IRAQ Law and Practice Contributed by: Ahmed Al-Janabi, MENA Associates in association with Amereller
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
Financial due diligence • Examination of financial statements, bank accounts and outstanding liabilities. • Analysis of cash flow, profitability and debt levels. Operational and commercial due diligence • Assessment of the target’s business model, market position and customer base. • Evaluation of supplier relationships and key con - tractual obligations. Employment and labour matters • Confirmation of compliance with Iraqi labour laws, including employee contracts and social security contributions. • Review of the composition of the workforce and related liabilities. Regulatory compliance • Verification of regulatory filings and compliance with Iraqi Companies Law and other relevant regu - lations, despite the challenges posed by incom - plete public records. Risk and liability assessment • Identification of potential legal liabilities, ongoing disputes or pending litigation. • Evaluation of insurance coverage and any contin - gent liabilities. Intellectual property and assets • Confirmation of the ownership of intellectual prop - erty and other critical assets. • Investigation of any encumbrances or disputes over these assets. Given the challenges in obtaining reliable public records in Iraq, a comprehensive due diligence pro - cess is always recommended to fully assess the target company’s status and mitigate risks. 5.4 Standstills or Exclusivity Under Iraqi regulation, neither standstills nor exclu - sivity provisions are mandated. These conditions are typically negotiated between the parties, rather than being required by law.
Disclosure Requirements for Target Companies Iraq’s law does not mandate a specific stage at which a target company must disclose a deal. There is no legal obligation to disclose when first approached, during negotiations, upon signing a non-binding let - ter, or at the point of signing definitive agreements. Acquirer’s discretion Acquirers can stipulate disclosure conditions within the deal terms. This allows them to require the target to disclose relevant business information at a particu - lar stage, based on their requirements. 5.2 Market Practice on Timing Timing of Disclosure There are no statutory regulations governing the tim - ing of disclosure in this context. As a result, market practice is the dominant criterion. Market practice prevails In the absence of legal requirements, companies follow prevailing market practices to determine the appropriate timing of disclosure. Discretion in negotiations Acquirers and targets can agree on disclosure condi - tions during negotiations, allowing flexibility to meet their specific needs. 5.3 Scope of Due Diligence Scope of Due Diligence in a Negotiated Business Combination in Iraq Due to the instability in Iraq and the often incomplete and inaccessible public records, a very detailed due diligence process is essential. The following aspects are typically scrutinised. Corporate records and legal structure • Review of articles of incorporation, shareholders’ resolutions and any amendments. • Verification of the company’s legal status and organisational structure, recognising that public records may be incomplete.
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