the Registrar shall cancel the registration licence and strike the branch off by reasoned decision if the branch has carried on no commercial activity under Art. 6 for four years from its last activity; has failed, without legitimate excuse, to attend the Registrar with its final accounts and required documents for two consecutive years after the licence was issued; is proven to have submitted forged documents or inaccurate and misleading information; or is proven to carry on activity contrary to Iraqi legislation or acts affecting national security. The foreign company may challenge the decision before the competent court. Leaving a branch dormant without an orderly liquidation is therefore not a safe option.
Employees first. The end-of-service gratuity is due in all cases under Labour Law No. 37 of 2015, and the entity that registered the worker with the Workers' Retirement and Social Security Department and paid the contribution remains liable for the worker's contributions after the end of service until the date of notification of the end of service (Law 18/2023, Art. 24, First), so notify promptly. Close out foreign workers' files and work permits within the same liquidation plan.
How we help. We review the branch's position before the closure decision, prepare the liquidation application, follow it up with the Companies Registration Department, and close out employment files.
We serve clients in Baghdad, the Kurdistan Region and Basra from our Baghdad office, with a team of 15 lawyers. Branches registered in the Kurdistan Region follow KRG procedures not covered here.
www.al-taswia.com
General information, not legal advice. / معلومات عامة وليست استشارة قانونية.