The following are the types of Businesses in Yemen
Foreign Companies Operating in Yemen (Branch Offices)
An operating foreign company is a company or a body registered outside Yemen, whose head office is in another country, and whose nationality is non-Yemeni. Such companies are classified into two types according to the nature of their activities:
Non-Permanent: such as a foreign company that has been awarded a contract in Yemen requiring the execution of work within a limited period of time (e.g. a construction contract). Upon termination of the contract, new contracts can be obtained in order to extend the company’s operation. If no new contracts are obtained by the company, then the branch office should be closed and liquidated.
Permanent, which operate in Yemen permanently with licenses to that effect from the concerned authorities.
An operating foreign company is allowed to conduct commercial activities in Yemen after registering and obtaining a work permit.
Registration fees paid for a branch office are YR…. if the share capital of the foreign company at its home office does not exceed the equivalent of YR 1 million, and YR…. if the share capital of the foreign company exceeds the equivalent of YR 1 million.
A branch or project office must notify the Department of Companies in writing of the date it expects its operations to end in Yemen, or the date specified for the termination thereof, at least 30 days prior to that date. It must prove to the Department of Companies the settlement of all its commitments resulting from operating in Yemen prior to obtaining approval of registration cancellation.
Offshore Companies
An offshore company can take the form of a private shareholding company with limited liability, a limited partnership in shares or a public shareholding company. The offshore company is listed as a Yemeni entity, but cannot conduct any business in Yemen. Ownership of offshore companies is strictly for non-Yemenis.
Offshore companies cannot offer their shares for public subscription in Yemen.
The minimum share capital of an offshore company depends on its form:
· YR ………. for a private shareholding company with limited liability.
· YR ……… for a public shareholding company.
· YR 1,000,000 for companies offering financial services (banking, insurance, and re-insurance).
Any exempt company must register with the Department of Companies in a register reserved for Yemeni companies operating outside the country.
Upon incorporation, if an offshore company takes the form of a public shareholding company it must pay a registration fee of YR ……., and in all other cases it must pay YR…… The same fees are levied annually. Stamp duties due on registration amount to 3 per mille of its share capital.
Joint Ventures
A joint venture is a commercial undertaking formed by two or more persons, who may be natural persons or legal entities. A joint venture is not subject to the provisions and procedures of registration and licensing and does not have a separate legal identity. However, a joint venture is confined to the special relationship between partners in the venture as specified in the joint venture agreement.
General Partnerships
A general partnership is formed by a minimum of two and a maximum of twenty natural persons unless an excess of that number is due to an inheritance. Each partner is liable jointly and severally with all other partners for all the debts and obligations incurred by the company while he/she is a partner and shall be deemed a guarantor of such debts. Each partner is entitled to take part in the management of the partnership, although the partnership agreement normally provides for its authorized representative and signatory. The following are general partnership regulations:
· Any amendment to a partnership agreement requires the approval of all partners and must be registered with the Department of Companies.
· A partner may not withdraw from a general partnership that is formed for a fixed duration except by a court order.
· The withdrawing partner remains personally liable for the debts of the partnership as to the effective date of withdrawal and may be liable for the remaining partners for any harm or damage sustained as a result of withdrawal.
· A partner may not be expelled from a partnership except by a court order upon request of any of the partners.
· A partner may not sell or dispose of his interest in the partnership except with the approval of all other partners.
· The introduction of a new member to the partnership requires the approval of all existing partners unless otherwise stated in the partnership agreement.
· The new partner is only liable for the debts of the partnership that arise after the date of joining the partnership.
· A registration fee of YR…. is required upon registration.
Limited Partnership
A Limited partnership is formed by two categories of partners: general and limited. The general partners assume unlimited personal liability for the debt of the partnership jointly and severally amongst themselves. The liability of the limited partners for the debt of the partnership is limited to their contributions to the capital of the partnership. The following are limited partnership regulations:
· A limited partner may not take part in the management of the partnership nor act in its name. Failure to observe the said restrictions may render the limited partner personally liable for the debts of the partnership.
· A limited partner may relinquish his/her share in the partnership to another person. The recipient in this event either becomes a general or a limited partner. Consent of all partners is required to become a general partner.
· The limited partnership is dissolved and liquidated in the same manner as a general partnership, except that the bankruptcy or insolvency of a limited partner does not result in the dissolution of the limited partnership. In general, most of the provisions that apply to general partnerships also govern limited partnerships.
· A registration fee of YR… Is required upon registration.
Private Shareholding Company with Limited Liability
Most business organizations outside the “family” circle take the form of a private shareholding company (PSC) which may be formed by one shareholder or more. An application in this regard is made to the Controller of Companies, attaching the proposed Articles and Memorandum of Association. The following are PSC regulations:
· The liability of shareholders is limited to their shares in the company’s capital. The minimum authorized capital is set at YR …… of which at least 50% should be paid upon the incorporation of the PSC, with the remaining 50% to be paid in two years.
· A PSC may not offer its shares for public subscription, or increase its capital or borrow in that manner. It is also not permitted to issue negotiable shares or bonds. Existing shareholders have priority over non-shareholders to purchase shares in the PSC. The shares are issued at a nominal value of no less than YR.
· Any partner in a PSC may assign his share(s) to any of the partners or to others per a certificate of association. The approval of other partners, managers, or the management is not required.
· The management of the company can be entrusted to a single director or to a management committee of two to seven members who are elected for a four-year term.
· A PSC is obligated to annually retain 10% of its net profits as mandatory reserves (with a maximum capital of 100% of its authorized capital) and may retain up to 20% of its net profits as voluntary reserves.
· A PSC is obliged to prepare its annual balance sheet, its final accounts including the profit and loss account in addition to its annual account, and submit them all to the Controller together with the appropriate recommendations. Any shareholder has the right to inspect such accounts and records, which should be filed and registered with the Department of Companies.
· Registration fees amount to 1 per mille of a PSC’s share capital. Stamp duties are levied at 3 per mile of the share capital of a PSC.
· Registration fees and stamp duties at the above rates are also due on any increase in the share capital.
Holding Companies
A holding company (HC) is a public shareholding company that has financial and administrative control over one or more companies that became subsidiaries thereof by means of the HC owning at least the absolute majority of their shares or the control of the composition of their board of directors. An HC may not own shares in general or limited partnerships and subsidiaries are not allowed to own shares in an HC.
The objective of an HC is to acquire shares in other companies, manage them, extend loans to them, and provide them with guarantees and credit facilities. Has are subject to the same provisions of public shareholding companies. The registration fees applicable to public shareholding companies also apply to Have.
Joint Investment Companies
The objective of a Joint Investment Company (JIC) is to encourage and facilitate international investment in securities traded at the Amman Financial Market (AFM). A JIC is formed as a public shareholding company, hence, is controlled in general by the provisions governing public shareholding companies.
The capital of a JIC is either variable or fixed. A JIC with a variable capital may issue redeemable shares, the value of which is to be determined based on the JIC’s current assets. In this case, the JIC is obligated to redeem the shares upon the request of a shareholder based on the price that is announced by the JIC on a weekly basis with the knowledge of the AFM. The shares of a JIC with a fixed capital are traded on the AFM in the usual manner and their prices are determined by market force.
General Partnerships
· The equipment’s required for the projects are exempted from tax and custom duties.
· The appliances of animal, agriculture and fish production are exempted from tax and custom duties.
· Investment projects are exempted from profit tax for seven years extendable to 16 years according to some conditions.
· In case of losses during exemption period, the tax exemption could be increased to 3 years more.
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