1. To: Engineering Management 654 “ Technology Entrepreneurship” American University of Beirut 8 April 2013 By: Rindala Beydoun Celine Bsaibes Magda Farhat What you need to know to start a company in Lebanon, the United Arab Emirates and Saudi Arabia

2. Section 1: Most Used Companies in Lebanon Section 2: Most Used Companies in the United Arab Emirates (UAE) Section 3: Most Used Companies in Saudi Arabia (KSA) 2

3. Section 1: Most Used Companies in Lebanon The most widely used companies in Lebanon are:  The limited liability company (known as SARL - Société à Responsabilité Limitée); and  The joint stock company (known as SAL - Société Anonyme Libanaise). Said forms of companies limit the liability of the shareholders to their capital contribution. In other words, in case of losses, the risks of a shareholder are those of losing the capital it contributed without its personal assets being at stake. SAL and SARL have different minimum capital requirements and shares are more easily transferred in a SAL compared to in a SARL. This usually reflects the main difference between the SAL and SARL which is that SAL is more anonymous in nature in the sense that the identity of the shareholders does not play an important role in the company’s business. Other forms of widely used Lebanese companies are the holding company and the offshore company which are joint stock companies with certain particularities mainly related to the nature of the activities they exercise:  The holding company is defined as a company that owns other companies' outstanding stock. The term usually refers to a company which does not produce goods or provide services; rather, its purpose is to own shares in other companies.  The offshore company is a company incorporated in Lebanon, but can only operate outside the Lebanese territory. 3

4. Limited Liability Company (S.A.R.L.)Joint Stock Company (S.A.L.) Time to Incorporate2 to 3 days Cost of IncorporationAround USD 1,300 (excluding legal fees) Around USD 1,800 (excluding legal fees) Minimum Share Capital Requirement 5,000,000 L.L.30,000,000 L.L. OfficeOffice in Lebanon required Partners/Shareholders3 to 203 or more Foreign Ownership100% foreign ownership allowed. Exception: for commercial representation activities, (i) the majority of number of shareholders should be Lebanese nationals; and (ii) the majority of share capital should be held by Lebanese nationals Foreign ownership allowed except for the guarantee shares held by the directors. Exception: for commercial representation activities, the majority of the capital should be held by Lebanese and the chairman/general manager should be Lebanese. Management1 director or more managing the company that can be a non-shareholder (the director(s) may not be Lebanese) Board of directors composed of 3 to 12 members, the majority of whom should be Lebanese (a chairman/general manager shall be elected) Restricted ActivitiesBanking, financial and insurance activitiesnone Share transferShares cannot be transferred to third parties, unless prior approval of shareholders representing at least 75 % of the capital Free transfer of shares LawyerRequired AuditorNot required except if there are more than 20 shareholders or the share capital is L.L. 30,000,000 or more Required 4

5. 5 Holding CompanyOffshore Company ActivitiesThe activities of a holding company are restricted to the following: -Acquiring shares in joint-stock or limited liability companies, or in public or private Lebanese or non - Lebanese companies. -Managing companies in which it holds shares. -Lending companies in which it holds shares. -Possessing and licensing intellectual property rights such as patents, discoveries, concessions, registered trademarks and others. -Holding moveable or immoveable assets provided that such assets are used solely for the operations of the company. The activities of an offshore company are restricted to 10 activities, mainly: -Negotiating and signing contracts and agreements related to operations and deals to be executed outside Lebanon. -Managing companies which operate outside Lebanon. - Acquiring shares, bonds and participations in foreign non-resident establishments and companies, and granting loans to non-resident establishments in which capital the offshore company holds more than 20%. -Opening branches and representation offices abroad. An offshore company is prohibited from engaging in industry, banking, operations, insurance or any other commercial activity in Lebanon. It is also prohibited from earning any profits or revenues through moveable or immoveable assets in Lebanon, or through providing services to companies located in Lebanon, except for its interests on its bank accounts. Advantages-The holding company is exempt from taxation on profits and dividends’ distribution. -Board members can all be foreigners. -Annual lump sum tax of L.L. 1,000,000; an offshore company is exempt from taxation on profits and dividends’ distribution. -Board members can all be foreigners. In addition to the general rules governing the joint stock company in Lebanon, the holding and the offshore companies are governed by specific rules set forth respectively in decree-law 45/1983 and 46/1983:

6. Section 2: Most Used Companies in the UAE  One of the most widely used companies in the UAE is the limited liability company (LLC) in which each partner’s liability is limited to the extent of its share contribution in the capital. The LLC can carry out all kinds of activities except insurance, banking and investment activities.  The private joint stock company (PJSC) is less widely used in the UAE. The shares of a PJSC cannot be offered to the public or for public subscription unlike the public joint stock company. Foreign ownership in both the LLC and the PJSC is limited to 49% of the share capital of the company. However, foreign investors can achieve near 100% ownership of LLCs via what is known as the “local sponsorship scheme documents”.  Free zone companies are defined as special purpose vehicles that can be suitably used as investment companies, holding companies, real estate holding companies, for investments purposes inside and outside the UAE and for international trading. Free zone companies can be 100% owned by foreign investors.  Offshore companies can be set up in some of the UAE free zones such as Jebel Ali Free Zone and Ras Al Khaimah Free Zone. No office is required. 6

7. Limited Liability Companies (L.L.C.)Private Joint Stock Company (P.J.S.C) Time to Incorporate14 working days-- Cost of IncorporationAround AED 40,000 (around USD 10,900) -- Minimum Share Capital Requirement AED 300,000 (around USD 81,670) (Dubai) AED 2,000,000 (around USD 544,500) (Dubai) OfficeOffice in UAE is required Partners/ShareholdersMinimum 2 and maximum 503 or more Foreign Ownership49% foreign ownership (100% Gulf Cooperation Countries’ (GCC) ownership allowed for most sectors) 49% foreign ownership (100% GCC ownership allowed for most sectors) Management 1 director or more managing the company. Board of directors is optional if there is more than one director provided the directors are chosen among the shareholders and their number does not exceed 5 Board of directors composed of 3 to 15 members. The chairman and the majority of the board of directors should be UAE nationals LiabilityLimited to the number of shares held in the company Share transferShares cannot be transferred to third parties without the prior approval of shareholders representing at least 75 % of the capital Free transfer of shares Restricted ActivitiesBanking, finance and insurance activitiesnone Lawyer /AuditorRequired 7

8. UAE Free Zone Companies 8  A free zone company is subject to free zone regulations. This type of company can be established either as:  a free zone establishment (FZE) in which the sole shareholder is an individual or a corporate entity;  a free zone company (FZCO) composed of 2 or more shareholders (individuals or corporate entities); or  a branch of a foreign company.  The main advantages of free zone entities are as follows:  100% foreign ownership (no local partner or sponsor);  Fast and easy incorporation process;  No minimum share capital requirement;  Guaranteed income tax exemption;  Duty free imports of goods into the free zone; and  Facilities concerning licensing, work permits and residence visa.  The main disadvantage:  Cannot sell goods or provide services inside the UAE.  Few examples of Dubai free zones:  Dubai Airport Free Zone (DAFZ)  Dubai Silicon Oasis  Dubai Technology and Media Free Zone (TECOM)  Jebel Ali Free Zone (JAFZ)

9. Offshore companies are allowed to:  open bank accounts in the UAE;  become shareholders in a new or existing company in the UAE and other jurisdictions;  hold shareholders’ and directors’ meetings within the UAE; and  carry out international trading. Offshore companies are not allowed to:  carry on business with persons resident in the UAE;  own an interest in real estate property situated in the UAE, other than a lease property referred to in the regulations or approved by the authorities;  carry on a banking business;  carry on business as an insurance or re-insurance company, insurance agents or insurance brokers; and  carry on any other business which may, by regulations, be prohibited by the authorities. 9

10. Section 3: Most Used Companies in KSA 10  One of the most widely used companies in KSA is the limited liability company (LLC) in which each partner’s liability is limited to the extent of its share contribution in the capital.  The joint stock company (JSC) is less widely used in KSA. The shares of a JSC can be offered to the public or for public subscription provided that the capital of the company in this case should exceed SR 10,000,000 (around USD 2,666,540).  Foreign ownership in both the LLC and the JSC should be licensed by the Saudi Arabian General Investment Authority (“SAGIA”) which is in charge of regulating foreign investments in KSA and issuing the relevant licenses to foreign investors. Note that SAGIA is showing reluctance to issue licenses lately.

11. Eligibility of the foreign investor to invest in KSA  The main condition required for obtaining the SAGIA license is that the business related to goods, services as well as the methods of production, must comply with KSA industry regulations and Shari’ah.  Another important condition for obtaining SAGIA’s license is that the amount of capital invested should meet the minimum capital required by SAGIA that varies according to the project of the investment:  For industrial development projects, the capital invested must not be less than SR 2 million (around USD 533,300)  For other investment projects, the capital invested must not be less than SR 500,000 (around USD 133,320)  Subject to the above capital requirement, foreign investors are allowed to invest in all KSA business activities except certain activities that must be owned 100% by KSA/GCC nationals or wholly-owned KSA/GCC companies. Few examples:  Oil exploration, drilling and production  Manufacturing of military equipment  Manufacturing of explosives for civilian use  Services such as security, recruitment and employment, land transportation, printing and publishing  GCC investors are allowed to invest in all KSA business activities with few exceptions. 11

12. Limited Liability Company (L.L.C.) Joint Stock Company (J.S.C.) Time to Incorporate4 weeks3 months Share Capital Requirement SR 500,000 (around USD 133,330) SR 2,000,000 (around USD 533,320) OfficeOffice in Saudi is required Partners/ShareholdersMinimum 2 and maximum 505 or more Foreign OwnershipSubject to SAGIA’s license: 100% foreign ownership except for certain activities for which only 75% foreign ownership is allowed (commercial distribution – engineering services – legal services – architecture services) Subject to SAGIA’s license: 100% foreign ownership except for certain activities for which only 75% foreign ownership is allowed (commercial distribution – engineering services – legal services – Architecture services) Management1 director or more managing the company. Board of directors is optional if there is more than one director Board of directors with a minimum of 3 members. Liability of shareholdersLimited to the number of shares held in the company Share TransferShares cannot be transferred to third parties without prior approval of shareholders representing at least 75% of the capital Free transfer of shares 12

13. Contact Details DUBAI OFFICE Level 41 Emirates Towers Offices Sheikh Zayed Road P.O. Box 72545 Dubai, UAE Tel: +971 4 319 9977 Fax: +971 4 330 3365 BEIRUT OFFICE Starco Bldg, Block B 11th Floor Omar Daouk Street P.O. Box 14-6137 Mina Al Hosn Beirut, Lebanon Tel: +961 1 376 016 Fax: +961 1 376 018 CORE TEAM CONTACTS Rindala Beydoun Managing Partner T: +971 50 553 2609 E: rbeydoun@t-lawadvisors.com Carlo Pianese Partner T:+971 56 603 4543 E: cpianese@t-lawadvisors.com Mothanna El-Gasseer Managing Partner, Riyadh Office T:+966 50 628 6942 E: melgasseer@t-lawadvisors.com Altakhassusy Street, across Prince Sultan Street, Alhakbany Buildings Building No 5, 1st Floor P.O. Box 67677 Riyadh, Saudi Arabia Tel: +966 1 482 3733 Fax: +966 1 4811042 RIYADH OFFICE 13