Business Concern

Issued by legislative decrees.

L.D. 11, 1967Business Concern/Establishment

Corporeal Elements (Physical/Tangible) Non-Corporeal Elements (Intangible)

Furniture
Good-Will
Parts
Logo
Goods
Customers
Money in the Market
Lease Rights
Business Equipment
Signboard
Computers
Trade Name
Patents
Trade Mark
Copyright
Regular Merchant
To run the business and gain its
advantage.
To sell the business after a
duration of 3 years. Could be
sold before if accepted by the
buyer.
Free manager-ship contract Requirements of Selling a Business
with a new free manager.
Concern:
Prepare a sale contract between the owner of the business concern
and the new buyer (must be a regular merchant). Include the
following contents:
1. Price of the business concern
2. Profits done for the last 3 years (financial books)
3. Works done (failing/successful)
4. Elements of a business concern (corporeal & non-corporeal)
The original contract between the landowner and the owner of the
business concern is converted but first the landowner must be given
the opportunity whether to buy or not.
The landlord has the preemptive right to own the Business Concern
with the same price as the potential buyer (he 10-Day
gets the
priority).
Privilege

Sale of a Business Concern:

Registration of a contract must be signed in front of the chief clerk
of commercial register (official registration). Signing in front of the
Notary Public is not enough.
The nature of a business concern cannot be changed by the new
buyer; if its cloth then it remains cloth.
How can the new buyer be protected from the creditors without
being cheated by the owner of the business concern?
1. Registration of the contract in front of the chief clerk of
commercial register (registered according to the state of
where the business is located).
Duration of 15days.
2. Publication formalities
Must state the day of signing the sale
Must be published in 2 newspapers contract in front of the chief clerk.
i.
Official Gazette (Obligatory) Repeated twice; in the duration of the
2nd week that follows the 1st publication.
ii.
Local Gazette (Chosen by the judge)
October 1, 2015
in front of the Notary Public.
November 9, 2015
in front of the chief clerk of
commercial24,
register.
November
2015 (first publication) December 1 to December 8 (2nd
publishing)
The new buyer only pays after 10days after the formalities of the
publication are complete so as per the example:
December 8, 2015 is the last day therefore wait until December 18
(10 15 days after December 18).
In the case that there is a creditor in the market that needs to claim
his/her money then he/she must go to the chief clerk of commercial
register.
So what do creditors do to claim their right?
1. Mortgage of a business concern (first to register is first to get
his money as a creditor)
2. Garnishment of the business concern (taking the corporeal
elements)
3. Sale in public auction
Sale of a business concernProtected by the law

Protect
Protect
the buyer; the
L.D.
creditors
11,1967
Job of the Business Concern Owner:
1. Run the Business Concern
2. Sell the Business Concern
3. Do an investment (to do a free manager-ship contract or a
lease contract)

Owner of a Business Concern

To do an investment (free manager-ship contract)

Free Manager

The owner remains the same of the Business Concern but he will sit
aside and have a different administration running the business.
The landlord has no authority here except in the case the free
manager has changed the nature of the business concern then the
landlord may raise a case on both the owner and the free manager.
Lease management/free manager-ship contract should be:
1. Run by the free manager and on his own responsibility.
2. Corporeal and non-corporeal must be under the control of the
free manager (including customers and good-will).
3. The subject of the free manager-ship contract must be
operating.
The responsibilities of the owner of the business concern &
the manager-ship:
1. Submit the Business Concern with all its elements (corporeal &
non-corporeal).
2. No competitor activities.
3. The creditors whose credits are not paid can ask the court to
declare that their debts are claimable.
4. The owner and the management are jointly responsible for
payment of the first 15days of signing. (People come for both
the Business Concern and the free manager)
Case:
George as a landlord signed a rent contract with Adel as a renter for
a certain apartment in the landlords building.
The contract gave Adel the right to use the place for selling flowers
and did a business concern that was sold to Fadi the new buyer, who
used it for the sale of video tapes.
Can Fadi use the place for selling flowers or videotapes? & Why?
No, because what is registered in the commercial register is the sale
of flowers. In the case of selling videotapes a new renting contract
must be made and registered in the commercial register to sell.
Must have a business concern existing

Owner of a Business Concern

Lease Management/Free Manager-ship Contract

Free Manager
Must be registered in front of the chief clerk not the notary

The landlord cannot use his preemptive measures to be a free

manager. The landlords only job is to monitor the free manager in
order not to change the nature of the business. In the case the free
manager does change the nature of the business then the landlord
can take him to court.

How can the Lease Management be done?

1. Run by the free manager-ship at his own responsibility.
2. Important elements should be mentioned (good-will and
customers).
3. The subject must be an operating business concern.
Responsibility of the Owner:
1. Give the business with all its elements (all tangible and
intangible elements).
2. Not allowed to do any competitive business activities in the
place where the business is found.
3. Creditors of the owner must ask the court to declare that their
debts are claimable.
4. In the following 15 days (after signing the contract) both
owner and the free manager are jointly and civilly responsible
for the payments of the debts.
Responsibility of the Free Manager:
1. Must pay remuneration to the owner of the business concern
(paid 2 times a year once at the beginning and once in the
middle).
2. Must run the business as a good head of the family.
3. Must not divert the customers of the business concern to a
new/different business that he is going to establish.
4. The free manager is responsible about all debts that happen
to be after the first 15 days from signing the contract.
5. The last 15 days before the end of the contract (3/5 years)
there will be a joint and civil responsibility upon both the
owner and the free manager again as it is being converted
back to the owner.
6. Free manager under any circumstance cannot fire previously
hired employees, which are employed by the owner. However,
the free manager can hire new employees.
The owner when he takes over again can fire at will.
How

can the contract be terminated (3/5 years)?

By the end of the contract.
By the mutual obligation of the parties.
Bankruptcy of one of the partners.
Free manager goes bankrupt; they go after his belongings,
which is the business concern that harms the owner as well.
Hence, the contract is terminated.
If one of the partners faces death (passes away).
If the free manager is declared incapable due to a state of
minority.

Companies
Legal Nature of a Company
The company is more than one individual with the will to share
profits and afford losses (depending on the skills of ownership &
percentage of ownership). Also, through submitting and delivering
contribution in cash and in kind.
Partnerships must be merchants. Formed from
partners.
1. Partnerships
2. Corporations
3. Company of Shares/Joint Stock
4. Limited Liability (S.A.R.S)

Unlimited Partnerships (Joint Partnership)

Unlimited Partnerships (at least 2 partners)
Preferably a family

Joint
Aims of this Company:
Company
1. Responsibility of the
in the
personal belongings).
U.S.

partners is unlimited (Followed to their

2. They divide the profits and afford the losses (All according to
percentage of their company ownership).
3. To carry commerce or industry.
4. Usually the parts owned by the ownership, the parts would be
executed in front of court (debts etc.).
Creditors first they go after their capital deposited in the bank
as liquid. Secondly, if the capital is not enough or is
insufficient then they go after the personal belongings.
If the mistake was because of one partner then all the
partners must support him but once the case is closed then
the partners can go after the partner whom made the
mistakes belongings.
The law considers each partner a regular merchant.
Status of partners as merchants would disappear in the case
that the partnership faces financial problems. (He can return
to be a regular merchant only if the debts were closed off.
Otherwise, if bankrupt then not for another 5 years.

The Joint Partnership (Unlimited Partnership) has its own structural

name:
The name & company unlimited put on top of the official paper.
The first 2 names.

- A partner can sell his colleagues his share of the company and get
out provided that the number of partners remains more than 2.
In the case that the partner wants to sell his share to a 3 rd party
(foreigner) then there will be a unanimous vote. If any one partner
rejects then it is called off.
- Administration belongs to all partners or to one of them or to an
outsider appointed as a manager and decided by a unanimous vote
and paid a salary. Must be authorized by the partners to do a business with another
company/business of interest whilst working as a manager. (PRIVATE
SECTOR ONLY)

This contract and formation of the partnership must be registered in

front of the chief clerk of commercial register and must be in place
of where the business is founded.
The registration must be done in a period of 1 month from the day
starting the business. (Registration in front of the notary public is
not enough No required publication in newspapers)
Unlimited Partnership (Joint Partnership) must be regular
merchants (at least 2), jointly responsible.
A person that owns a business concern does not have to re-register
himself in the case of bankruptcy. However, as for unlimited
partnership in the case of dissolution, the status of the partners as
merchants will disappear and the partners will have to re-register
themselves to gain the status of regular merchants.
1. Partners of the partnership are individually responsible for the
In case the capital of payments of debts.
the company is not
If the 1st partner has enough money to cover the debts then
enough
they wont pursue the 2nd. In this case the 1st person will get
back the appropriate proportion from the 2nd person.
2. The assets of the partners will be executed in court if the
capital is not enough.
- Contribution in cash is put into the bank.
- Contribution in kind is registered in court, which is
estimated by an expert, and given a monetary value as to
be considered capital.
Partners must agree upon inviting a 3rd person/party into the
company through unanimous vote.
Causes of Dissolution, common causes:
1. Expiry date as mentioned in the contract that is not renewed
in time.
2. Impossibility to accomplish acts (due to earthquake,
by court
and declared.
catastropheIssued
and floods
etc)
These acts are mentioned as responsibility in the
contract.

3. When the product/object is done (like building a bridge)

Causes of Dissolution, private causes:
1. Bankruptcy

2. Absence of the partner (according to the law, absence =

death, partners are not known where they are for more than
10years The interests in this case are divided upon his
heirs).
3. Incapability of a partner (due to a state of minority, lunacy,
insanity, prodigality).
4. Withdrawal (withdrawing from a partnership would lead to
dissolution; within the 9months beginning January 1st the
partnership would be dissolved. However, if the withdrawal
occurs during the first 3months beginning January 1st then
nothing happens).
5. Special cause (if a partner raises a case against another
partner claiming he isnt doing anything/fulfilling his duty).
In Lebanon

In the U.S.

Limited Partnerships (Partnership in Commondite)

Two types of partners:
1. Active partners (regular merchants)
2. Sleeping partners (passive/non-merchants Professionals such
as doctors, lawyers and engineers)
Same way of registration like the unlimited partnership in the
commercial register in duration of 1 month and no publication in the
newspapers.
Responsibility of the active partners:
1. Jointly responsible and severally responsible
2. Must be merchants (registered)
3. Must be registered under the names of the active partners

First 2 names of active partners and company Underneath it should be mentioned Limited Partnership
In the case the name of the sleeping partner is mentioned in the registration, he will be automatically
transferred/considered as a regular merchant.

Responsibility of the sleeping partners:

1. Supervisor of the business/active partners.
2. They advise them to do a business/job for the sake of the
business (work as consultants) and this consultation must be
registered.
3. Authorize them to do a business that is out of their
power/jurisdiction.
For the active partners, personal belongings are put under the judge
in case of bankruptcy.
Active partners can also be managers of the company.
Sleeping partners are followed only for the investment they have
put into the company and not their personal belongings.
Limited partnerships have the same types/reasons for dissolution.

Proprietorship
-

Company of 1 person/unipersonal company (U.S.).

Exactly like an unlimited/limited partnership except run by 1
person.
In the public law, COC article #919, in an unlimited partnership
(formed from 2) if one of them faces bankruptcy then the partner
who isnt facing bankruptcy can apply for a case in court to get
hold of sole ownership of the company. Before dissolving the
partnership.
The partner would have to purchase all that partners
assets/values.
What the proprietor owns; the proprietorship owns. All debts of
the proprietorship are the debts of the proprietor.
Proprietor can appoint a foreigner to run the business
(manager/administrator). This must be registered in the
commercial register along with his/her responsibilities.
The proprietorship can be transferred from one owner to another
without restrictions. Should be done on a writing basis and
registered in front of the commercial register.
The death of the proprietor doesnt end the proprietorship but
instead is transferred to the heirs.
The company could be dissolved for all causes. Besides being run
by 1 person

Joint Stock Company (S.A.L)

Company of shares.
Difference between Unlimited, Limited partnerships and
Joint Stock Company
Unlimited
Limited Partnership Joint Stock Company
Partnership
Formed from parts
Family business

Formed from parts

Family business

Followed into personal

belongings

Followed into personal

belongings

Registered in front of the

chief clerk of commercial
register

Registered in front of the

chief clerk of commercial
register

Formed from shares

Establishers could be
foreigners
If anything happens in the
company then the partners
are followed only for their
shares and not their
personal belongings
because shareholders are
not merchants
Capital for the company is
blocked in a bank
Formed from at least 3
partners (shareholders)
that have not been
convicted of a felony or a
crime (article #79 of the
COC). It is also advisable
that none of them are
merchants. Must go to the
notary public (article #80

of the COC) in the location

of the business. The notary
public will then inform the
chief clerk.

Fundamental constitution/constituents of the Joint Stock

Company:
Names of the establishers (I.D., born, where theyve worked
etc.)
Name of the company (commercial name)
Objective of the company
Duration of the company (usually 50years)
Main office location and other branches with their location
Capital of the company (dependent on the subject of the
30 Million LBP if the subject is any commercial activity.
company)

Number of shares (starts with 1000 shares) distributed on the

establishers
Value of each share (starts at $1 and goes up)
Types of shares (2 types: registered share and nominated
share)
The registered share is under the owners name. If sold it must
be registered in front of the chief clerk of land registry, mainly
made for Lebanese people.
The nominated share is for the holder. If this type of share is
lost then it cannot be claimed to be owned; whoever holds it
gets its profits, mainly made for foreigners.

The nationality of the Joint Stock Company is Lebanese yet; it could

have a majority of foreigners as shareholders.
Lebanese law stresses a certain percentage of the capital to be
owned by Lebanese on the condition the subject of the business is a
public service or a real-estate enterprise.
Case:
George as an owner of a business concern borrowed $100,000 from
Michelle and then and suddenly George sold the business concern to
Anthony after doing a conspiracy and selling it for a low price which
is less than what is estimated in order to run away and not return
the $100,000 to Michelle.
How can the law protect Michelle from being cheated? According to
the L.D. 11, 1967.
First thing Michelle must register the note that he received from
George for the worth of the money loaned in front of the chief clerk
of commercial register. Secondly, registering the contract of sale
and publicizing its formalities in front of the commercial register.
IM NOT VERY SURE OF THIS HE WAS CONFUSED EXPLAINING IT
HIMSELF!

Constituent
Meeting

Ordinary Meeting

Extraordinary
Meeting

Establishers present
(registered the company)

Everybody to attend
(establishers and
shareholders)

Everybody to attend
(establishers and
shareholders)
They modify the objective
of the company

2
3

Will be held only if

Participants

(number of votes as
per the amount of
shares) makes it legal
to take action and
vote
Choosing a chairman
(chief of board of
directors)
2 investigators and
preferable lawyers to
ensure that the company
is established legally
Secretary that types and
signs the minutes of
meeting.

2
3

If the

is not

available then a second

meeting is held where

1
2

is to be the quorum

and if that is not

available then a third
meeting is held where

1
3

is to be the quorum.

1
3

of the capital is present

The meeting will be legal

no matter what the
quorum is at the 2nd
meeting
The meeting must take
place 6months before the
end of the financial year
Topics of discussion are:
Approving the
companys accounts
Distributing the
profits
Could elect board of
directors and auditors

They modify the form of

the company
Modification of the
fundamental constitution

Quorum is

3
4

of the

capital. No meeting if not

met.

2
3

of the

3
4

should accept to make

the decision legal
If the subject is anything
else besides the form of
the company then the
capital could be

1
2

and

2
,
3

1
, provided
3

that the decision is to be

2
3

If not then nothing

happens and no meeting
is registered occurs.
1 month is the duration
between meetings
Decisions are

2
3

2
3

of

participants will

pass/agree to the action.

2
3

the

Is also applied upon

1
2

and the

participants

1
3

Agenda for the meeting

Contribution in kind is added to the capital, which is to raise the

capital.
If the subject is to do with a building or a project then 30 million LBP
must be blocked in a well-known bank.
Has publication formalities Published in 3 newspapers and the
price of shares are mentioned + number of shares and the name of
the establishers.
When the company is to declare dividends at the end of the year
then the company must declare its reduction of capital in the
newspaper and as such the bank could say that it is hurting their
interest if there is a problem.
Quorum: Legal percentage to take decision.
Rights of the shareholders:
1. Right to vote (each share = 1 vote)
2. Right to participate in administration
3. Right to get a membership in joint stock company
4. Right to convert and sell shares
5. Right to get the dividends
Dividends: Difference in price for when you pay for a share and
when you want to sell a share.
Voting by the establishers, held by the chief and
investigators:
1. Elects the members of board of directors, which is done in the
presence of the establishers but in the case no elections takes
place then it will e chosen through the contract of formation.
2. Investigators should go back to the contract of formation
(examining the acts).
3. Appointing auditors.
Board of Directors:
At least 3 and at most 12
Elected from those that own the max amount of shares
Chosen for 3 years to be renewed through regular voting
Board of directors elects the chairman or by the constituent
meeting
If chosen by the fundamental constitutions then for 5 years
The majority of members of the board of directors must be
Lebanese
The right to participate in the administration of the company
Chairman must be Lebanese
What are the causes for dissolution?
1. Expiry date (50years). If not renewed 3 months before the end
of the financial year.

2. If the project is terminated then the contract is dissoluted.

3. Depending on the resolution taken by the partners which must
3
own
of the capital can declare its dissolution and its done
4
3
2
in the extraordinary meeting. Quorum must be
and
4
3
to take decision
3
4.
Of the joint company is lost (e.g. war)
4
Case:
A joint stock company which is controlled by the members of board
of directors who are the administrations of the JSC, what are the
relationships between the administration of the JSC and the
shareholders?
Who are the administrators of the JSC and what are the relationships
between the JSC and the administrators?
Members of the Board of Shareholders
Directors
Elected by shareholders who own
maximum number of shares
Represent the administration of the
company
Duration between 3 and 5 years

Maximum number of shares are the

voters
They hold certificate of shares
Duration forever

Limited Liability Company (S.A.R.L & L.L.C)

Private company taken from the UK Law. L.D. 35, 1967 and adjusted
in 1983.

1. Company
of Persons

2. Company
of Funds

1. Company of Persons
Personality of the partner (good reputation, respectful and
well-ranked).
Max number of partners is 20 and the min number of
partners is 3. Signed in front of the chief clerk because it is
a commercial company.
No invitation to public (no foreigners are allowed to enter).
No shares or bonds (formed from parts), fixed price parts.
No transfer to 3rd parties (Parts do not transfer to 3rd
parties. Unless 75% of the capital agrees to it).
Can establish a branch anywhere in the world.

Partners dont have to be regular merchants, anybody can be a

partner.
2. Company of Funds
Capital is deposited in a well-known bank; 5 million LBP is
just to register and begin (Should be at least 5 million LBP.
If it reaches less then it is to be converted to limited
partnership or joint partnership in a duration of 2 years. If
not converted then it faces dissolution).
Contribution in kind (assets estimated by an expert
assigned by court).
Bankruptcy of a partner will never lead to the company and
its dissolution.
Commercial company.
Responsibility of a partner only for the parts owned will be
followed by law provided he is not a merchant.
Legal reserve: 50% (If the capital is 10 million then the
legal reserve must be 50%, it is the capital besides the
minimum 5million LBP).
No claim is done.
Partners are not followed towards their belongings but in case one of
them is a merchant that he will be followed to his personal
belongings.
Heirs take after the death of a partner. The number of heirs +
partners must not exceed 30. In the case it does exceed then in 2
years duration the company must be converted to SAL or
partnership. If it is not converted then it faces dissolution.
Contract formation of the limited liability company:
Notary public registration is not enough; must be in front of
the chief clerk, in the place of the business found.
No constituent meetings
Subject is any commercial activity could be done except
banking, finance, insurance, navigation and airlines.
Certificate from the bank is required to ensure that 5 million
LBP is deposited in the bank and frozen.
Nationality is not restricted; any foreigners can be partners.
Partners Meetings:
Special; takes place during the year
1. Increase or decrease of capital (decreasing by giving the
partners parts).
3
2. Dissolution for the loss of
of the capital.
4
3. Increase in contribution in kind (real-estate, project etc.).
4. Increase of charges or partners (festivals and seminars).

5. Transfer to other types of companies (in case of loss or

increase in partners less than 3 or more than 30).
6. Change of nationally at 51% (Lebanese or Foreign).
Ordinary; takes place before the end of the financial year
1. Appointing the accounts for a quorum of 50% of the capital
They need to be informed about them to
leant.
present a defense.
2. Appointing managers and firing them.
3. Appointing auditors and firing them.
Administration of the L.L.C
Manager/administrators must not be regular merchants. Due
to bankruptcy issues.
They can all be managers/administrators or just 1 to run the
company. So administration belongs to all partners.
Appointing managers and fixing their powers should be
registered in the commercial register.
Manager appointed cannot deal with companies of interest
other than the one he/she is working for (e.g. has shares or
parts in another company).

Causes for Dissolution

1. If all partners agree.
2. If the L.L.C is converted due to the decrease of capital (less
than 5million LBP) into limited or unlimited partnership after
duration of 2 years and no attempt was made to raise the
capital.
3. If the L.L.C is converted due to the decrease or increase in
partners to a joint stock company (more than 30) or
partnership in commondite (less than 3) after a duration of 2
years.
4. If the duration is expired and the contract is not renewed.
5. If the project is finished.
3
6. If the project is destroyed (catastrophe or war),
of capital
4
is lost.
7. If it is impossible to complete the job due to anything.
Select the best answer of the following:
The legal incapability of a partner in the limited liability company
(L.L.C) if he is a merchant
a) Will not lead to the dissolution of the company

b) Will not lead to the bankruptcy of the partner

c) Will lead to the dissolution of the company
The partner in a joint partnership
a) Will be followed for what he owns of shares in a partnership
b) Will be followed in his/her personal belongings if the capital is
not enough
c) Will be followed in only what the capital of the company is
The proprietorship could be dissolved for all causes
a) Except for the death of a partner
b) Except for the bankruptcy of a partner
c) Except for the minimum number of partners