Decision of the Companies Registration Department

Decision of the Companies Registration Department on Submitting Water and Electricity Bills — Between Good Intentions and Poor Implementation

A Legal and Media Commentary

The recent decision issued by the Iraqi Companies Registration Department, which requires Iraqi companies and branches of foreign companies registered in Iraq to attach water and electricity bills related to the company headquarters and its founders for every legal transaction (such as share transfers, capital increases, change of authorized manager, etc.), has sparked wide concern in legal and economic circles.

Although the decision can be justified from a governmental standpoint aimed at verifying the credibility of companies and the financial solvency of their founders, the method of implementation has been confusing and burdensome, negatively affecting the business environment and directly hindering corporate activity.

Moreover, the decision adds an extra workload to the department’s staff, who are already overwhelmed with a heavy workload as they strive to complete transactions as quickly as possible.

The Intention Is Clear, but the Execution Is Flawed

While the state has the right to ensure the seriousness and competence of companies, the decision lacked:

• A flexible transitional period allowing companies to adjust their legal and financial status.
• A logical distinction between the company headquarters' utility bills (reasonable) and those of the founders (impractical).
• Exceptions for special cases, such as old or rented properties that do not have independent meters.

Impact of the Decision on the Private Sector:

• Turning the entrepreneur from a business developer into a bill collector chasing after partners or property owners.
• Potential disruption of business operations due to disputes or the absence of one of the founders, especially in cases involving small shareholdings.
• Opening the door to extortion within some business entities, where minority shareholders may be pressured or manipulated by majority shareholders, creating legal obstacles that did not previously exist.

Recommendations:

• Review and amend the decision to align with practical realities and the needs of the private sector.
• Limit the requirement to utility bills of the company’s main headquarters only, without mandating those of the founders.
• Allow for a sufficient transitional period to enable companies to organize their affairs and avoid the burdensome impact of rapid enforcement.

“While we value the state’s efforts to collect its dues, regulate the corporate market, and ensure that only credible companies remain, we believe that this decision, in its current form, constitutes a significant administrative and economic burden. It is an ill-considered step that may lead to counterproductive outcomes, harming the investment environment and hindering the growth of the private sector, which is already suffering from many challenges.
We hope the relevant authorities will reconsider the decision and open it up for institutional and legislative discussion to strike a balance between state interests and the smooth functioning of legal and commercial activities.”

Lawyer: Furat Abdul Adheem Kubba

Managing Director – Al-Nesoor Law Firm and Legal Consultations