LIBYA Law and Practice Contributed by: Salaheddin El Busefi, Heba Gedwar and Mahmud Zahaf, Zahaf & Partners
tive and financial regulations similar to local companies. Representative Offices Main characteristics Representative offices are used by foreign com - panies to conduct non-commercial activities, such as market research or liaison functions. They are not permitted to engage in profit-gen - erating activities. • Staffing and Structure: They are simple to set up, as they only require an office manager. Most Common Vehicle in Practice In Libya, LLCs are by far the most popular cor - porate vehicle. Their popularity is largely due to: • the small number of partners required; • the low capital threshold; and • their broad eligibility for various types of com - mercial activities. 3.2 Incorporation Process The main steps begin with submitting an appli - cation to the Ministry of Economy, which is the competent authority responsible for approving the incorporation of companies. The application must be accompanied by a set of required sup - porting documents. Timeframes for incorporating a company vary depending on the type of company, how many members it has and its chosen activity. Typical timeframes can be anywhere from two weeks up to two months for a branch of a foreign entity; for national entities, the timeframe is shorter. 3.3 Ongoing Reporting and Disclosure Obligations Any change to a company’s shareholding com - position, paid-up capital or ultimate beneficial
ownership needs to be reported to the Commer - cial Registry where such information is recorded. A commercial register extract is then updated which shows the company’s shareholding, legal management and capital value. For tax purposes, financial statements need to be approved and submitted to the tax authority every financial year. 3.4 Management Structures Companies are required to have a board of directors, which typically includes the compa - ny’s shareholders, but not always. This means that the most common framework is a two-tier system that separates executive and non-exec - utive management. This is especially the case where the directors on a company’s board are non-executive and appoint an executive man - ager to carry out the company’s daily tasks and management. However, it is possible for share - holders to be on the board, with executive man - agement essentially becoming a one-tier system – although this is more common in smaller pri - vate companies. 3.5 Directors’, Officers’ and Shareholders’ Liability Under Libyan law, directors and board mem - bers bear both civil and criminal liability for their duties. They are jointly responsible for any harm caused to the company due to negligence or misconduct. Criminal liability arises in cases such as fraudulent or negligent bankruptcy, including improper disposal of assets, reckless accumulation of debts, record falsification, or unfair treatment of creditors. Convictions can lead to penalties and disqualification from com - mercial roles for two to ten years. The concept of “piercing the corporate veil” is not expressly recognised under Libyan law. The
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