IRAQ Law and Practice Contributed by: Ahmed Al-Janabi, MENA Associates in association with Amereller
7.3 Producing Financial Statements Financial Statements in Disclosure Documents In the context of a share transfer in Iraq, disclosure obligations differ based on the legal status of the par - ties. Financial statements are required only from legal entities rather than natural persons. If the buyer is a legal entity, financial statements (whether pro forma or otherwise) must be provided. These financial statements must be prepared in accordance with the unified accounting system used in Iraq, ensuring consistency in financial reporting. This framework ensures that only relevant entities are held to these disclosure standards, in line with Iraqi accounting practices. 7.4 Transaction Documents Disclosure of Transaction Documents For a share transfer in Iraq, full disclosure of the trans - action documents is required. The following docu - ments must be disclosed and filed with the Compa - nies’ Registrar:
8.2 Special or Ad Hoc Committees Under Iraqi law, there is no requirement or regulation mandating the establishment of special or ad hoc committees in business combinations. 8.3 Business Judgement Rule Court Deference to the Board of Directors in Takeover Situations In Iraq, courts strictly adhere to statutory provisions when evaluating takeover situations. Unlike the busi - ness judgement rule in the United States, which affords significant deference to the board’s deci - sions, Iraqi courts do not automatically defer to the board’s judgement. The focus remains on the legal requirements as set out in the applicable laws, and the board’s decision does not influence the court’s interpretation or application of those laws. 8.4 Independent Outside Advice Due Diligence Oversight Reputable local attorneys, who are admitted and well- versed in Iraqi law, typically conduct and oversee the due diligence process. Primary Independent Advice This due diligence review is the most common form of independent outside advice provided to directors, ensuring that all legal, financial and regulatory matters are thoroughly assessed. 8.5 Conflicts of Interest Judicial and Regulatory Scrutiny of Conflicts of Interest in Iraq Iraqi laws regulate conflicts of interest for directors, managers, shareholders and advisers. However, in practice, such conflicts are not monitored to a high extent. Conflict of interest provisions are included in relevant corporate and commercial legislation. Enforcement and oversight of these provisions tend to be limited compared with other jurisdictions.
• Share Transfer Resolution; and • Share Purchase Agreement.
8. Duties of Directors 8.1 Principal Directors’ Duties
Directors are primarily responsible for managing all aspects of the company, including its legal, adminis - trative and financial affairs. Their role is to ensure the smooth operation and governance of the company during the business combination process, with par - ticular focus on the following. • Management of company affairs – directors must oversee and manage all facets of the company’s operations, ie, legal, administrative and financial. • Reporting obligations – directors report exclusively to the direct shareholders of the company, rather than to all stakeholders.
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