The Decline of Incorporating Holding Companies Working in Iraq
To tackle the reality of the holding companies in Iraq, we have, as a first step, to discuss the interpretation of the Iraqi legislator to the holding companies.
Holding companies, according to Iraqi law no. (17) for the year 2019 in which it is the form of the amended law no. (17) For the year 1997, the (Holding Company) is a limited or corporate company that takes control of one company or a group of limited corporate companies. The holding company has the right to own half of the capital of the company as well as the principle of control and management. This feature makes it able to take control of the board of directors of corporate companies.
As stated in Iraqi law, the holding company can own movable equities and properties. It has the right to incorporate new companies that emerged from it and participate in the management of the other companies. The holding companies can invest their equities in the stock market, submit their proposals, fund and make insurance. It has also the right to own patents, trademarks and franchises.
But one of the reasons these companies decline is the economic infeasibility because it needs huge equities to begin working properly.
In addition to that, any defect or legal or technical infringement to one of the subordinate companies of the group will have great damage to all of these companies. Hence, the principle of joint liability will greatly impact all companies under the umbrella of the parent company. This will lead to grave damage to the other companies that do not participate in this damage.
One of the most important points that weaken the tendency of the stakeholders to incorporate the holding companies is the unclearness of the conception of the holding companies in Iraqi law, the uncertainty of economic infeasibility and the aspects that can be made benefit it.
The Iraqi legislator has imposed on the holding companies great rates to be paid to governmental institutions like General Commission for Taxes, Social Security Department and others. This has resulted to be under the burdens of great payments that may be incompatible with economic feasibility.
These aspects are the main reasons to abstain the investors the incorporation of the holding companies even though it has the main priority among the companies to involve in the field of projects and auctions.