The emerging business environment in Palestine is attracting investors and encouraging the return of many educated Palestinians living abroad. Many new institutions have been established to help regulate and sustain growth.
you use the following information as a general guide to doing business in Palestine.
Registration:
Registration of companies in the West Bank falls within the purview of the Ministry of National Economy ( LINK) and is governed by the Jordanian Companies Law of 1964.
Companies doing business in non-autonomous areas of the West Bank are governed by the Israeli Military Order of 1970.
In Gaza, the Ministry of Justice [link to website] is responsible for registering companies and administering the company law.
The prevailing legal framework for registering a company in Gaza is the British Mandatory Companies Law of 1929.
The Palestinian Authority has drafted a new Companies Law that will unify, modernize and supplant the current two-track legal system. It will also eliminate the existing requirements for par value of the share stated capital and will simplify the incorporation procedure.
Sole Proprietorships
Although sole proprietorships are the most common type of business structure, they are not considered legal entities under the new draft legislation, nor are they regulated under current commercial laws.
Most family-owned establishments are sole proprietorships with licenses to operate, yet they are not registered businesses like Ordinary or Shareholding companies.
Despite the fact that this does not enable the sole proprietor to benefit from limited liability protection, investors still benefit from a sole proprietorship. The lack of regulation on the sole proprietorship enables the owner to seek financing for expansion down a variety of avenues.
Ordinary Companies, or Partnerships/Joint Ventures:
Ordinary Companies are formed by an agreement between two or more people, with a maximum of 20 partners. There are currently three types of Ordinary Companies.
Ordinary General Company
In an Ordinary General Company, all partners are considered General Partners and are jointly liable for all debts, contracts and obligations of the company. Partnership agreements do not limit the amount of liability for any one partner in Ordinary General Companies.
Company law states that the practices and proxies of each partner, or those representing the company, are considered as undertaken in proxy of all partners. In the event of a partner claiming bankruptcy, the debts of the company have priority over the partner's personal debts. If the company declares bankruptcy the creditors of the company have priority over any debts the company owes to the partners.
Ordinary Limited Company
In a limited partnership, there must be at least one "General Partner," who is responsible for all partnership liabilities. A "Limited Partner" is only responsible for his/her share of the partnership's capital and cannot participate in the management of the partnership, nor act in its name. Failure to observe this restriction 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, can become either a general or limited partner. However, 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 partnership also govern limited partnership.
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Foreign Ordinary Company
A Foreign Ordinary Company is a company that is registered outside of Palestine Foreign companies, their subsidiaries, representatives and branch offices that wish to conduct business in Palestine must fulfill the same registration requirements as a locally established company.
The procedure for registration [link to registration procedures] is simple. The Company must register with the Companies Registrar either as a partnership or a limited company. Foreign investors can work in Palestine provided they obtain work permits from the appropriate ministry.
Shareholding Companies
Business operations consisting of twenty or more partners must register as a shareholding company. There are two types of shareholding companies.
Public Shareholding Company
Private Shareholding Company
Both are subject to the existing law that requires 51% of their shares to be held by Palestinian nationals. The section below describes the regulations that govern each shareholding structure.
Public Shareholding Company
A public shareholding company receives capital by the sale of its shares to the public. The company must have at least seven shareholders and may not restrict the transferability of its shares. Liability of a shareholder in a public shareholding company is limited to the value of the shares each shareholder holds.
A shareholding company becomes a corporate body bearing the name stated in the by-laws and articles of association from the date of its registration.
Private Shareholding Company
A private shareholding company must have between a minimum of two shareholders and a maximum of fifty shareholders. Such companies are prohibited from offering their shares to the public, and can impose restrictions on the transferability of their shares.
Shareholder liability in a private stock company is limited to the value of the shares that shareholder holds in the company. If a private shareholding company changes its articles of association it will lose its status as a private company. The company must submit necessary documents to the Registrar to adjust its legal position to that of a public shareholding company within 14 days from the date of the change.
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