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MTL Circular. 18th February 2007
New rules effecting branches of foreign companies in Libya:
On 14th of November 2006 GPC issued decision 443/2006 that introduced some fundamental issues into the structures of business vehicles of foreign companies doing business in Libya . The Decision was unclear in various aspects. The un-clarity of the decision prompted GPCETI to issue a circulation on November 30th, 2006. The fundamentals of the new decision can be summarized as follows:

  1. The Libyan government introduced a fundamental change to the acceptable structures of business vehicles of foreign companies operating in Libya.
  2. As a general rule foreign contractors are no longer required nor permitted to establish or maintain company branches in Libya except for (i) branches with existing contracts signed prior to 14th November 2006 until completion thereof (ii) by special permission at the discretion of GPC in consideration of the nature of the relevant project.
  3. Foreign contractors who wish to establish or maintain business presence are required to establish joint venture companies with a specialized local entity.
  4. All activities that may be performed by foreign companies in Libya (listed in GPC decision 13/2005) are within the scope of the application of the above.
  5. The required joint venture companies are a special type of Libyan companies where foreign ownership is allowed up to a maximum of 65%. of its share capital.
  6. The philosophy behind these new rules is to involve Libyan effective participation in the foreign contracting works in Libya.
  7. Implementation of the new rules by foreign contractors entails:
      a. Companies wishing to do business in Libya have to go through establishing joint companies unless otherwise exempted.
      b. Application for establishment of branches is no longer feasible expect in connection with specific project pre approved by GPC.
      c. Companies with existing branches need to restructure as in (a) expect if they have current contracts or special permission from GPC and only up to the completion of the relevant projects.
  8. The new rules are not applicable to :
      a. Representative Offices
      b. Business vehicles established or to be established under law 5/1997 concerning Encouragement of Foreign Investment.
      c. Business vehicles established or to be established under law 7/2004 concerning tourism.
In spite of the above the situation still looks volatile and further changes may be forthcoming.

 

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