HOME Legal Encounters In Gaza, the Institute of Law Organises a Legal Encounter on The New Company Law in Gaza

In Gaza, the Institute of Law Organises a Legal Encounter on The New Company Law in Gaza

Gaza - Wednesday, 8 April 2015: In partnership with the Konrad Adenauer Stiftung - Palestinian Territories,the Institute of Law (IoL) at Birzeit University organised a legal encounter on The New Company Law in Gaza enacted in Gaza during the internal Palestinian political split.

The event brought together a select number of legal experts, lawyers, and interested persons.

Mr. Sharhabeel Al-Zaeem highlighted reflections of the internal Palestinian political divide, including enactment of different regulations in the West Bank and Gaza Strip. Government functions have also been duplicate and contradictory. Adversely affecting the investment climate, the internal political divide has prevented investors from expanding or starting new investments. With the exception of the 2008 incidental amendments, political, security and economic conditions have further precluded promulgation of a consolidated Palestinian Company Law.

If enforced, provisions of the new Company Law will stir much controversy. In comparison to operative laws, Article 2 of the new enactment prescribes that “[p]rovisions of the present Law shall be applicable to the company, which deals in commercial activities in a manner that does not contradict provisions of the Islamic Law [Sharia].” This provision raises a question about the mechanism needed to deal with existing commercial banks. Given that they deal in non-Islamic banking transactions, how can this Law be applied to these banks? Article 10 of the new Law gives rise to another controversy: “The Minister shall have the power to cancel a company from the Company Register in the event it does not exercise its operations within a year from the date of its registration.” However, this, and subsequent articles, do not provide a mechanism to appeal or challenge the decision on de-registration of a company. Article 12 addresses registration of companies incorporated in Palestine in line with agreements concluded by the Palestinian government with other governments. According to speculations, gas fields discovered off the coast of Gaza are the main rationale behind this article. To exclude previous contracting arrangements, the government can conclude contracts with new corporations for gas exploration. Article 13 allows the Council of Ministers to transform any public institution, authority or body into a shareholding company that operates in line with commercial principles. Accordingly, the Gaza government can transform public authorities, such as the Land Authority, Energy Authority and Radio and Television Authority, into shareholding companies. Article 191 sets a maximum limit (5,000 Jordanian dinars) for honoraria paid to members on boards of directors of shareholding companies. As a result, many persons may decline membership on corporate boards. In fact, considerable responsibilities require that board members receive a suitable honorarium and incentive.

In relation to registered companies, Mr. Al-Zaeem reviewed substantial changes introduced by the new Company Law to capital requirements and method of payment. According to the Law, a company with limited liability must have a capital of not less than JD 50,000. 50% of the capital must be paid before registration fees are collected. The rest is paid over a period of two years. As a result, the number of registered companies might decline in the Gaza Strip. In the West Bank, the operative Company Law provides that the capital should not be less than JD 10,000. 25% of the capital is paid at the time of registration and the rest is satisfied over four years. Compared to companies provided under laws in force, Mr. Al-Zaeem made a presentation about the types of companies under the new Law, investigating each type and relevant goal of incorporation.

In the ensuing discussion, participants raised several questions, highlighting political and legal dimensions and impacts of the new Law on the investment climate. In addition to procedures needed to handle it, discussants explored the position taken by the private sector and Palestinian decision makers towards this Law.