In order to establish a foreign business in Libya, foreigners must acquire either an Investment License, which registers them in the Company House, or a Commercial License, which is regulated by the Ministry of Economy. Generally, foreign companies will obtain the Commercial License in order to run one of the seven types of businesses available in Libya.
In this article, we will be talking about the best types of businesses in Libya. There are many investment options in Libya to invest in. So, all you have to do is follow the proper regulations and select the one that fits your business plan the most. Starting a business in the area is an easy process if you have the support you need. If you are asking What are the key business opportunities in Libya? here, you will find out!
Joint Stock Company
The Ministry of Economy established with Decree No. (207) of 2012 that the joint-stock company is incapable of being a holding company. The joint-stock company can conduct within most business sectors in Libya.
Such as energy, infrastructure, telecoms, agriculture and industry, barring specific activities that are exclusive to Libyan citizens.
A minimum of one million Libyan Dinars (1,000,000 LYD) is necessary to form a joint-stock company, with 30% of the total amount being paid on registration and the rest within five years. This capital can be taken back out at any point.
The Libyan investor will own 51% of the joint-stock company while the foreign investor holds 49%. Although with the approval of the Minister of Economy, the foreign investor’s stake can raise to 60% for certain activities. Establishing a Joint-Stock Company requires a number of legal documents from both natural and legal entities who are foreign investors.
To start this type of business in Libya, a legal person must provide:
- MoA and AoA.
- Resolution of Board of Directors.
- Dommercial Register.
- Bank Certificate.
- A record showing evidence that the distribution of shares has been completed, regardless of whether the Libyan partner or the foreign partner was responsible for it.
- Investor’s valid passport.
- Legal age proof.
- Clear criminal record.
- Bank Certificate.
- Share in Kind.
The Joint-stock business in Libya must abide by the following limitations when carrying out operations:
- Tech and knowledge transfer.
- Hire Libyan staff.
- Provide training.
- Provide replacement programs.
The person responsible for the Board of Directors of the Joint-stock company must be of Libyan origin.
JSC cannot practice these activities:
- Retail and wholesale trade.
- Importation activities.
- Catering services.
- Commercial agencies’ activities.
- Land transport services.
- Examining all imported and exported goods and commodities, unless the Minister has already provided permission to do otherwise.
- The activity of managing, transporting and unloading at airports.
- Legal/financial audit works.
- Packing activity.
- Stone crushing (breakers).
- Civil works and construction activities worth up to thirty million Dinars.
- Any other area of activity that is for Libyan citizens only by law.
The Ministry of Economy and the Ministry of Manpower are in charge of overseeing the founding of a joint-stock company in Libya. The Ministry of Manpower’s involvement in this process relates to Libyan personnel as 25% of the joint-stock company staff must be from Libya.
Foreign Company Branch in Libya
In order to operate a business in Libya, a company must be registered there. The Commercial Code determines the requirements for a foreign business to open a branch in Libya, which must be approved by the Ministry of Economy in accordance with Article 7 of Decree No. 207 of 2012. The branch will have a five-year term that can be extended multiple times, with fees to be paid at each renewal. In contrast, a joint-stock company can remain open for an indefinite period of time, with only the registration fees to be paid. Moreover, foreign firms’ branches are monitored more closely by the Tax Department than joint-stock companies.
The necessary documents to make the most of Libyan business opportunities with a branch are:
- Application form.
- AoA and MoA.
- Board’s Resolution.
- Activity description.
- Branch Manager appointment.
- 250,000 LYD minimum capital.
- Certificate of Experience.
- Commercial Register.
- Bank Certificate.
- The foreign company promises to produce a balance sheet and profit and loss account for their branch in Libya.
A branch business in Libya can undertake the following activities:
- Firstly, construction and civil work.
- Oil services.
- Communication supply.
- Survey and planning.
- Environmental protection.
- Health services.
- Also, aviation services.
Setting Up Representative Office
In accordance with Law No. (23) of 2010 and Decree No. (207) of 2012, it is permissible for a foreign company to open a Representative Office in Libya. The purpose of this office is to research the local market, collect data, and help the company to carry out its activities in the country without the power to enter into agreements. Likewise, the Representative Office can stay operational for a period of two years, with a chance to extend for one additional period.
To make the most out of the Libyan business opportunities, you must provide:
- AoA and MoA.
- Board of Directors Resolution.
- Commercial Register.
- Representative Office Manager Appointment.
- Bank Account Opening.
The original Law No. 6 of 2004, which allowed for commercial agencies, was replaced by Law No. (23) of 2010. However, the Executive Regulation referred to in Chapter 14 of this law has yet to be approved. As such, the commercial agencies in Libya are subject to the Decree issued in 2007 until the Executive Regulation is sanctioned. A Libyan agent must be chosen through the Agency Agreement, which must be endorsed by the Ministry of Economy.
Although parties may agree on their own terms, certain restrictions have been imposed by the Ministry of Economy.
- The agreement between the commercial agency should not contain any clauses granting exclusive rights.
- The principal must originate from the main company, not from a subsidiary.
According to section 375 of this statute, a foreign individual is not permitted to promote their products, items, and services in Libya without the assistance of a local representative. In the case of a legal entity, it must be completely under Libyan investors.
An additional ruling concerning commercial agencies is in the midst of being composed and still needs to be sanctioned.
This investment fund was initially established in accordance with Article 379 of Law No. 23 of 2010 and was created through Article 2 of Law No. 11 of 2010 regarding the Stock Market. The fund may not be formed without getting prior approval from the Public Monetary and Supervisory Board for Non-Banking Financial Installments. The founder is able to create more than one fund.
This form of investment fund allows for up to 10 times the paid capital to be leveraged. All entities such as Banks, Insurance Companies and Financial Institutions are eligible to create this type of fund.
A foreign investor may invest in commercial notes as per Article 16 of Law 11 of 2010. However, they cannot invest in banking activities such as granting loans or guarantees. Additionally, they are cannot establish a new company or purchase shares outside of the Libyan Stock Market.
Establishment of Free Zones
The idea of setting up free zones in Libya was originally brought up in Law No. 9 of 2000. This law provides the legal basis for the establishment of free zones, but it does not establish any areas itself. Instead, it gives the Prime Minister the power to create such zones at the request of the Minister of Economy.
Later that same year, the Prime Minister issued Decree No. 495, which declared the formation of Misurata as a free zone in Libya (this was later modified by Decree No. 32 of 2006). In 2006, Decree No. 215 declared Zwara-Abu-Kemmash to be a free zone, and this was later converted into Law No. 9 of 2010.
Although the Misurata and Zwara-Abu-Kammash free zones have already been established, enabling foreign companies to establish a branch or a company in either zone, the registration fee for doing so is 100,000 USD. The Benghazi free zone, however, is still in the process of being established.
Foreign Capitals Investment
The Government has been making ongoing efforts since 1997 to draw in both domestic and foreign capital investments with Law No. (5). Law No. (9) of 2010 “Investment Promotion” was enacted to bring investments into Libya within the scope of the overall policy and objectives of economic and social progress, particularly with the purpose of:
- Assist transfer of technology.
- Create Libyan technical cadres.
- Accelerate diversification.
- Encourage development.
- Achieve local development.
The following forms of investment of both domestic and foreign capital are under this law in the context of a project capital set-up:
- The currency of the region and exchangeable foreign currencies.
- Tools, systems, factories, installations, replacements, and components required for the project.
- Ethical privileges such as patents, permits, brand names, and trade names.
- A portion of the project profits and earnings that is reinvested, either in the same project or a different one.
The size of the investment project will be 5,000,000 LYD for international investors and 2,000,000 LYD for local investors. According to the legislation, authorization to commence the project will be provided by the Investment Promotion Board and the Minister of Economy. Furthermore, the project needs to be registered in both the Commercial and Investment registries.
This law targets various sectors including:
- Lastly, any other area set forth by the Ministry of Economy.
The Ministry of Economy is making changes to rules and regulations to try and revive an inviting atmosphere for investments. It is likely that we will observe progress in investment regulations soon. Additionally, several embassies evacuated from Libya due to the civil war. However, there are numerous indicators that they could return soon now that the National Unity Government has been appointed, especially if the current stability persists.
Finally, if you want to learn more about Local and foreign business in Libya, you can check our insights section now!