Investing in Syria: does a foreign investor need a Syrian partner?

As investors show growing interest in establishing businesses and projects in Syria, a set of basic legal questions arises that an investor should understand before beginning to operate. Below are the principal questions and answers on company formation, licences, partners, profit transfer, and the difference between the various legal forms of investment.

What does an investor in Syria need before starting their project?

It begins with identifying the nature of the activity the investor wishes to carry on and the legal form suited to the project, then determining the requirements and licences needed for that activity. It cannot be said that every type of company requires a special licence: that depends primarily on the company’s objects and its activity.

For example, a company importing and exporting construction materials does not need a special licence to carry on that activity, whereas an activity concerning, say, the manufacture of tractors or agricultural equipment may require a licence from the Ministry of Industry. Defining the activity and objects precisely from the outset is therefore among the most important legal steps an investor must take.

Is a foreign investor required to have a Syrian partner when forming a company in Syria?

Not necessarily. Where a foreign investor wishes to form a company in Syria, the other partner may be a foreign individual or a foreign legal entity, and may equally be a Syrian partner. There is therefore no general rule obliging a foreign investor to have a partner of Syrian nationality exclusively.

If, however, the investor wishes to register a branch of their foreign company in Syria, no partner is needed, because a branch is not founded on the existence of partners as an independent company is.

What is the difference between an independent company, a branch and a representative office?

The independent company

A company established in Syria under the provisions of Syrian law: its articles of association are prepared, its capital is set and it is registered in Syria, and it acquires a legal personality separate from the persons or companies that own or hold shares in it. The company is therefore a legal entity independent of its partners.

The branch of a foreign company

A branch is an extension of the foreign parent company inside Syria and does not, in principle, constitute a Syrian company independent of the parent. It is tied to the foreign company in its formation, governing rules, management and funding, under the legal provisions regulating the registration of branches and the conduct of their activity in Syria. A branch therefore needs no partner, because it is not a company founded on a partnership between persons.

The representative office

A representative office differs from both the independent company and the branch: through it, the foreign company represents its interests in Syria within the limits and objects the law permits. The relationship between the foreign company and the party undertaking the representation may be regulated by an agreement setting out the nature of the representation work and the agreed remuneration, while the legal personality of each party remains independent of the other.

Can an investor transfer profits out of Syria?

The transfer of profits and returns abroad is tied to the legislation and regulations in force on foreign exchange and financial transfers, to the nature of the investment and the legal form of the project, and to discharging the legal and tax obligations arising from it. An investor should therefore study the mechanism for transferring profits and funds abroad before establishing the project, not after beginning to operate, so as to choose the legal and financial structure suited to the project and to comply with the regulatory requirements in force.

What are the principal legal risks an investor may face, and how can they be avoided contractually?

In practical terms, choosing the appropriate legal form and regulating the relationship between partners and managers clearly are among the most important means of limiting legal risk. In a limited liability company, a partner’s liability is in principle limited to the extent of their contribution to the company’s capital and does not automatically extend to their personal assets merely because the company has obligations. That is why the limited liability company is among the most common legal forms in commercial ventures.

The company’s articles of association likewise play a fundamental role in defining the powers of partners and managers, the decision-making mechanism, the limits of delegation and the manner of managing the company. Studying and drafting the articles precisely, together with drafting commercial contracts clearly and setting out each party’s rights and obligations, the dispute resolution mechanisms, the liabilities and the delegations, are therefore among the most important means of helping an investor limit legal risk and protect their investment.

In summary

Protecting an investment does not begin at the moment the first contract is signed. It begins with choosing the correct legal form for the project, defining the company’s objects precisely, knowing which licences are required, and regulating the relationship between partners, managers and contracting parties clearly. Obtaining specialist legal advice before establishing the project can therefore help an investor avoid many of the legal difficulties that may surface later, during the conduct of the activity.