Joint-Stock Company
Explanation
The joint-stock company [société anonyme] is a commercial company operating under a commercial name. Its capital is divided into negotiable shares [actions]. This company consists of at least three persons who subscribe to the shares. The partners in it are distinguished by the fact that they are not liable for the company's debts except to the extent of their contributions.
All joint-stock companies are subject to the Code of Commerce and its customs regardless of their object. However, if the object of the company is the exploitation of a public interest or a public utility, the law imposes special conditions. One third of its capital must be registered shares [actions nominatives] owned exclusively by natural Lebanese persons or by companies fully owned by Lebanese persons. Any transfer of these shares to non-Lebanese persons is considered absolutely null [nullité absolue].
The law places strict conditions on the founders [fondateurs]. Anyone who has been declared bankrupt and has not been rehabilitated for ten years is prohibited from founding the company. Also prohibited is anyone who has been convicted of specific financial crimes such as fraud or issuing checks without provision during the last ten years. These conditions also apply to the representatives of legal entities.
The founders bear joint liability [responsabilité solidaire] for the obligations and expenses incurred to found the company. If they fail to found the company, they do not have the right to claim these expenses from the subscribers.
Finally, the law requires the company to duly deposit its documents. The judge supervising the commercial register imposes an annual fine of one hundred thousand Lebanese pounds for each undeposited document. To facilitate the deposit, the company is exempted from presenting a clearance certificate [quitus] from the National Social Security Fund.
Official legal articles
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Think deeper
How does the text connect the founders' liability for incorporation expenses with their inability to claim them back from the subscribers if the company is not founded?
Flashcards
What is the minimum number of founders for a joint-stock company?
Not less than three persons.
What is the limit of the partners' liability for the debts of a joint-stock company?
They are not liable for the company's debts except to the extent of their contributions.
What is the legal nature of the shares of a joint-stock company?
They are negotiable securities (Article 77).
What is the percentage of shares that must be registered to Lebanese persons in public interest exploitation companies?
One third of the company's capital.
What is the penalty for transferring public interest shares to non-Lebanese persons contrary to the law?
The transfer is absolutely null.
Do the founders have the right to claim incorporation expenses from the subscribers if the company is not founded?
They do not have the right to do so, and they are jointly liable for these expenses.
What is the annual fine for each document that is not duly deposited in the commercial register?
One hundred thousand Lebanese pounds.
Practice questions
Which of the following crimes prevents a person from participating in the founding of a joint-stock company if convicted of it less than ten years ago?
The law prohibits anyone convicted of specific crimes from founding the company, including issuing bad checks (Article 79).
What is the ownership condition for one third of the capital of a joint-stock company that exploits a public utility?
One third of the capital must be registered shares for natural Lebanese shareholders or fully Lebanese companies (Article 78).
What is the liability of a partner subscribing to shares in a joint-stock company for its debts?
Partners are not liable for the company's debts except to the extent of their capital contributions (Article 77).
If the joint-stock company is not founded, who bears the obligations and expenses incurred for the incorporation?
The founders are jointly liable for incorporation expenses, and cannot claim them from subscribers (Article 79).
In order to facilitate the deposit and registration of documents in the commercial register, from which document is the joint-stock company exempted?
The company is exempted from presenting a National Social Security Fund clearance certificate to deposit these documents (Article 102).
Case problems
Four persons wanted to found a joint-stock company. One of them was declared bankrupt five years ago and has not been rehabilitated. Can he participate in the founding? And what is the liability of the other founders for the incorporation expenses if they fail to found the company and withdraw from the project?
Model answer
A bankrupt person who has not been rehabilitated for at least ten years cannot participate in founding a joint-stock company (Article 79).
As for the incorporation expenses, if the company is not founded, the other founders are jointly liable for the obligations and expenses incurred for the founding.
The founders do not have the right to claim these expenses back from the subscribers (Article 79).
Self-grading rubric
A joint-stock company whose object is the exploitation of a public utility transferred half of its registered shares allocated to Lebanese persons (which constitute one third of the capital) in favor of a foreign company. What is the fate of this transfer? And is this company subject to the Code of Commerce even though its object is the exploitation of a public utility?
Model answer
This company is subject to the Code of Commerce and its customs whatever its object (Article 78).
As for the transfer of the registered shares allocated to Lebanese persons in favor of a foreign company, it is absolutely null.
The law requires that one third of the capital of public utility companies be registered shares for Lebanese shareholders, and prohibits their transfer except to Lebanese persons (Article 78).