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Transcript
PROPOSING A PROJECT-LAW FOR SIMPLIFIED
JOINT-STOCK COMPANIES IN LEBANON S.A.S “Société
par Actions Simplifiée”
Dr Fouad Zmokhol – Chargé d’enseignement à la FGM
Président du « Rassemblement de Dirigeants et Chefs D’Entreprises
Libanais » (RDCL)
The Lebanese private sectors truly believe that the SAS form of company will
facilitate the creation, development and growth of SMEs in Lebanon.
SMEs are very fragile organizations sensitive to various outside factors (local
and regional economy, trade barriers, cost structure) and to their legal
environment in general. Any sustainable ambition to improve the business
environment for SMEs will have to look at various factors and their implications
on the development of these enterprises. Beyond direct or indirect subsidies and
various transactional initiatives, SMEs need to operate in environments that will
encourage constructive and healthy development dynamics.
SMEs in the recent past have been moving from family/individual businesses
with their own self-financing capabilities to businesses requiring the cooperation
or pooling of various player categories upfront.
Successful SMEs development along its various stages require flexibility,
mobility, fast track execution, and reassurance on their rights guaranteed by the
business law.
Typically, SMEs go through various development phases and will require
funding at different stages. Also, they will need opening to outside talents. This
will result in temporary swings in the balance of power, added value and of
course risk sharing distribution. Complicated or rigid requirements or constraints
can stall the development of SMEs, or even dramatically accelerate their exit
from the market.
The current Lebanese Commerce Law offers a very limited spectrum of options
for the legal set-up of companies:
Sarl : société anonyme à responsabilité limitée (limited liability Company):


Is designed mainly for small businesses with limited need for outside
capital
Is not equipped to attract outside investors along its development phases
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
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Is not attractive to outside creditors (limited liability)
Does not have the minimum checks and balances and accountability
procedures to attract outside players (silent partners, experts vesting
plans)
Any change in the statutes, shareholding or the business requires
procedures that are tedious and relatively uncertainly long or costly
Usually, it is ideal for owner /manager with limited reporting
/accountability constraints or requirements.
SAL: Societé Anonyme Libanaise or Joint Stock Company basically requiring a
board with accountability, a relatively heavy set of requirements in terms of
reporting to the public authorities and well organized by the Commerce Law.
Currently the most dramatic hurdles to create and develop SMEs in the
Lebanese business environment come from three major sources:
1) The close relation by law between capital and authority (as set by the
Commercial Law) which results in scaring away experts and
entrepreneurs to partner with outside capital and which imposes long and
tedious uninformed negotiations or dialogue of the deaf
(Expert/entrepreneurs ask for the Capital up-front for high stakes in
companies to secure authority in the organization; Capital needs needs to
oversee more their investment). Discussions take too long and they often
lead nowhere
2) The legal limitations for the integration of contractual agreements among
various players where all issues are addressed and where the rights are
protected and the clauses are effectively executable. Here again any
balanced agreement will be requiring long, tedious and expensive
customization and craftsmanship efforts, and many potential “joining
forces” efforts are dropped because of the difficulty to design platforms
for cooperation
3) The constraints and requirements of the SAL with respect to the real
needs of the SMEs are scaring the SMEs managers with their
overwhelming responsibilities and requiring efforts with limited added
value to the development and growth of their organizations. Equally
frustrating is the fact that SMEs that start on a fast track as SARL, later
find it complicated and tedious to upgrade to SAL structure and penalize
themselves with a tight and often limiting structure.
The French system from which the Lebanese system is entirely inspired and on
which it is based/benchmarked has developed its own set of laws to facilitate the
administrative work for SMEs while maintaining an acceptable level of flexibility
in the relations among the various parties.
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SMEs in France can conveniently operate under the legal structure of a “Societé
par Actions Simplifiée” (SAS), a legal framework more adapted to their needs
and equipped to address their concerns.
The Lebanese Government needs to look at the SAS section already developed
and tested in France (where SMEs with a SAL structure have dropped from 40%
in 2000 to 10% five years after the introduction of SAS structures) and come up
with a customized version for the Lebanese SMEs.
The Lebanese Government can take useful and effective action for SMEs
by integrating a law for a SAS type of legal structure in its programmed
overhauling of the Lebanese Commerce Law. It is fundamental to provide the
structural direction for SMEs before considering traditional and standard
incentive programs proven to be more costly and to have overall less
sustainable effects.
3