694 articles
Legislative Decree No. 304 dated 24 December 1942. We, Alfred Naccache, Delegate of the French High Commissioner in the States of the Levant under French Mandate, President of the Lebanese Republic, Hereby decree the following:
Commerce in General; Merchants and Commercial Establishments
General Provisions
This Code sets forth, on one hand, the rules governing commercial acts performed by any person regardless of their legal capacity, and on the other hand, the provisions applicable to persons who have adopted commerce as their profession.
Where this Code contains no provision, the rules of general law shall apply to commercial matters, provided that such rules are applied only to the extent that they are consistent with the principles specific to commercial law.
Where no statutory provision can be applied, the judge may be guided by jurisprudential precedents and the requirements of good commercial faith and equity.
When determining the effects of a commercial act, the judge shall apply established custom, unless it appears that the contracting parties intended to derogate from the rules of custom, or where custom conflicts with mandatory statutory provisions. Special custom and local custom shall prevail over general custom.
Commercial exchanges(1), fairs, markets, public warehouses, storehouses, and other establishments designated for trade are subject, as required, to special laws and regulations.
The rules set forth in the Code of Obligations and Contracts regarding the contract of partnership shall apply to commercial companies, provided that such rules are not expressly or implicitly contrary to the rules of this Code. Without prejudice to the rights of bona fide third parties, if the number of partners or shareholders in commercial companies of any type falls below the number required by law for each type, dissolution of the company must be declared by a decision of the remaining partners within three months of the occurrence of the cause referred to, unless the deficiency is remedied. The court, upon request by any interested party, shall declare the dissolution of the company after the expiry of the three-month period for remediation.
All commercial companies, other than joint ventures, must be evidenced by a written instrument; however, third parties may, as the case may be, prove the existence of the company or of any provision relating thereto by all means. All companies incorporated in Lebanon must have their principal office therein, and are deemed to be of Lebanese nationality notwithstanding any contrary provision.
The constitutive instruments of all commercial companies — other than joint ventures — must be published by completing the procedures described below, failing which they shall be null and void.
A change in the form of a company does not create a new legal personality; the legal personality remains, and the new company continues with the same legal personality as before the transformation. Such change shall not be enforceable against third parties except from the date of registration in the commercial register and upon expiry of one month from the announcement of the change in the Official Gazette and in a local daily newspaper designated by the judge supervising the commercial register. Persons who acted in the name of a company in the course of its formation, before it acquired legal personality, shall be personally and jointly liable for the acts performed, unless the company, after its incorporation, assumes responsibility for those acts, in which case those acts shall be deemed to have been approved by the company from the date they occurred.
Every merchant, before suspending payments or within the ten days following such suspension, may apply to the court of first instance in the district where his principal establishment is located and request it to convene his creditors in order to discuss and deliberate on a proposed preventive settlement.
The merchant must submit in support of his application: his commercial books(3), properly kept for at least three years or since the commencement of his commercial activity if it has been less than three years; a balance sheet; a list of creditors with their addresses and the amount of each debt; a list of debtors; and a brief explanatory statement of the situation.
The court, after hearing the public prosecutor, shall rule in chambers to reject the application: - If the applicant has not filed the books and documents referred to in the preceding article. - If he was previously adjudicated bankrupt and has not been rehabilitated. - If he has already been granted a preventive settlement. - If he has been convicted of negligent or fraudulent bankruptcy.
If the court finds the application to comply with the law and to merit consideration, it shall issue, by an unappealable order, a summons for creditors to appear before a delegated judge to discuss and deliberate on the proposed preventive settlement. This judge shall be one of the court members specially designated by the court for that purpose.
The court's order shall be published by the clerk by means of notices posted at the court's door, and an extract of the same order shall subsequently be published in the Official Gazette and in a daily newspaper. If the list of creditors is incomplete, or if broader publication is warranted, the court shall order publication in additional newspapers.
From the date of filing the application until the order ratifying the settlement acquires the force of res judicata, no creditor whose debt predates the order may commence or continue enforcement proceedings or acquire any lien(1) or privilege, unless the court expressly authorises it.
During the preventive settlement procedure, the debtor shall remain in possession of his assets and shall be permitted to carry out all normal acts relating to his commerce, subject to the supervision of the appointed official and under the direction of the delegated judge. Both may object to any act they deem improper.
Gifts(3) and other gratuitous acts or acts of guarantee performed by the debtor during the preventive settlement procedure may not be enforced against creditors. The same principle applies if the debtor makes payments on debts not yet due.
If the debtor violates the provisions of the two preceding articles, or if it is established that he concealed part of his assets, omitted to declare some of his creditors, or committed any fraud, the delegated judge shall refer the matter to the chamber of deliberation, which may declare him bankrupt.
The supervisor, after examining the debtor's books and documents and based on the information he was able to gather, shall verify the accuracy of the creditors' and debtors' list, make all necessary corrections thereto, and indicate the amounts of debts, their nature, and their seniority.
The delegated judge shall preside over the creditors' meeting. Each creditor may appoint a special proxy bearing a written power of attorney; this power may be written without formality on the letter of summons or on a telegram. The debtor or his representative must attend the meeting.
Every creditor may state the reasons why he believes a particular debt is disputed, or why the debtor is not entitled to the indulgence sought, or why the proposals are not worthy of acceptance. Creditors may also raise individual objections.
The preventive settlement must be approved by a majority of creditors who participated in the vote, and that majority must represent at least three-quarters of the unsecured and unencumbered debts (those not secured by movable or immovable pledge)(1).
The debts of the debtor's spouse and those of his relatives and in-laws up to the fourth degree shall not be counted in calculating the majority described in the preceding article. Persons who acquired such debts by assignment within six months preceding the filing of the application for preventive settlement shall also be excluded from voting.
The delegated judge shall record in the minutes those who accepted the settlement; they must all sign the minutes. Persons who expressed their acceptance by letter or telegram addressed to the delegated judge or the clerk before the meeting shall be counted toward the majority.
Before the signatures are collected, the delegated judge shall issue an order recorded in the minutes summoning the interested parties to attend a hearing before the court within a period not exceeding twenty days for the ratification of the settlement.
The supervisor must file with the court clerk, three days before the designated hearing, his reasoned submissions on the feasibility of accepting the settlement. At the hearing, the delegated judge shall present a report, and the debtor and creditors shall be entitled to intervene.
In the ratification order, the court may provisionally assess, based on indications, the declared debts and their amounts, in order to verify the existence of the required majority, subject to any subsequent definitive judgments on those debts.
If the court finds that the debtor deserves to benefit from the settlement, and that the objections set forth in the preceding articles do not eliminate the required majority, and that the settlement terms are not less than the legal minimum and do not contain illegal conditions, it shall issue a decision ratifying the settlement. Otherwise, it shall refuse ratification.
Unless there is a contrary agreement in the settlement agreement or in another decision taken under the conditions described above and confirmed by the court, the debtor may not, before fully performing all his obligations under the settlement agreement, sell or mortgage his immovable property or surrender his assets.
Orders granting or refusing ratification of the settlement must be published in accordance with the rules that will be specified below for the announcement of bankruptcy.
Dissenting creditors may object to ratification of the settlement within five days of the date of closing the final minutes; the objection must state its grounds and must be notified to the debtor and to the supervisor. No further objection may be lodged after the five-day period has expired.
Ratification of the preventive settlement renders it binding on all creditors. Creditors, even those who voluntarily consented to the settlement, shall retain all their rights in full against co-debtors, guarantors, and others jointly liable for the debtor's debts.
A settlement granted to a company shall benefit partners who are personally liable for the company's debts, unless there is a contrary provision.
In any commercial company that has issued bonds representing more than twenty per cent of its total debts, a settlement may only be granted if the bondholders' assembly approves the proposals by a resolution adopted under the conditions of the general assembly of bondholders.
If it is worthwhile to convene the bondholders' assembly, the period previously set for convening creditors may be extended to sixty days.
Holders of bonds with a redemption premium (Les porteurs d'obligations avec prime de remboursement) may not only claim the issuance price; they must add to it the portion of the premium that has accrued at the date the settlement proposal was filed.
Upon application by any creditor within three years from the date of publication of the ratification order, the court may annul the settlement and declare the debtor bankrupt if it is established that he exaggerated or fraudulently manipulated the debts attributed to him in the settlement proposal.
If the debtor fails to fulfil all obligations set out in the settlement agreement, every creditor, after pursuing the guarantors and exercising the rights provided as security, may request the rescission (Faire résoudre) of the settlement and the declaration of bankruptcy.
The settlement agreement may stipulate that the merchant shall not be finally discharged from the portion of his debt written off under the settlement unless he remains insolvent. However, the duration of this condition must be fixed at five years, and it must also be stipulated that the debtor may be finally discharged before the expiry of that period if he proves his solvency.
Commercial Acts
The following acts are deemed commercial by their very nature (Nature propre), as are all acts that may be considered analogous to them by reason of their similar characteristics and purposes (Caractères identiques):
1. See Legislative Decree No. 120 of 16/9/1983 on the organisation of the Beirut Stock Exchange; Decree No. 4808 of 29/1/1982 on the internal regulations of the Beirut Stock Exchange; and Legislative Decree No. 29 of 8/5/1967 defining the powers of the Government Commissioner to the Beirut Stock Exchange.
2. See Law No. 78 of 21/11/1987 on the regulation of the money-changing profession in Lebanon.
3. See the Regulation on Creditors and Auctions issued on 26/9/1934.
4. Regarding insurance contracts, see Article 9 et seq. of Decree No. 9812 of 5/4/1968 on the organisation of insurance entities, and Decision No. 109/L.B. of 21/7/1937 on the regulation of insurance companies and the collection of fees and savings.
5. See the Mining Regulations issued pursuant to Decision No. 113/L.B. of 9/8/1933.
The following are also deemed maritime commercial acts:
All acts performed by a merchant for the needs of his trade are also deemed commercial in the eyes of the law. In the presence of a partner, a merchant's acts shall be presumed to have been performed for that purpose, unless the contrary is proved.
A general partnership is one that operates under a specific firm name and is formed between two or more persons who are personally and jointly liable for the debts of the company.
The constitutive instrument may be notarised or privately signed. However, in the latter case, as many copies of the instrument must be drawn up as there are partners.
Within the month of incorporation of the company, a copy or an extract of the constitutive instrument must be filed with the clerk of the court of first instance of the district of the company's registered office.
Within the same period, the company must also be registered in the commercial register of its registered office district. Such publication shall be in summary form and shall contain all information useful for third parties to know, in particular:
If an amendment is subsequently made to the constitutive instrument, a new copy thereof must be filed with the court clerk, and registration in the commercial register is also required if the change affects matters that concern third parties.
Failure to file the constitutive instrument with the court clerk, or failure to register it in the commercial register, shall render the company null and void and shall make all partners jointly and severally liable towards third parties where damage has been caused to them.
The nullity arising from failure to publish is not extinguished by the mere passage of time, and any interested party may invoke it. Partners may not invoke it against third parties; however, if publication is made belatedly, only those who dealt with the company before the rectification may invoke the nullity to which the company was exposed.
Every partner in a general partnership is deemed to be carrying on trade personally under the company's firm name; accordingly, each partner acquires the legal status of a merchant. The bankruptcy of the company entails the personal bankruptcy of each partner.
The firm name (Raison Sociale) of the company is composed of the names of all partners or the names of some of them together with the word 'and Partners'. The firm name must at all times correspond to the company's current membership (Personnel Actuel). Any person extraneous to the company who knowingly consents to the inclusion of his name in the company's firm name shall become liable for its debts towards any person misled thereby.
Except for transfers expressly provided for in the constitutive instrument, no partner may assign his share in the company's capital to a third party without the consent of all partners and compliance with the publication formalities. However, a partner may assign to a third party the rights and benefits related to his shareholding, since such an arrangement is binding only between the contracting parties.
The right to manage the affairs of the company belongs to all partners, unless the company's articles or a subsequent instrument provide that management be entrusted to one or more partners or to another person, even an outsider to the company.
Managers (Gérants) may be removed in the same manner in which they were appointed; however, if the removal is wrongful, it may give rise to a claim for compensation under the conditions set out in Article 822 of the Code of Obligations. Where a new manager is appointed to replace a regular manager, this replacement must be published.
Managers may carry out all acts necessary for the normal operation of the company's enterprise, unless their authority is limited by the company's articles.
Managers may not enter into any agreement for their own account with the company, or any agreement in which they or any of them have a direct or indirect interest, without specific authorisation from the partners renewed as the case may be each year. Ordinary contracts relating to operations normally carried out by the company with its clients are exempt from this prohibition.
Likewise, managers may not manage an enterprise similar to that of the company unless they obtain authorisation renewed annually.
Where several managers exist, each of them has the right to object to transactions that the others intend to carry out. In such case, the decision shall be taken by majority vote of the said managers, unless the objection is based on the ground that the contemplated act is contrary to the company's articles, in which case it is for the court to assess the nature of the act.
The company shall be bound by acts performed by the managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use that signature in furtherance of their personal interests, unless the third party is in bad faith.
Creditors of the company may sue it; however, before doing so, they must send it a formal notice demanding payment. They may also sue any partner who was a member at the time of the contract. Such partners shall be jointly and severally obligated to make payment from their personal assets.
The general causes of dissolution applicable to all companies are:
A general partnership is also subject, in addition to the foregoing, to the following specific causes of dissolution:
Unless the company's articles provide otherwise, a general partnership, upon the death of one of its partners, shall continue among the surviving partners, unless the deceased leaves a spouse or descendants to whom his rights pass. If so, the company shall continue with the spouse or descendants of the partner, and they shall have the status of silent partners (commanditaires).
In all cases, the value of the rights of the deceased or excluded partner shall be determined by a special inventory, unless the company's articles provide for another method of valuation.
The dissolution of a company — except where dissolution occurs automatically pursuant to the constitutive instrument — must be published in the same manner and within the same period as the company itself. The same procedure applies upon the exclusion of a partner and upon the continuation of the company after the death of one of its members.
After dissolution, commercial companies retain their legal personality for the period required for liquidation, and only for the purposes of that liquidation.
If the company's articles do not provide for the appointment of the liquidator or liquidators, and the partners do not agree on their choice, they shall be appointed by the court in whose district the company's registered office is situated, from among its members.
The result of the selection or the court order appointing the liquidators must be published by those liquidators.
On assuming their duties, the liquidators must draw up an inventory of assets together with the managers of the company's affairs.
The liquidators shall collect the debts owed to the company by third parties or by the partners, pay the company's debts, sell its assets, and carry out all acts required by the liquidation. However, they may not continue to operate the company's enterprise, nor dispose of the company's establishment as a whole, except pursuant to a specific authorisation from the partners.
The liquidators must provide the partners, upon request, with all information on the state of the liquidation. However, no obstacles to the liquidation may be raised on account of unlawful claims.
The partition shall be carried out in accordance with the conditions of the partnership agreement and shall also be governed by the provisions of Articles 941 and 949 of the Code of Obligations.
In all commercial companies, and without prejudice to actions that may be brought against liquidators in their capacity as such, the actions of the company's creditors against a partner, his heirs, or his successors in title shall be extinguished by prescription after five years from the dissolution of the company, or from the departure of a partner with respect to actions directed against that partner. The prescription period shall run from the date of completion of publication in all cases where publication is required, and from the date of finalisation of liquidation for actions arising from the liquidation itself. Prescription may be suspended or interrupted in accordance with the rules of general law.
The proof of commercial contracts is not in principle subject to the exclusive rules established for civil contracts; accordingly, subject to the exceptions arising from special legal provisions, the contracts referred to may be proved by all means of evidence that the judge deems appropriate to accept in accordance with commercial custom and usage.
In commercial matters, the date of private instruments may be proved against third parties by all means of evidence. The date of negotiable instruments and the date of their endorsement shall be deemed valid until the contrary is proved.
Co-debtors under a commercial obligation are presumed to be jointly and severally bound by that obligation; this presumption also applies to guarantees of commercial debts.
The legal rate of interest in commercial matters is fixed at nine per cent.
For the purpose of establishing the fair price and market price, reference shall be made to stock exchange prices and mercuriales, unless there is a contrary agreement.
No commercial obligation to perform an act or a service shall be presumed to be gratuitous; if the parties do not specify a fee, commission, or brokerage, the remuneration customary in the profession shall be due.
In commercial matters, a court may not grant a time limit for rescission except in exceptional circumstances. A party who has applied to the court for rescission of the contract may not thereafter claim performance; however, a party who sought performance may subsequently opt for a claim for rescission. Performance of obligations after a rescission action has been brought shall not preclude the action.
The non-performance of one of the obligations under contracts with successive obligations entitles the party who fulfilled its obligations to request termination of the contract in respect of all obligations not yet performed, without prejudice to its right to claim damages.
In commercial matters, the right to bring a claim is extinguished by prescription after ten years if no shorter period is specified. If a judgment has been issued containing a decision, the claim arising from the res judicata shall be extinguished in all cases after ten years.
Sale(1), credit, transport undertakings(2), insurance undertakings(3), and all contracts whose rules are not determined by this Code are subject to the Code of Obligations and to custom. The special rules relating to public transport enterprises shall also apply to contracts of carriage. Stock exchange transactions, whether on securities or commodities, shall also be subject to special legislation.
The commercial pledge provided for in the following articles is one that secures a commercial debt.
Subject to the following provisions on delivery, the pledge may be proved by all means of evidence that the court deems necessary to accept. A pledge over a registered instrument shall be established by a transfer transaction recorded in the registers of the establishment that issued the instrument and on the instrument itself. For a promissory note(3), the pledge shall be established by an endorsement entered in the register.
A pledge agreement shall not produce its effect as a pledge if the pledged property remains in the possession of the debtor such that it appears to third parties as still part of his free assets from which he may obtain new credit; it is therefore necessary that the pledged property be delivered to the creditor, and even if it remains in the possession of the creditor or of a third party holding it for the creditor's account.
The pledgee must deliver to the debtor upon request a receipt specifying the nature, type, quantity, weight, and all distinguishing marks of the things delivered as pledge.
If the pledge is over fungible things or instruments, the pledge shall remain valid even if those things or instruments are replaced by things or instruments of the same type; if those things or instruments are non-fungible, the debtor may also recover them and replace them with the creditor's consent, provided that the pledge agreement is a notarial deed or a private instrument with certified date.
The creditor must, for the debtor's account, exercise all rights attaching to the things or instruments delivered to him as pledge. If what he received is an option credit instrument (Titres de crédit donnant droit à option), the debtor who wishes to exercise his option right must notify the creditor sufficiently in advance.
If the thing pledged is an instrument whose price has not been fully paid, the debtor, upon being called to pay, must remit the money to the creditor a few days at least before maturity, failing which the pledgee may proceed to sell the instrument.
In the event of non-payment at maturity, the creditor — after a period of two months running from the date of a simple notice sent to the debtor and to the third-party provider of the pledged property if any — may apply to the president of the enforcement department to order the sale of the pledged things by public auction. The creditor shall recover his debt from the proceeds of sale; any surplus shall be remitted to the debtor.
Cover is provided by the drawer or the person on whose account the bill is drawn; this shall not prevent the drawer acting for the account of a third party from remaining personally liable to endorsers and holders of the bill only. Cover exists if, at the maturity date of the bill, the drawee is indebted to the drawer or to the person on whose account the bill was drawn in an amount at least equal to the bill's value.
Acceptance of a bill implies the existence of cover. Such acceptance establishes cover in relation to endorsers. In the absence of acceptance, the drawer must, upon denial of the existence of cover, prove that the drawee had cover at the maturity date, failing which he shall be liable to guarantee the cover, even if the protest was raised after maturity.
A promissory note shall contain: - The words 'to order' or a statement in the text of the instrument itself in the language used for writing it. - An unconditional promise (La promesse pure et simple) to pay a specified sum. - A specification of the maturity date. - A specification of the place of payment. - The name of the person to whom or to whose order payment is to be made. - The date and place where the note is drawn. - The signature of the maker.
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a promissory note, except in the following cases: - A promissory note not specifying the maturity date shall be deemed payable at sight. - If no special place of payment is indicated, the place shown next to the maker's name shall be deemed the place of payment. - If no place of drawing is indicated, the instrument shall be deemed to have been drawn at the place indicated as the place of payment.
The provisions applicable to bills of exchange and relating to the following matters shall apply to promissory notes to the extent compatible with their nature: Endorsement (Articles 325 to 335) Maturity (Articles 348 to 352) Payment (Articles 353 to 363) Recourse for non-payment (Articles 365 to 376) Protest (Articles 377 to 382) Intervention (Articles 383 to 391) Copies (Articles 395 and 396) Alterations (Article 397) Prescription (Articles 398 and 399) Legal holidays, counting of periods, and prohibition on days of grace (Articles 400 to 402)
The provisions applicable to bills of exchange payable at the domicile of a third party or in a place other than the maker's domicile (Articles 317 and 342), and the provisions on interest stipulations (Article 318), discrepancies in amounts (Article 319), the effects of signatures in the case of unauthorised agents (Article 321), and other related provisions shall also apply to promissory notes.
The provisions on aval shall also apply to promissory notes (Articles 345 to 347). In the case specified in the last paragraph of Article 346, if the aval does not indicate for whose account it was given, it shall be deemed given for the maker's account.
The maker of a promissory note is bound in the same manner as the acceptor of a bill of exchange. A promissory note payable at a certain period after sight (Payable à un certain délai de vue) must be presented to its maker for authentication within the time limits specified in Article 338.
Merchants
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
A joint-stock company is a company whose capital is divided into shares, i.e., negotiable instruments, which operates under a trade name, and which is formed among a minimum of three persons who hold shares in their own names and are not liable for the company's debts beyond the extent of their contributions.
Every joint-stock company, regardless of its object, is subject to the commercial law and its customs. One third of the capital of joint-stock companies whose object is the exploitation of a public utility or public service must be held as registered shares by Lebanese natural persons or by companies whose entire capital consists of registered shares or quotas owned entirely by Lebanese persons and whose articles require the transfer of shares or quotas therein only to Lebanese persons. Any transfer of such shares in a manner different from the preceding paragraph shall be absolutely null and void.
Every bill of exchange not expressly drawn 'not to order' is transferable by endorsement. If the drawer has inscribed on the bill the words 'not to order' or a similar expression, the bill is only transferable by way of an ordinary assignment in accordance with the rules applicable to that. Endorsement may be to the drawee's own order, whether he has accepted the bill or not, to the drawer himself, or to any other party bound by the bill; all such persons may re-endorse the bill.
Endorsement must be unconditional. Any condition attached to an endorsement shall be deemed void. A partial endorsement is null and void. An endorsement 'to bearer' shall be treated as a blank endorsement.
Endorsement must be written on the bill of exchange or on an allonge attached to it, and must bear the endorser's signature. The endorsement need not name the endorsee, or may consist solely of the endorser's signature (blank endorsement); in the latter case, the endorsement shall only be valid if written on the back of the bill or on the allonge.
Endorsement transfers all rights arising from the bill of exchange. If the endorsement is in blank, the holder may:
An endorser guarantees acceptance and payment unless there is a contrary agreement. He may prohibit further endorsement; in such case, he shall not be bound to guarantee against persons to whom the bill is subsequently endorsed.
The holder of a bill of exchange shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another endorsement, the signatory of that second endorsement shall be deemed to have acquired the bill by virtue of the blank endorsement. If a bill of exchange is taken from its holder by any event whatsoever, the holder who establishes his title in the manner described in the preceding paragraph shall not be required to surrender the bill unless he acquired it in bad faith or committed a gross error at the time of acquisition.
If it appears from the balance sheet submitted by the bankrupt, or from subsequent information, that the bankruptcy estate's assets do not exceed two thousand five hundred Lebanese pounds, or if the dividend to be distributed to creditors appears too small to justify the ordinary procedure, the court may, based on the delegated judge's report or of its own motion, substitute the summary procedure for the ordinary one.
The summary procedure described above differs from the ordinary procedure in the following characteristics:
Commercial Companies
General Provisions
This Code sets forth, on one hand, the rules governing commercial acts performed by any person regardless of their legal capacity, and on the other hand, the provisions applicable to persons who have adopted commerce as their profession.
Where this Code contains no provision, the rules of general law shall apply to commercial matters, provided that such rules are applied only to the extent that they are consistent with the principles specific to commercial law.
Where no statutory provision can be applied, the judge may be guided by jurisprudential precedents and the requirements of good commercial faith and equity.
When determining the effects of a commercial act, the judge shall apply established custom, unless it appears that the contracting parties intended to derogate from the rules of custom, or where custom conflicts with mandatory statutory provisions. Special custom and local custom shall prevail over general custom.
Commercial exchanges(1), fairs, markets, public warehouses, storehouses, and other establishments designated for trade are subject, as required, to special laws and regulations.
The rules set forth in the Code of Obligations and Contracts regarding the contract of partnership shall apply to commercial companies, provided that such rules are not expressly or implicitly contrary to the rules of this Code. Without prejudice to the rights of bona fide third parties, if the number of partners or shareholders in commercial companies of any type falls below the number required by law for each type, dissolution of the company must be declared by a decision of the remaining partners within three months of the occurrence of the cause referred to, unless the deficiency is remedied. The court, upon request by any interested party, shall declare the dissolution of the company after the expiry of the three-month period for remediation.
All commercial companies, other than joint ventures, must be evidenced by a written instrument; however, third parties may, as the case may be, prove the existence of the company or of any provision relating thereto by all means. All companies incorporated in Lebanon must have their principal office therein, and are deemed to be of Lebanese nationality notwithstanding any contrary provision.
The constitutive instruments of all commercial companies — other than joint ventures — must be published by completing the procedures described below, failing which they shall be null and void.
A change in the form of a company does not create a new legal personality; the legal personality remains, and the new company continues with the same legal personality as before the transformation. Such change shall not be enforceable against third parties except from the date of registration in the commercial register and upon expiry of one month from the announcement of the change in the Official Gazette and in a local daily newspaper designated by the judge supervising the commercial register. Persons who acted in the name of a company in the course of its formation, before it acquired legal personality, shall be personally and jointly liable for the acts performed, unless the company, after its incorporation, assumes responsibility for those acts, in which case those acts shall be deemed to have been approved by the company from the date they occurred.
Every merchant, before suspending payments or within the ten days following such suspension, may apply to the court of first instance in the district where his principal establishment is located and request it to convene his creditors in order to discuss and deliberate on a proposed preventive settlement.
The merchant must submit in support of his application: his commercial books(3), properly kept for at least three years or since the commencement of his commercial activity if it has been less than three years; a balance sheet; a list of creditors with their addresses and the amount of each debt; a list of debtors; and a brief explanatory statement of the situation.
The court, after hearing the public prosecutor, shall rule in chambers to reject the application: - If the applicant has not filed the books and documents referred to in the preceding article. - If he was previously adjudicated bankrupt and has not been rehabilitated. - If he has already been granted a preventive settlement. - If he has been convicted of negligent or fraudulent bankruptcy.
If the court finds the application to comply with the law and to merit consideration, it shall issue, by an unappealable order, a summons for creditors to appear before a delegated judge to discuss and deliberate on the proposed preventive settlement. This judge shall be one of the court members specially designated by the court for that purpose.
The court's order shall be published by the clerk by means of notices posted at the court's door, and an extract of the same order shall subsequently be published in the Official Gazette and in a daily newspaper. If the list of creditors is incomplete, or if broader publication is warranted, the court shall order publication in additional newspapers.
From the date of filing the application until the order ratifying the settlement acquires the force of res judicata, no creditor whose debt predates the order may commence or continue enforcement proceedings or acquire any lien(1) or privilege, unless the court expressly authorises it.
During the preventive settlement procedure, the debtor shall remain in possession of his assets and shall be permitted to carry out all normal acts relating to his commerce, subject to the supervision of the appointed official and under the direction of the delegated judge. Both may object to any act they deem improper.
Gifts(3) and other gratuitous acts or acts of guarantee performed by the debtor during the preventive settlement procedure may not be enforced against creditors. The same principle applies if the debtor makes payments on debts not yet due.
If the debtor violates the provisions of the two preceding articles, or if it is established that he concealed part of his assets, omitted to declare some of his creditors, or committed any fraud, the delegated judge shall refer the matter to the chamber of deliberation, which may declare him bankrupt.
The supervisor, after examining the debtor's books and documents and based on the information he was able to gather, shall verify the accuracy of the creditors' and debtors' list, make all necessary corrections thereto, and indicate the amounts of debts, their nature, and their seniority.
The delegated judge shall preside over the creditors' meeting. Each creditor may appoint a special proxy bearing a written power of attorney; this power may be written without formality on the letter of summons or on a telegram. The debtor or his representative must attend the meeting.
Every creditor may state the reasons why he believes a particular debt is disputed, or why the debtor is not entitled to the indulgence sought, or why the proposals are not worthy of acceptance. Creditors may also raise individual objections.
The preventive settlement must be approved by a majority of creditors who participated in the vote, and that majority must represent at least three-quarters of the unsecured and unencumbered debts (those not secured by movable or immovable pledge)(1).
The debts of the debtor's spouse and those of his relatives and in-laws up to the fourth degree shall not be counted in calculating the majority described in the preceding article. Persons who acquired such debts by assignment within six months preceding the filing of the application for preventive settlement shall also be excluded from voting.
The delegated judge shall record in the minutes those who accepted the settlement; they must all sign the minutes. Persons who expressed their acceptance by letter or telegram addressed to the delegated judge or the clerk before the meeting shall be counted toward the majority.
Before the signatures are collected, the delegated judge shall issue an order recorded in the minutes summoning the interested parties to attend a hearing before the court within a period not exceeding twenty days for the ratification of the settlement.
The supervisor must file with the court clerk, three days before the designated hearing, his reasoned submissions on the feasibility of accepting the settlement. At the hearing, the delegated judge shall present a report, and the debtor and creditors shall be entitled to intervene.
In the ratification order, the court may provisionally assess, based on indications, the declared debts and their amounts, in order to verify the existence of the required majority, subject to any subsequent definitive judgments on those debts.
If the court finds that the debtor deserves to benefit from the settlement, and that the objections set forth in the preceding articles do not eliminate the required majority, and that the settlement terms are not less than the legal minimum and do not contain illegal conditions, it shall issue a decision ratifying the settlement. Otherwise, it shall refuse ratification.
Unless there is a contrary agreement in the settlement agreement or in another decision taken under the conditions described above and confirmed by the court, the debtor may not, before fully performing all his obligations under the settlement agreement, sell or mortgage his immovable property or surrender his assets.
Orders granting or refusing ratification of the settlement must be published in accordance with the rules that will be specified below for the announcement of bankruptcy.
Dissenting creditors may object to ratification of the settlement within five days of the date of closing the final minutes; the objection must state its grounds and must be notified to the debtor and to the supervisor. No further objection may be lodged after the five-day period has expired.
Ratification of the preventive settlement renders it binding on all creditors. Creditors, even those who voluntarily consented to the settlement, shall retain all their rights in full against co-debtors, guarantors, and others jointly liable for the debtor's debts.
A settlement granted to a company shall benefit partners who are personally liable for the company's debts, unless there is a contrary provision.
In any commercial company that has issued bonds representing more than twenty per cent of its total debts, a settlement may only be granted if the bondholders' assembly approves the proposals by a resolution adopted under the conditions of the general assembly of bondholders.
If it is worthwhile to convene the bondholders' assembly, the period previously set for convening creditors may be extended to sixty days.
Holders of bonds with a redemption premium (Les porteurs d'obligations avec prime de remboursement) may not only claim the issuance price; they must add to it the portion of the premium that has accrued at the date the settlement proposal was filed.
Upon application by any creditor within three years from the date of publication of the ratification order, the court may annul the settlement and declare the debtor bankrupt if it is established that he exaggerated or fraudulently manipulated the debts attributed to him in the settlement proposal.
If the debtor fails to fulfil all obligations set out in the settlement agreement, every creditor, after pursuing the guarantors and exercising the rights provided as security, may request the rescission (Faire résoudre) of the settlement and the declaration of bankruptcy.
The settlement agreement may stipulate that the merchant shall not be finally discharged from the portion of his debt written off under the settlement unless he remains insolvent. However, the duration of this condition must be fixed at five years, and it must also be stipulated that the debtor may be finally discharged before the expiry of that period if he proves his solvency.
General Partnerships
The following acts are deemed commercial by their very nature (Nature propre), as are all acts that may be considered analogous to them by reason of their similar characteristics and purposes (Caractères identiques):
1. See Legislative Decree No. 120 of 16/9/1983 on the organisation of the Beirut Stock Exchange; Decree No. 4808 of 29/1/1982 on the internal regulations of the Beirut Stock Exchange; and Legislative Decree No. 29 of 8/5/1967 defining the powers of the Government Commissioner to the Beirut Stock Exchange.
2. See Law No. 78 of 21/11/1987 on the regulation of the money-changing profession in Lebanon.
3. See the Regulation on Creditors and Auctions issued on 26/9/1934.
4. Regarding insurance contracts, see Article 9 et seq. of Decree No. 9812 of 5/4/1968 on the organisation of insurance entities, and Decision No. 109/L.B. of 21/7/1937 on the regulation of insurance companies and the collection of fees and savings.
5. See the Mining Regulations issued pursuant to Decision No. 113/L.B. of 9/8/1933.
The following are also deemed maritime commercial acts:
All acts performed by a merchant for the needs of his trade are also deemed commercial in the eyes of the law. In the presence of a partner, a merchant's acts shall be presumed to have been performed for that purpose, unless the contrary is proved.
A general partnership is one that operates under a specific firm name and is formed between two or more persons who are personally and jointly liable for the debts of the company.
The constitutive instrument may be notarised or privately signed. However, in the latter case, as many copies of the instrument must be drawn up as there are partners.
Within the month of incorporation of the company, a copy or an extract of the constitutive instrument must be filed with the clerk of the court of first instance of the district of the company's registered office.
Within the same period, the company must also be registered in the commercial register of its registered office district. Such publication shall be in summary form and shall contain all information useful for third parties to know, in particular:
If an amendment is subsequently made to the constitutive instrument, a new copy thereof must be filed with the court clerk, and registration in the commercial register is also required if the change affects matters that concern third parties.
Failure to file the constitutive instrument with the court clerk, or failure to register it in the commercial register, shall render the company null and void and shall make all partners jointly and severally liable towards third parties where damage has been caused to them.
The nullity arising from failure to publish is not extinguished by the mere passage of time, and any interested party may invoke it. Partners may not invoke it against third parties; however, if publication is made belatedly, only those who dealt with the company before the rectification may invoke the nullity to which the company was exposed.
Every partner in a general partnership is deemed to be carrying on trade personally under the company's firm name; accordingly, each partner acquires the legal status of a merchant. The bankruptcy of the company entails the personal bankruptcy of each partner.
The firm name (Raison Sociale) of the company is composed of the names of all partners or the names of some of them together with the word 'and Partners'. The firm name must at all times correspond to the company's current membership (Personnel Actuel). Any person extraneous to the company who knowingly consents to the inclusion of his name in the company's firm name shall become liable for its debts towards any person misled thereby.
Except for transfers expressly provided for in the constitutive instrument, no partner may assign his share in the company's capital to a third party without the consent of all partners and compliance with the publication formalities. However, a partner may assign to a third party the rights and benefits related to his shareholding, since such an arrangement is binding only between the contracting parties.
The right to manage the affairs of the company belongs to all partners, unless the company's articles or a subsequent instrument provide that management be entrusted to one or more partners or to another person, even an outsider to the company.
Managers (Gérants) may be removed in the same manner in which they were appointed; however, if the removal is wrongful, it may give rise to a claim for compensation under the conditions set out in Article 822 of the Code of Obligations. Where a new manager is appointed to replace a regular manager, this replacement must be published.
Managers may carry out all acts necessary for the normal operation of the company's enterprise, unless their authority is limited by the company's articles.
Managers may not enter into any agreement for their own account with the company, or any agreement in which they or any of them have a direct or indirect interest, without specific authorisation from the partners renewed as the case may be each year. Ordinary contracts relating to operations normally carried out by the company with its clients are exempt from this prohibition.
Likewise, managers may not manage an enterprise similar to that of the company unless they obtain authorisation renewed annually.
Where several managers exist, each of them has the right to object to transactions that the others intend to carry out. In such case, the decision shall be taken by majority vote of the said managers, unless the objection is based on the ground that the contemplated act is contrary to the company's articles, in which case it is for the court to assess the nature of the act.
The company shall be bound by acts performed by the managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use that signature in furtherance of their personal interests, unless the third party is in bad faith.
Creditors of the company may sue it; however, before doing so, they must send it a formal notice demanding payment. They may also sue any partner who was a member at the time of the contract. Such partners shall be jointly and severally obligated to make payment from their personal assets.
The general causes of dissolution applicable to all companies are:
A general partnership is also subject, in addition to the foregoing, to the following specific causes of dissolution:
Unless the company's articles provide otherwise, a general partnership, upon the death of one of its partners, shall continue among the surviving partners, unless the deceased leaves a spouse or descendants to whom his rights pass. If so, the company shall continue with the spouse or descendants of the partner, and they shall have the status of silent partners (commanditaires).
In all cases, the value of the rights of the deceased or excluded partner shall be determined by a special inventory, unless the company's articles provide for another method of valuation.
The dissolution of a company — except where dissolution occurs automatically pursuant to the constitutive instrument — must be published in the same manner and within the same period as the company itself. The same procedure applies upon the exclusion of a partner and upon the continuation of the company after the death of one of its members.
After dissolution, commercial companies retain their legal personality for the period required for liquidation, and only for the purposes of that liquidation.
If the company's articles do not provide for the appointment of the liquidator or liquidators, and the partners do not agree on their choice, they shall be appointed by the court in whose district the company's registered office is situated, from among its members.
The result of the selection or the court order appointing the liquidators must be published by those liquidators.
On assuming their duties, the liquidators must draw up an inventory of assets together with the managers of the company's affairs.
The liquidators shall collect the debts owed to the company by third parties or by the partners, pay the company's debts, sell its assets, and carry out all acts required by the liquidation. However, they may not continue to operate the company's enterprise, nor dispose of the company's establishment as a whole, except pursuant to a specific authorisation from the partners.
The liquidators must provide the partners, upon request, with all information on the state of the liquidation. However, no obstacles to the liquidation may be raised on account of unlawful claims.
The partition shall be carried out in accordance with the conditions of the partnership agreement and shall also be governed by the provisions of Articles 941 and 949 of the Code of Obligations.
In all commercial companies, and without prejudice to actions that may be brought against liquidators in their capacity as such, the actions of the company's creditors against a partner, his heirs, or his successors in title shall be extinguished by prescription after five years from the dissolution of the company, or from the departure of a partner with respect to actions directed against that partner. The prescription period shall run from the date of completion of publication in all cases where publication is required, and from the date of finalisation of liquidation for actions arising from the liquidation itself. Prescription may be suspended or interrupted in accordance with the rules of general law.
The proof of commercial contracts is not in principle subject to the exclusive rules established for civil contracts; accordingly, subject to the exceptions arising from special legal provisions, the contracts referred to may be proved by all means of evidence that the judge deems appropriate to accept in accordance with commercial custom and usage.
In commercial matters, the date of private instruments may be proved against third parties by all means of evidence. The date of negotiable instruments and the date of their endorsement shall be deemed valid until the contrary is proved.
Co-debtors under a commercial obligation are presumed to be jointly and severally bound by that obligation; this presumption also applies to guarantees of commercial debts.
The legal rate of interest in commercial matters is fixed at nine per cent.
For the purpose of establishing the fair price and market price, reference shall be made to stock exchange prices and mercuriales, unless there is a contrary agreement.
No commercial obligation to perform an act or a service shall be presumed to be gratuitous; if the parties do not specify a fee, commission, or brokerage, the remuneration customary in the profession shall be due.
In commercial matters, a court may not grant a time limit for rescission except in exceptional circumstances. A party who has applied to the court for rescission of the contract may not thereafter claim performance; however, a party who sought performance may subsequently opt for a claim for rescission. Performance of obligations after a rescission action has been brought shall not preclude the action.
The non-performance of one of the obligations under contracts with successive obligations entitles the party who fulfilled its obligations to request termination of the contract in respect of all obligations not yet performed, without prejudice to its right to claim damages.
In commercial matters, the right to bring a claim is extinguished by prescription after ten years if no shorter period is specified. If a judgment has been issued containing a decision, the claim arising from the res judicata shall be extinguished in all cases after ten years.
Sale(1), credit, transport undertakings(2), insurance undertakings(3), and all contracts whose rules are not determined by this Code are subject to the Code of Obligations and to custom. The special rules relating to public transport enterprises shall also apply to contracts of carriage. Stock exchange transactions, whether on securities or commodities, shall also be subject to special legislation.
The commercial pledge provided for in the following articles is one that secures a commercial debt.
Subject to the following provisions on delivery, the pledge may be proved by all means of evidence that the court deems necessary to accept. A pledge over a registered instrument shall be established by a transfer transaction recorded in the registers of the establishment that issued the instrument and on the instrument itself. For a promissory note(3), the pledge shall be established by an endorsement entered in the register.
A pledge agreement shall not produce its effect as a pledge if the pledged property remains in the possession of the debtor such that it appears to third parties as still part of his free assets from which he may obtain new credit; it is therefore necessary that the pledged property be delivered to the creditor, and even if it remains in the possession of the creditor or of a third party holding it for the creditor's account.
The pledgee must deliver to the debtor upon request a receipt specifying the nature, type, quantity, weight, and all distinguishing marks of the things delivered as pledge.
If the pledge is over fungible things or instruments, the pledge shall remain valid even if those things or instruments are replaced by things or instruments of the same type; if those things or instruments are non-fungible, the debtor may also recover them and replace them with the creditor's consent, provided that the pledge agreement is a notarial deed or a private instrument with certified date.
The creditor must, for the debtor's account, exercise all rights attaching to the things or instruments delivered to him as pledge. If what he received is an option credit instrument (Titres de crédit donnant droit à option), the debtor who wishes to exercise his option right must notify the creditor sufficiently in advance.
If the thing pledged is an instrument whose price has not been fully paid, the debtor, upon being called to pay, must remit the money to the creditor a few days at least before maturity, failing which the pledgee may proceed to sell the instrument.
In the event of non-payment at maturity, the creditor — after a period of two months running from the date of a simple notice sent to the debtor and to the third-party provider of the pledged property if any — may apply to the president of the enforcement department to order the sale of the pledged things by public auction. The creditor shall recover his debt from the proceeds of sale; any surplus shall be remitted to the debtor.
Cover is provided by the drawer or the person on whose account the bill is drawn; this shall not prevent the drawer acting for the account of a third party from remaining personally liable to endorsers and holders of the bill only. Cover exists if, at the maturity date of the bill, the drawee is indebted to the drawer or to the person on whose account the bill was drawn in an amount at least equal to the bill's value.
Acceptance of a bill implies the existence of cover. Such acceptance establishes cover in relation to endorsers. In the absence of acceptance, the drawer must, upon denial of the existence of cover, prove that the drawee had cover at the maturity date, failing which he shall be liable to guarantee the cover, even if the protest was raised after maturity.
A promissory note shall contain: - The words 'to order' or a statement in the text of the instrument itself in the language used for writing it. - An unconditional promise (La promesse pure et simple) to pay a specified sum. - A specification of the maturity date. - A specification of the place of payment. - The name of the person to whom or to whose order payment is to be made. - The date and place where the note is drawn. - The signature of the maker.
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a promissory note, except in the following cases: - A promissory note not specifying the maturity date shall be deemed payable at sight. - If no special place of payment is indicated, the place shown next to the maker's name shall be deemed the place of payment. - If no place of drawing is indicated, the instrument shall be deemed to have been drawn at the place indicated as the place of payment.
The provisions applicable to bills of exchange and relating to the following matters shall apply to promissory notes to the extent compatible with their nature: Endorsement (Articles 325 to 335) Maturity (Articles 348 to 352) Payment (Articles 353 to 363) Recourse for non-payment (Articles 365 to 376) Protest (Articles 377 to 382) Intervention (Articles 383 to 391) Copies (Articles 395 and 396) Alterations (Article 397) Prescription (Articles 398 and 399) Legal holidays, counting of periods, and prohibition on days of grace (Articles 400 to 402)
The provisions applicable to bills of exchange payable at the domicile of a third party or in a place other than the maker's domicile (Articles 317 and 342), and the provisions on interest stipulations (Article 318), discrepancies in amounts (Article 319), the effects of signatures in the case of unauthorised agents (Article 321), and other related provisions shall also apply to promissory notes.
The provisions on aval shall also apply to promissory notes (Articles 345 to 347). In the case specified in the last paragraph of Article 346, if the aval does not indicate for whose account it was given, it shall be deemed given for the maker's account.
The maker of a promissory note is bound in the same manner as the acceptor of a bill of exchange. A promissory note payable at a certain period after sight (Payable à un certain délai de vue) must be presented to its maker for authentication within the time limits specified in Article 338.
Joint-Stock Companies (Sociétés Anonymes)
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
Pursuant to the legal rules concerning formal requirements to be observed in general assembly deliberations, any resolution contrary to those requirements shall be null and void, provided it is established that the violation actually affected the decisive outcome. Any interested party may invoke this nullity before the competent authority. The nullity shall lapse upon rectification of the deliberations or after one year from the date on which the assembly was held without proper compliance.
Persons who fraudulently fabricate or attempt to fabricate a false majority at a shareholders' or bondholders' general assembly — in particular those who represent themselves as holding securities belonging to others who cannot vote, or who induce others by means of private benefits to vote in a specified manner or to abstain from voting, or who use any other illicit means — shall be liable to the prescribed penalties.
Joint-stock companies shall be dissolved upon expiry of the period for which they were formed, upon completion of the enterprise for which they were incorporated, or upon the impossibility of completing it. They shall also be dissolved by the shareholders' decision expressed at a general assembly in accordance with the conditions of Articles 202 and 204, and in all particular cases provided for in the articles.
In any event, if the board of directors fails to convene the assembly, or if the assembly cannot be validly constituted for lack of quorum, or if the assembly refuses to dissolve the company, every shareholder retains the right to apply to the competent court to take appropriate action or to dissolve the company.
The resolution adopted, whatever its nature, must be published.
Liquidation shall be conducted in principle in accordance with the rules provided for general partnerships.
If liquidators are not designated in the company's articles, they shall be appointed by the ordinary general assembly, unless the company is to be dissolved before its scheduled term, in which case the extraordinary general assembly shall appoint them at the same time. If the general assembly does not appoint the liquidators, their appointment shall rest exclusively with the competent court upon application by any interested party.
Auditors, joined by an expert appointed by the court, shall remain in office and shall supervise the liquidation.
Liquidators shall receive the accounts of administrative acts performed by board members and the general manager since the general assembly's approval of the last balance sheet until the opening of liquidation; they shall either approve them or refer any apparent problems to the competent court.
If the liquidation period exceeds one year, liquidators must draw up and publish the annual balance sheet.
Upon completion of liquidation, the liquidators shall draw up the final balance sheet, specifying each shareholder's share in the distribution of the company's assets.
Auditors shall prepare a report on the accounts submitted by the liquidators; the ordinary general assembly shall then approve them and resolve to grant a discharge to the liquidators or to object to the accounts, in which case the dispute shall be referred to the competent court.
A bill of exchange may be presented for acceptance to the drawee at his domicile at any time before maturity, either by the holder or by any holder for collection.
The drawer may stipulate in any bill of exchange that it be presented for acceptance, with or without a time limit. He may prohibit presentation for acceptance in the bill, unless the bill is payable at a third party's address, or in a place other than the drawee's domicile, or unless it is a bill payable at a certain time after sight.
Bills drawn at a period after sight must be presented for acceptance within one year of their date. The drawer may shorten or extend this period; endorsers may also shorten the periods referred to.
The drawee may request that the bill be presented to him a second time on the day following the first presentation; interested parties may not invoke this request as insufficient unless it is mentioned in the protest. The holder is not obliged to surrender a bill presented for acceptance to the drawee.
Acceptance is written on the bill of exchange and is expressed by the word 'accepted' or an equivalent; it is signed by the drawee, and the drawee's mere signature on the face of the bill is deemed acceptance. If the bill is payable at a period after sight, or if it must be presented for acceptance within a specified time by special stipulation, the acceptance must be dated on the day of presentation; failing this, the holder may, in order to preserve his rights against endorsers and the drawer, establish the omission by a protest on a specific date.
Acceptance shall be unconditional; however, the drawee may limit it to part of the amount. Any other modification of the bill's terms in the acceptance shall constitute a refusal; however, the acceptor shall be bound in accordance with the terms of his declaration.
If the drawer designates in the bill a place of payment other than the drawee's domicile without specifying a third party at whose address payment must be made, the drawee may designate that third party upon acceptance; failing such designation, the drawee shall be deemed to have undertaken to pay at the designated place himself.
The drawee's acceptance of the bill binds him to pay at maturity; in the event of non-payment, the holder — even if he is the drawer himself — has a direct action against the acceptor arising from the bill for everything that may be claimed pursuant to the applicable provisions.
If the drawee wrote an acceptance on the bill and then struck it out before returning the bill, refusal of acceptance shall be deemed to have occurred; the striking out shall be presumed to have been made before the return of the bill unless the contrary is proved. However, if the drawee notified his acceptance in writing to the holder or to any signatory of the bill, he shall be bound to those persons in accordance with the terms of his acceptance.
The deliberating creditors may not approve a post-bankruptcy settlement agreement unless the following conditions are met, failing which the agreement shall be null and void. The agreement shall only be concluded by a vote of creditors forming the majority in number and representing three-quarters of the total debt; the foregoing conditions being cumulative.
Creditors holding a mortgage(1) or movable pledge privilege may not vote unless they waive their securities in accordance with the conditions provided for in the chapter on preventive settlement.
The settlement agreement must be signed at the same session, failing which it shall be null and void. If only a majority in number, but not in amount, is obtained, or only a majority in amount is obtained, the session shall be adjourned for eight days and no further adjournment may be granted; in this second session the creditors who were present or represented at the first session may alone deliberate.
No settlement agreement may be concluded for a person convicted of fraudulent bankruptcy(1). If an investigation is ongoing regarding fraudulent bankruptcy, creditors shall be convened to decide whether they intend to deliberate on a settlement at the conclusion of the investigation.
If the bankrupt is convicted of negligent bankruptcy, a settlement agreement is possible. However, creditors may, in the case of ongoing criminal proceedings, defer deliberations until after the conclusion of those proceedings in accordance with the provisions of the preceding article.
In the case of a commercial company that has issued bonds, a settlement agreement may only be concluded if it is approved by the bondholders' assembly under the conditions and in the circumstances specified in the chapter on preventive settlement.
Any creditor entitled to participate in the settlement agreement and whose rights have been recognised, and the bondholders' assembly if one exists, may object to the settlement. The objection must be stated and the objectors must affix their signatures at the same session.
The ratification procedure shall be initiated before the court upon application of the most diligent party (A la requête de la partie la plus diligente); the court may not act before the expiry of the eight-day period referred to in Article 562, and must rule at the earliest at the session convened for that purpose.
In all cases, the delegated judge shall, before the court rules on ratification, prepare a report on the characteristics of the bankruptcy and the feasibility of accepting the settlement.
If the rules set forth above have not been observed, or if grounds relating to the public interest or the interests of creditors appear to preclude the settlement, the court must refuse ratification. It may also refuse to ratify a settlement agreement if the bankrupt is deemed undeserving of the benefit.
Ratification of the settlement agreement renders it binding on all creditors, whether listed in the balance sheet or not, and whether their debts have been verified or not. It is also enforceable against creditors residing outside Lebanese territory.
After the ratification judgment acquires the force of res judicata, the effects of the bankruptcy shall cease, subject to the continuation of the loss of political rights provided for in Article 500. The trustees whose duties have ended shall render their accounts to the bankrupt.
The settlement agreement involves above all payment of debts in instalments over successive periods, and in general the discharge of the debtor from a greater or lesser portion of his debt. However, this discharge leaves him with a natural obligation. The settlement agreement may also not include the bankrupt's final discharge for the written-off portion.
The mortgage created in favour of the mass of creditors (L'hypothèque de la masse) shall be retained as security for payment of the sum specified in the settlement agreement.
Creditors may also request one or more guarantees to secure performance of the settlement agreement.
Until the full amount provided for in the settlement agreement is paid, the debtor may not make any extraordinary disposition not required by the conduct of the trade itself, unless there is a contrary agreement. The provisions of Articles 466 and 467 shall apply to this effect.
No action to annul the settlement agreement after ratification shall be admissible unless it is based on fraud discovered after ratification and arising from the concealment of the bankrupt's assets or the exaggeration of debts owed by him. Every creditor may bring such an action within five years of the ratification.
If after ratification of the settlement agreement the bankrupt is prosecuted for fraudulent bankruptcy and a temporary or permanent arrest warrant is issued against him, the court may order any precautionary measures it is authorised to take. These measures shall be lifted if the bankrupt is ultimately acquitted.
If the bankrupt fails to perform the terms of the settlement agreement, an action may be brought before the court for the rescission (Résolution) of the agreement; any guarantors shall be summoned or invited to attend in the proper manner.
When the court becomes aware of the judgment ordering fraudulent bankruptcy(2), it shall proceed to appoint a delegated judge and one or more trustees. It shall also make this appointment in the order declaring the settlement annulled or rescinded, or in the judgment declaring the bankruptcy of a company whose partners are personally liable.
Verification of debt instruments filed pursuant to the preceding article shall be commenced without delay. There is no need to conduct a new verification of previously verified debts, subject to the right to reject or reduce debts and to provisionally admit or reject new ones.
After completion of the acts described above, creditors shall be convened to give their opinion on retaining the trustees or replacing them if no new settlement has been concluded.
Acts performed by the bankrupt after ratification of the settlement agreement and before its annulment or rescission shall only be voided in the event of fraud affecting creditors' rights.
Pre-settlement creditors shall retain all their rights against the bankrupt alone. With respect to the mass of creditors, they may only participate within the following limits: if they received nothing or were not fully satisfied under the previous settlement, they may participate for the portion of their debt for which they were not satisfied, together with all creditors under the new settlement.
If no settlement agreement is concluded, the creditors shall ipso jure enter into a state of union. The delegated judge shall immediately consult them regarding management acts and the retention or replacement of the bankruptcy trustees, and those creditors whose debts have been verified or provisionally admitted shall participate in deliberations.
Creditors shall be consulted as to whether it is possible to grant the bankrupt an allowance from the bankruptcy estate (Actif). If the majority of creditors present agree, an allowance may be granted; the delegated judge shall propose the amount, and the court shall fix it.
If a partnership is declared bankrupt, creditors may only conclude a settlement agreement with one or more partners. In such case, the totality of the company's assets shall remain subject to the creditors' union. The personal assets allocated to each individual partner under a settlement with that partner shall be withdrawn from the union.
The trustees shall represent the mass of creditors and carry out the liquidation acts. However, the creditors may authorise the trustees to continue operating the existing assets. The authorisation shall specify the duration and the scope of that operation.
If the trustees' acts give rise to obligations exceeding the value of the union's assets, only the creditors who authorised those acts shall be personally liable for the excess beyond their share in those assets; however, their liability shall not exceed their share in the union's assets.
The trustees shall proceed to collect outstanding debts. They may accept settlements on the same terms as were previously in use, notwithstanding any objection by the bankrupt. However, for disputes involving a lump sum, the delegated judge's authorisation is required.
The trustees must proceed to sell all movable assets, including the commercial enterprise(1), under the delegated judge's supervision and without the need to convene the creditors' assembly, in accordance with the forms prescribed for execution.
If no forced sale procedure has been completed before the union, the trustees alone shall be authorised to proceed with the sale and must commence it within eight days with the delegated judge's authorisation and through the enforcement department.
The trustees shall draw up the conditions of sale pursuant to which bidding shall take place, and shall include therein the particulars required by Article 744 of the Code of Civil Procedure(2). Articles 746 and 747 of the same Code shall also apply.
The delegated judge shall convene the creditors in union at least once during the first year, and also in subsequent years when circumstances require. The trustees must submit accounts of the administration at the meetings.
The bankruptcy estate assets shall be distributed among all creditors in proportion to each creditor's verified debt, after deducting the costs of administration, the allowances granted to the bankrupt or his family, and the amounts paid to preferential creditors.
For this purpose, the trustees shall submit monthly statements to the delegated judge on the state of the bankruptcy and the amounts deposited with the designated bank for receiving and paying enforcement funds; the delegated judge shall then order, as appropriate, the distribution of funds among creditors.
The trustees may not carry out any closing of a debt except against presentation of the instrument evidencing the debt; they shall note on the instrument the amount paid or ordered to be paid. If production of the instrument is not possible, the procedure prescribed by law for the circumstances shall apply.
After completion of the bankruptcy liquidation, the delegated judge shall convene the creditors for a final meeting; at this final meeting the trustees shall render their accounts, and the bankrupt shall be present or duly summoned. The creditors shall decide whether to discharge the trustees or to raise objections; in the latter case the dispute shall be referred to the competent court.
The delegated judge shall submit to the court the creditors' resolution concerning the excusing of the bankrupt, together with a report on the characteristics and circumstances of the bankruptcy. The court shall then issue its decision declaring the bankrupt excused or not excused.
Persons convicted of fraudulent bankruptcy(1), and persons convicted of forgery, theft, fraud, breach of trust, or embezzlement of public funds(2), may not be declared excused.
A settlement may be concluded involving the total or partial transfer of the bankrupt's assets. The conditions of this type of settlement are the same as those provided for the simple settlement agreement; however, the discharge of the bankrupt in respect of any shortfall resulting from the realisation of the assets shall not operate automatically but only if expressly agreed upon.
If at any time before ratification of the settlement or formation of the union it appears that the course of the bankruptcy proceedings has been suspended due to insufficiency of assets, the court may, based on the delegated judge's report or of its own motion, close the bankruptcy proceedings. In such case, each creditor shall recover his freedom to act individually.
The bankrupt or any interested person may at any time apply to the court to reverse the closure order if they prove the existence of sufficient assets to cover the bankruptcy costs, or if they deliver to the trustees the sufficient amount to cover such costs.
A joint-stock company is a company whose capital is divided into shares, i.e., negotiable instruments, which operates under a trade name, and which is formed among a minimum of three persons who hold shares in their own names and are not liable for the company's debts beyond the extent of their contributions.
Every joint-stock company, regardless of its object, is subject to the commercial law and its customs. One third of the capital of joint-stock companies whose object is the exploitation of a public utility or public service must be held as registered shares by Lebanese natural persons or by companies whose entire capital consists of registered shares or quotas owned entirely by Lebanese persons and whose articles require the transfer of shares or quotas therein only to Lebanese persons. Any transfer of such shares in a manner different from the preceding paragraph shall be absolutely null and void.
Every bill of exchange not expressly drawn 'not to order' is transferable by endorsement. If the drawer has inscribed on the bill the words 'not to order' or a similar expression, the bill is only transferable by way of an ordinary assignment in accordance with the rules applicable to that. Endorsement may be to the drawee's own order, whether he has accepted the bill or not, to the drawer himself, or to any other party bound by the bill; all such persons may re-endorse the bill.
Endorsement must be unconditional. Any condition attached to an endorsement shall be deemed void. A partial endorsement is null and void. An endorsement 'to bearer' shall be treated as a blank endorsement.
Endorsement must be written on the bill of exchange or on an allonge attached to it, and must bear the endorser's signature. The endorsement need not name the endorsee, or may consist solely of the endorser's signature (blank endorsement); in the latter case, the endorsement shall only be valid if written on the back of the bill or on the allonge.
Endorsement transfers all rights arising from the bill of exchange. If the endorsement is in blank, the holder may:
An endorser guarantees acceptance and payment unless there is a contrary agreement. He may prohibit further endorsement; in such case, he shall not be bound to guarantee against persons to whom the bill is subsequently endorsed.
The holder of a bill of exchange shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another endorsement, the signatory of that second endorsement shall be deemed to have acquired the bill by virtue of the blank endorsement. If a bill of exchange is taken from its holder by any event whatsoever, the holder who establishes his title in the manner described in the preceding paragraph shall not be required to surrender the bill unless he acquired it in bad faith or committed a gross error at the time of acquisition.
If it appears from the balance sheet submitted by the bankrupt, or from subsequent information, that the bankruptcy estate's assets do not exceed two thousand five hundred Lebanese pounds, or if the dividend to be distributed to creditors appears too small to justify the ordinary procedure, the court may, based on the delegated judge's report or of its own motion, substitute the summary procedure for the ordinary one.
The summary procedure described above differs from the ordinary procedure in the following characteristics:
Limited Partnerships
A limited partnership operating under a trade name comprises two categories of partners: firstly, general partners (Commandités) who alone have the right to conduct its business and who are personally and jointly liable for the company's debts; and secondly, silent partners (Commanditaires) who provide the capital and each of whom is liable only to the extent of his contribution.
There are two types of limited partnerships: the simple limited partnership and the limited partnership with shares (La Commandite simple et la Commandite par actions).
A limited partnership operates under a trade name that includes only the names of the general partners. If there is only one general partner, the word 'and Partners' may be added to his name. If a silent partner consents to the inclusion of his name in the company's trade name, he shall become liable as a general partner towards any bona fide third party.
General partners, whether all of them manage the company's affairs or whether one or some of them do so on behalf of all, are subject to the same legal rules applicable to members of a general partnership.
A silent partner may not intervene in the management of the company's affairs with respect to third parties, even if such intervention is based on a power of attorney. If he violates this prohibition, he shall become jointly and severally liable until the end together with the general partners for obligations arising from his managerial act; the liability imposed on him may be limited either to the results of the acts in which he intervened, or may extend to all the company's debts, in proportion to the number of those acts.
Simple limited partnerships are subject to the rules applicable to the formation and dissolution of general partnerships, even as regards silent partners.
In limited partnerships with shares, the capital is divided into shares, and the silent partner therein is subject to the same legal rules applicable to a shareholder in a joint-stock company.
Limited partnerships with shares, regardless of their object, are subject to commercial law and its customs.
The legal rules applicable to joint-stock companies shall apply to the formation and operation of limited partnerships with shares.
All obligations imposed by law on board members of a joint-stock company shall apply to managers of a limited partnership with shares.
The number of auditors must be at least three, including a court-appointed accountancy expert designated by the president of the court by a decision. General partners may not be selected as auditors. They shall meet as a supervisory council as often as required by the supervision and investigations they are required to conduct. The term of the supervisory council shall be determined in the company's articles, but the initial council may only be appointed for one year.
All general assembly resolutions, other than those relating to the ratification of managerial acts, shall implicitly require the personal consent of the general partners in accordance with the rules set out in the company's articles.
A current account exists whenever two persons, whose mutual business requires them to make reciprocal deliveries of funds, agree to convert their mutual debts into simple debit and credit entries forming a single account, so that only the final balance at the closing of that account constitutes a due and payable debt (Du compte courant).
The scope of the current account depends on the parties' wishes; they may make it cover all their transactions or only a specific type thereof. The current account may be maintained for both parties or for one party only; in the latter case, one party is not obliged to lend money to the other unless so agreed.
The existence of a current account does not negate the right to commissions and recovery of expenses on transactions relating to the current account; these shall be entered in the account unless there is a contrary agreement.
Payment by commercial instrument is only deemed final upon collection of its value unless there is a contrary agreement; if its value is not collected at maturity, the recipient may, while retaining it as security and exercising the rights attached to it, debit its value against the payor's account. In the event of the payor's bankruptcy, the recipient may reclaim the instrument, and its value may not be included in the current account.
Payments shall automatically generate interest in favour of the lender against the borrower, calculated at the legal rate unless otherwise specified by contract or custom.
Debts credited to either party in the current account shall lose their specific nature and individual identity upon entry; they shall no longer be capable of individual payment, set-off, legal action, or enforcement, nor shall they be separately extinguished by prescription. Personal or real security attaching to debts entered in the account shall be extinguished unless otherwise agreed.
Neither party shall be deemed a creditor or debtor of the other before the closing of the current account; it is solely the closing of the account that determines the state of the legal relationship between them, giving rise automatically to the global set-off of all account entries, and identifying the creditor and the debtor.
The account shall be closed and settled at the maturity dates agreed by contract or determined by local custom, or at the end of each six-month period. The resulting balance shall constitute a net, due, and payable debt that shall bear interest at the agreed current account rate from the date of settlement, whether transferred to a new account or not.
The contract shall terminate at the time stipulated by agreement; if no time limit has been agreed upon, it shall terminate by the wish of either party; it shall also terminate upon the death, incapacity, or bankruptcy of either party.
The drawer or holder may cross the cheque with the following consequences. Crossing is made by drawing two parallel lines on the face of the cheque; crossing may be general or special. It is general if there is no designation between the lines or merely the word 'banker' or an equivalent. It is special if the name of a banker is written between the lines.
The drawee may not pay a generally crossed cheque (À barrement général) except to a customer or to another banker. The drawee may not pay a specially crossed cheque except to the named banker. If the named banker is the drawee, payment may be made to a customer. A cheque bearing two special crossings may only be paid if the two crossings are for clearing purposes or in one of the other cases provided by law.
The drawer or holder of a cheque may prohibit cash payment by writing transversally on its face the expression 'to be credited to account' (A porter en compte) or an equivalent. In such case, the cheque may only be settled by book entry (credit to account, transfer, or set-off), which shall be equivalent to payment.
Any instrument by which the maker undertakes to deliver a specified sum of money or a quantity of fungible things at a specified place and time may be transferred by endorsement if it expressly bears the words 'to order'. Endorsement shall be subject to the provisions applicable to bills of exchange, unless otherwise provided by law, regulations, or the nature of the instrument.
If a bill of exchange, promissory note, or other endorsable instrument is delivered in payment of a debt, this shall not constitute novation of the contract unless the intention of the parties so requires.
The criminal court of first instance shall hear negligent bankruptcy cases(2) (Banqueroute simple) upon application of the trustees, any creditor, or the public prosecution. The penalty shall be imprisonment for between one month and two years.
Any merchant found in any of the following situations shall be deemed a negligent bankrupt:
Any merchant found in any of the following situations may be deemed a negligent bankrupt:
The costs of an action brought by the public prosecution for negligent bankruptcy may not in any case be charged to the mass of creditors. In the event of a settlement, the Treasury may not claim those costs from the settlement estate.
The costs of an action brought by the trustees on behalf of creditors shall be borne by the mass of creditors if the accused is acquitted, and by the Treasury if convicted, with the Treasury retaining its right of recourse against the convicted party.
The trustees may not bring an action for negligent bankruptcy, nor adopt the status of civil party plaintiff on behalf of the mass of creditors, unless authorised to do so by a resolution of the majority in number of creditors present at a duly convened creditors' meeting.
The costs of a criminal action brought by one of the creditors shall be paid by the Treasury if the accused is convicted, and by the creditor plaintiff if he is acquitted.
Any bankrupt merchant who has concealed his books, concealed part or all of his assets, fraudulently claimed debts that do not exist, whether in entries in his books, in notarial instruments, in private documents, or in letters, or who has removed himself from prosecution and refused to appear, shall be deemed guilty of fraudulent bankruptcy.
The costs of a fraudulent bankruptcy action may in no case be charged to the mass of creditors. If one or more creditors have adopted the status of civil party plaintiff, they shall bear the costs if the accused is acquitted, and the Treasury shall bear them if he is convicted, with the Treasury retaining its right of recourse against the convicted party.
The penalty for fraudulent bankruptcy (Banqueroute frauduleuse) shall be imposed on:
The bankrupt's spouse, ascendants, descendants, and in-laws of the same degree who concealed, attempted to conceal, or disposed of bankruptcy estate property without conspiring with the bankrupt shall be punished by the penalty for theft.
In the cases provided for in the preceding articles, the court of first instance or the court of appeal shall decide the following matters even in the event of an acquittal:
A trustee who commits embezzlement in the management of his duties shall be subject to the penalty prescribed for breach of trust.
Any creditor who reaches an agreement with the bankrupt or any other person for private benefits to be obtained in exchange for his vote at creditors' assemblies, or who enters into a private arrangement giving him a special benefit from the bankrupt's assets, shall be subject to the prescribed penalties.
In addition, the arrangements referred to above shall be declared null and void against all persons, including the bankrupt. The creditor must return to the mass of creditors the cash and amounts received pursuant to those arrangements.
All orders and judgments issued pursuant to the provisions of this chapter shall be posted and published in the manner prescribed for publishing the bankruptcy declaration judgment.
Prosecutions for negligent or fraudulent bankruptcy do not require any modification of the general rules applicable to the administration of the bankruptcy estate.
However, in such cases the trustees are required to deliver to the public prosecution all documents, instruments, papers, and information requested of them.
Documents, instruments, and papers delivered by the trustees during the investigation shall be placed in the court clerk's office; access thereto shall be granted upon the trustees' request, and they may take certified copies thereof.
Companies with Variable Capital (Cooperative Companies)
Any company may include in its articles a provision stipulating that its capital is variable, in which case it shall be subject to the provisions of the following articles in addition to the general rules applicable to it according to its specific form. That provision must be published.
When a company has variable capital, its capital may be increased, either by the admission of new partners or by additional contributions from existing partners, and may be reduced by the withdrawal by partners of all or part of their contributions. Capital increases and reductions shall be made freely and without the publication formalities required, unless the company's articles provide otherwise.
Repealed by Article 5 of Legislative Decree No. 54 of 16/6/1977.
The company's articles must specify a minimum amount below which the capital may not fall through the withdrawal of partners' contributions or their departure. That minimum may not be less than one-fifth of the company's capital, and this provision shall be mentioned in the company's articles for publication purposes.
The company's articles may contain a provision allowing the general assembly to decide, by the majority required for amending the articles, to exclude a partner or several partners without depriving them of their accrued rights in the reserve allocated to them.
A partner who leaves the company either voluntarily or pursuant to a general assembly resolution shall remain liable to the partners and to third parties for a period of three years for all obligations that existed at the time of his departure.
If a company has adopted the form of a joint-stock company, its shares must remain registered even after full payment of their price. The company's general assembly or board of directors may be granted the right to object to the transfer of such shares, provided that this right is not abused.
Regardless of the form of the company, it shall not be dissolved by the departure, bankruptcy, incapacity, loss of general legal capacity, or death of any of its partners; it shall remain in existence by operation of law among the remaining partners.
This Code shall apply to agricultural cooperative companies unless the provisions of their special law are contrary to it.
A bank(1) that receives a sum of money on deposit shall become its owner and must return its equivalent in a lump sum or in instalments upon the depositor's first demand, or in accordance with the notice or time-limit conditions specified in the contract. All bank transactions must be supported by written instruments.
If what is deposited at the bank consists of securities (Titre de crédit), the ownership of those securities shall remain with the depositor unless it is proved that the intention was otherwise. Such intention shall be presumed if the depositor has granted the bank in writing and without restriction the right to dispose of those securities, or has granted it the right to return securities of the same type. The provisions applicable to the loan of fungible things shall apply to such deposits.
The rules applicable to the hiring of things shall apply to deposits made in safe-deposit boxes or in compartments thereof. The bank shall be responsible for the safety of the hired boxes.
Under credit facility agreements, the credit provider (Créditeur) undertakes to place certain funds at the disposal of the beneficiary (Crédité), enabling him to draw upon them in a lump sum or in successive instalments according to his needs within a specified period. Amounts repaid or returned by the beneficiary during the term of the contract shall increase the credit available during the remaining period.
The credit provider may terminate the agreement if the beneficiary has become insolvent or was insolvent at the time of contracting without the credit provider's knowledge. If any material reduction in the personal or real security provided by the beneficiary occurs, the credit provider may request additional security or a reduction of the credit amount.
If the security provided is a mortgage, the mortgage registration made at the time of the agreement shall secure, from its date, all drawdowns subsequently made pursuant to the credit facility agreement.
If bank credit is earmarked to be paid to a third party and the bank confirms the credit to the beneficiary, it may no longer be revoked or modified without the beneficiary's consent; the bank becomes directly and irrevocably bound to accept the instruments (Effets) and deposits intended. The bank may recover amounts paid against the principal's account.
Banking operations not mentioned in this chapter are subject to the provisions of the Code of Obligations applicable to the various types of contracts arising from those operations, or to the contracts under which they fall.
Shares, bonds, annuities, and all other negotiable instruments (Des actions, obligations, rentes et tous autres titres négociables) issued in bulk and conferring on their holders equal rights to monetary value may be registered (nominatif), to order (à ordre), or to bearer (au porteur).
If the instrument is to bearer, it shall be transferred by mere delivery. Any holder shall be deemed entitled to exercise the rights attaching thereto; provided the debtor has not received a valid objection, payment made to the holder shall validly discharge the debtor, in good faith.
If the instrument is registered, the holder's right is established by registration in his name in the books of the issuing body. Ownership of such an instrument shall be transferred by this registration.
Transfer of a registered instrument shall be effected by a declaration recording the transfer in the books and signed by the transferor or a person authorised by him. The issuing body may, before registering the transfer, request from the person making the declaration proof of his identity.
Registered instruments may include detachable coupons conferring on their holder the right to collect maturities, distributions, and interest (these are called mixed instruments).
Negotiable securities instruments issued to order shall be transferred by endorsement. Their endorsement shall be governed by the same rules as the endorsement of bills of exchange, unless different provisions arise from the law, regulations, or the nature of the instrument.
After ten years from the declaration of bankruptcy, the bankrupt shall be automatically rehabilitated without any formality if he was not found guilty of negligent or fraudulent bankruptcy. Rehabilitation in this manner cannot be denied to the bankrupt on the grounds of his failing to pay his debts.
Rehabilitation shall occur automatically for a bankrupt who has paid all debts owed by him in principal, interest, and costs; interest shall not be demanded for a period exceeding five years. For the rehabilitation to take effect, the bankrupt must prove payment, which shall be confirmed by the delegated judge or, if the case has ended, by the president of the court.
Rehabilitation may also be granted to a bankrupt of recognised integrity:
Every rehabilitation application shall be filed with the attorney-general at the court that issued the bankruptcy judgment, together with the instruments and supporting documents. The attorney-general shall refer all papers to the court together with his reasoned opinion.
The court clerk shall send a registered letter notifying each creditor whose debt is verified against the bankruptcy estate, or recognised in a subsequent judicial decision, and who has not received full payment, of the rehabilitation application.
Any creditor who has not been fully paid the dividend stipulated in the settlement agreement or who has not fully released the debtor may, within one month of receiving such notice, file an objection to the rehabilitation with the court.
After expiry of the period, the results of the required investigations and the creditors' objections shall be referred to the attorney-general to whom the application was submitted; he shall forward them together with his reasoned opinion to the president of the court that issued the bankruptcy judgment.
The court shall, where appropriate, summon the rehabilitation applicant and the objectors and shall hear them in camera; the applicant may be assisted by counsel. In the case of full payment of debts, the court may limit itself to verifying the evidence of payment and rule accordingly.
If the application is refused, it may not be renewed until after one year. If the application is granted, the judgment issued by the court of first instance or the court of appeal shall be entered in the register of the bankruptcy court or the court having jurisdiction at the bankrupt's domicile.
A commercial rehabilitation application shall not be considered for fraudulent bankrupts, nor for persons convicted of theft, embezzlement, fraud, or breach of trust, unless they have first obtained their criminal rehabilitation.
Rehabilitation of the bankrupt may be granted after his death.
Joint Ventures (Sociétés en Participation)
A joint venture (société en participation) is distinguished from other commercial companies in that its existence is confined to the contracting parties and it is not intended to be disclosed to third parties.
The agreements concluded between the parties freely determine the mutual rights and obligations of the partners and allocate profits and losses among them, subject to the application of the general principles specific to the number of partners.
The existence of the agreements referred to above may be proved by all means of evidence accepted in commercial matters.
Joint ventures are not subject to the publication formalities imposed on other commercial companies.
A joint venture does not have legal personality.
Third parties shall only have a legal relationship with the partner with whom they contracted. However, a joint venture that discloses itself to third parties as such may be treated by them as a de facto company.
The company may not issue shares or negotiable instruments transferable or tradeable for the benefit of the partners.
In addition to the rules set forth in the preceding chapters, companies shall be subject to the following provisions:
All commercial companies, other than joint ventures(1), may obtain a preventive settlement and may also be declared bankrupt. A company that is in the course of liquidation may also be declared bankrupt.
The application for a preventive settlement or the declaration seeking a bankruptcy judgment must be signed by the partner or partners who have authority to sign on behalf of the company if it is a general partnership, by all general partners if it is a simple limited partnership, and by the legal representative if it is any other type of company.
All partners in general partnerships(3) and all commandités in limited partnerships(4) must also, each as regards himself, make the required declaration within twenty days of the suspension of payments. The bankruptcy of the company shall automatically entail the personal bankruptcy of each general partner.
In all companies, the trustee in bankruptcy may compel partners to complete payment of the company's capital even before the maturity dates set in the company's articles.
If a company becomes fraudulently or negligently bankrupt, a criminal liability action may, where appropriate, be brought against partners of a general partnership and against commandités of a limited partnership, and also against directors, board members, and managers of joint-stock companies and limited liability companies.
All prior legislative texts dealing with the matters covered by this Code shall lose their legal force from the date this Code becomes enforceable. This Code shall enter into force six months after its publication in the Official Gazette.
Companies formed pursuant to the Commercial Code promulgated on 24 March 1942 must comply with the provisions of the Commercial Code as amended by this Law, under penalty of dissolution of the company, within three months of the date of entry into force of this Law.
Limited Liability Companies
Certain Financial Offences
Mergers and Demergers of Companies
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
Pursuant to the legal rules concerning formal requirements to be observed in general assembly deliberations, any resolution contrary to those requirements shall be null and void, provided it is established that the violation actually affected the decisive outcome. Any interested party may invoke this nullity before the competent authority. The nullity shall lapse upon rectification of the deliberations or after one year from the date on which the assembly was held without proper compliance.
Persons who fraudulently fabricate or attempt to fabricate a false majority at a shareholders' or bondholders' general assembly — in particular those who represent themselves as holding securities belonging to others who cannot vote, or who induce others by means of private benefits to vote in a specified manner or to abstain from voting, or who use any other illicit means — shall be liable to the prescribed penalties.
Joint-stock companies shall be dissolved upon expiry of the period for which they were formed, upon completion of the enterprise for which they were incorporated, or upon the impossibility of completing it. They shall also be dissolved by the shareholders' decision expressed at a general assembly in accordance with the conditions of Articles 202 and 204, and in all particular cases provided for in the articles.
In any event, if the board of directors fails to convene the assembly, or if the assembly cannot be validly constituted for lack of quorum, or if the assembly refuses to dissolve the company, every shareholder retains the right to apply to the competent court to take appropriate action or to dissolve the company.
The resolution adopted, whatever its nature, must be published.
Liquidation shall be conducted in principle in accordance with the rules provided for general partnerships.
If liquidators are not designated in the company's articles, they shall be appointed by the ordinary general assembly, unless the company is to be dissolved before its scheduled term, in which case the extraordinary general assembly shall appoint them at the same time. If the general assembly does not appoint the liquidators, their appointment shall rest exclusively with the competent court upon application by any interested party.
Auditors, joined by an expert appointed by the court, shall remain in office and shall supervise the liquidation.
Liquidators shall receive the accounts of administrative acts performed by board members and the general manager since the general assembly's approval of the last balance sheet until the opening of liquidation; they shall either approve them or refer any apparent problems to the competent court.
If the liquidation period exceeds one year, liquidators must draw up and publish the annual balance sheet.
Upon completion of liquidation, the liquidators shall draw up the final balance sheet, specifying each shareholder's share in the distribution of the company's assets.
Auditors shall prepare a report on the accounts submitted by the liquidators; the ordinary general assembly shall then approve them and resolve to grant a discharge to the liquidators or to object to the accounts, in which case the dispute shall be referred to the competent court.
A bill of exchange may be presented for acceptance to the drawee at his domicile at any time before maturity, either by the holder or by any holder for collection.
The drawer may stipulate in any bill of exchange that it be presented for acceptance, with or without a time limit. He may prohibit presentation for acceptance in the bill, unless the bill is payable at a third party's address, or in a place other than the drawee's domicile, or unless it is a bill payable at a certain time after sight.
Bills drawn at a period after sight must be presented for acceptance within one year of their date. The drawer may shorten or extend this period; endorsers may also shorten the periods referred to.
The drawee may request that the bill be presented to him a second time on the day following the first presentation; interested parties may not invoke this request as insufficient unless it is mentioned in the protest. The holder is not obliged to surrender a bill presented for acceptance to the drawee.
Acceptance is written on the bill of exchange and is expressed by the word 'accepted' or an equivalent; it is signed by the drawee, and the drawee's mere signature on the face of the bill is deemed acceptance. If the bill is payable at a period after sight, or if it must be presented for acceptance within a specified time by special stipulation, the acceptance must be dated on the day of presentation; failing this, the holder may, in order to preserve his rights against endorsers and the drawer, establish the omission by a protest on a specific date.
Acceptance shall be unconditional; however, the drawee may limit it to part of the amount. Any other modification of the bill's terms in the acceptance shall constitute a refusal; however, the acceptor shall be bound in accordance with the terms of his declaration.
If the drawer designates in the bill a place of payment other than the drawee's domicile without specifying a third party at whose address payment must be made, the drawee may designate that third party upon acceptance; failing such designation, the drawee shall be deemed to have undertaken to pay at the designated place himself.
The drawee's acceptance of the bill binds him to pay at maturity; in the event of non-payment, the holder — even if he is the drawer himself — has a direct action against the acceptor arising from the bill for everything that may be claimed pursuant to the applicable provisions.
If the drawee wrote an acceptance on the bill and then struck it out before returning the bill, refusal of acceptance shall be deemed to have occurred; the striking out shall be presumed to have been made before the return of the bill unless the contrary is proved. However, if the drawee notified his acceptance in writing to the holder or to any signatory of the bill, he shall be bound to those persons in accordance with the terms of his acceptance.
The deliberating creditors may not approve a post-bankruptcy settlement agreement unless the following conditions are met, failing which the agreement shall be null and void. The agreement shall only be concluded by a vote of creditors forming the majority in number and representing three-quarters of the total debt; the foregoing conditions being cumulative.
Creditors holding a mortgage(1) or movable pledge privilege may not vote unless they waive their securities in accordance with the conditions provided for in the chapter on preventive settlement.
The settlement agreement must be signed at the same session, failing which it shall be null and void. If only a majority in number, but not in amount, is obtained, or only a majority in amount is obtained, the session shall be adjourned for eight days and no further adjournment may be granted; in this second session the creditors who were present or represented at the first session may alone deliberate.
No settlement agreement may be concluded for a person convicted of fraudulent bankruptcy(1). If an investigation is ongoing regarding fraudulent bankruptcy, creditors shall be convened to decide whether they intend to deliberate on a settlement at the conclusion of the investigation.
If the bankrupt is convicted of negligent bankruptcy, a settlement agreement is possible. However, creditors may, in the case of ongoing criminal proceedings, defer deliberations until after the conclusion of those proceedings in accordance with the provisions of the preceding article.
In the case of a commercial company that has issued bonds, a settlement agreement may only be concluded if it is approved by the bondholders' assembly under the conditions and in the circumstances specified in the chapter on preventive settlement.
Any creditor entitled to participate in the settlement agreement and whose rights have been recognised, and the bondholders' assembly if one exists, may object to the settlement. The objection must be stated and the objectors must affix their signatures at the same session.
The ratification procedure shall be initiated before the court upon application of the most diligent party (A la requête de la partie la plus diligente); the court may not act before the expiry of the eight-day period referred to in Article 562, and must rule at the earliest at the session convened for that purpose.
In all cases, the delegated judge shall, before the court rules on ratification, prepare a report on the characteristics of the bankruptcy and the feasibility of accepting the settlement.
If the rules set forth above have not been observed, or if grounds relating to the public interest or the interests of creditors appear to preclude the settlement, the court must refuse ratification. It may also refuse to ratify a settlement agreement if the bankrupt is deemed undeserving of the benefit.
Ratification of the settlement agreement renders it binding on all creditors, whether listed in the balance sheet or not, and whether their debts have been verified or not. It is also enforceable against creditors residing outside Lebanese territory.
After the ratification judgment acquires the force of res judicata, the effects of the bankruptcy shall cease, subject to the continuation of the loss of political rights provided for in Article 500. The trustees whose duties have ended shall render their accounts to the bankrupt.
The settlement agreement involves above all payment of debts in instalments over successive periods, and in general the discharge of the debtor from a greater or lesser portion of his debt. However, this discharge leaves him with a natural obligation. The settlement agreement may also not include the bankrupt's final discharge for the written-off portion.
The mortgage created in favour of the mass of creditors (L'hypothèque de la masse) shall be retained as security for payment of the sum specified in the settlement agreement.
Creditors may also request one or more guarantees to secure performance of the settlement agreement.
Until the full amount provided for in the settlement agreement is paid, the debtor may not make any extraordinary disposition not required by the conduct of the trade itself, unless there is a contrary agreement. The provisions of Articles 466 and 467 shall apply to this effect.
No action to annul the settlement agreement after ratification shall be admissible unless it is based on fraud discovered after ratification and arising from the concealment of the bankrupt's assets or the exaggeration of debts owed by him. Every creditor may bring such an action within five years of the ratification.
If after ratification of the settlement agreement the bankrupt is prosecuted for fraudulent bankruptcy and a temporary or permanent arrest warrant is issued against him, the court may order any precautionary measures it is authorised to take. These measures shall be lifted if the bankrupt is ultimately acquitted.
If the bankrupt fails to perform the terms of the settlement agreement, an action may be brought before the court for the rescission (Résolution) of the agreement; any guarantors shall be summoned or invited to attend in the proper manner.
When the court becomes aware of the judgment ordering fraudulent bankruptcy(2), it shall proceed to appoint a delegated judge and one or more trustees. It shall also make this appointment in the order declaring the settlement annulled or rescinded, or in the judgment declaring the bankruptcy of a company whose partners are personally liable.
Verification of debt instruments filed pursuant to the preceding article shall be commenced without delay. There is no need to conduct a new verification of previously verified debts, subject to the right to reject or reduce debts and to provisionally admit or reject new ones.
After completion of the acts described above, creditors shall be convened to give their opinion on retaining the trustees or replacing them if no new settlement has been concluded.
Acts performed by the bankrupt after ratification of the settlement agreement and before its annulment or rescission shall only be voided in the event of fraud affecting creditors' rights.
Pre-settlement creditors shall retain all their rights against the bankrupt alone. With respect to the mass of creditors, they may only participate within the following limits: if they received nothing or were not fully satisfied under the previous settlement, they may participate for the portion of their debt for which they were not satisfied, together with all creditors under the new settlement.
If no settlement agreement is concluded, the creditors shall ipso jure enter into a state of union. The delegated judge shall immediately consult them regarding management acts and the retention or replacement of the bankruptcy trustees, and those creditors whose debts have been verified or provisionally admitted shall participate in deliberations.
Creditors shall be consulted as to whether it is possible to grant the bankrupt an allowance from the bankruptcy estate (Actif). If the majority of creditors present agree, an allowance may be granted; the delegated judge shall propose the amount, and the court shall fix it.
If a partnership is declared bankrupt, creditors may only conclude a settlement agreement with one or more partners. In such case, the totality of the company's assets shall remain subject to the creditors' union. The personal assets allocated to each individual partner under a settlement with that partner shall be withdrawn from the union.
The trustees shall represent the mass of creditors and carry out the liquidation acts. However, the creditors may authorise the trustees to continue operating the existing assets. The authorisation shall specify the duration and the scope of that operation.
If the trustees' acts give rise to obligations exceeding the value of the union's assets, only the creditors who authorised those acts shall be personally liable for the excess beyond their share in those assets; however, their liability shall not exceed their share in the union's assets.
The trustees shall proceed to collect outstanding debts. They may accept settlements on the same terms as were previously in use, notwithstanding any objection by the bankrupt. However, for disputes involving a lump sum, the delegated judge's authorisation is required.
The trustees must proceed to sell all movable assets, including the commercial enterprise(1), under the delegated judge's supervision and without the need to convene the creditors' assembly, in accordance with the forms prescribed for execution.
If no forced sale procedure has been completed before the union, the trustees alone shall be authorised to proceed with the sale and must commence it within eight days with the delegated judge's authorisation and through the enforcement department.
The trustees shall draw up the conditions of sale pursuant to which bidding shall take place, and shall include therein the particulars required by Article 744 of the Code of Civil Procedure(2). Articles 746 and 747 of the same Code shall also apply.
The delegated judge shall convene the creditors in union at least once during the first year, and also in subsequent years when circumstances require. The trustees must submit accounts of the administration at the meetings.
The bankruptcy estate assets shall be distributed among all creditors in proportion to each creditor's verified debt, after deducting the costs of administration, the allowances granted to the bankrupt or his family, and the amounts paid to preferential creditors.
For this purpose, the trustees shall submit monthly statements to the delegated judge on the state of the bankruptcy and the amounts deposited with the designated bank for receiving and paying enforcement funds; the delegated judge shall then order, as appropriate, the distribution of funds among creditors.
The trustees may not carry out any closing of a debt except against presentation of the instrument evidencing the debt; they shall note on the instrument the amount paid or ordered to be paid. If production of the instrument is not possible, the procedure prescribed by law for the circumstances shall apply.
After completion of the bankruptcy liquidation, the delegated judge shall convene the creditors for a final meeting; at this final meeting the trustees shall render their accounts, and the bankrupt shall be present or duly summoned. The creditors shall decide whether to discharge the trustees or to raise objections; in the latter case the dispute shall be referred to the competent court.
The delegated judge shall submit to the court the creditors' resolution concerning the excusing of the bankrupt, together with a report on the characteristics and circumstances of the bankruptcy. The court shall then issue its decision declaring the bankrupt excused or not excused.
Persons convicted of fraudulent bankruptcy(1), and persons convicted of forgery, theft, fraud, breach of trust, or embezzlement of public funds(2), may not be declared excused.
A settlement may be concluded involving the total or partial transfer of the bankrupt's assets. The conditions of this type of settlement are the same as those provided for the simple settlement agreement; however, the discharge of the bankrupt in respect of any shortfall resulting from the realisation of the assets shall not operate automatically but only if expressly agreed upon.
If at any time before ratification of the settlement or formation of the union it appears that the course of the bankruptcy proceedings has been suspended due to insufficiency of assets, the court may, based on the delegated judge's report or of its own motion, close the bankruptcy proceedings. In such case, each creditor shall recover his freedom to act individually.
The bankrupt or any interested person may at any time apply to the court to reverse the closure order if they prove the existence of sufficient assets to cover the bankruptcy costs, or if they deliver to the trustees the sufficient amount to cover such costs.
Commercial Contracts in General and Certain Commercial Contracts in Particular
Commercial Pledge
The following acts are deemed commercial by their very nature (Nature propre), as are all acts that may be considered analogous to them by reason of their similar characteristics and purposes (Caractères identiques):
1. See Legislative Decree No. 120 of 16/9/1983 on the organisation of the Beirut Stock Exchange; Decree No. 4808 of 29/1/1982 on the internal regulations of the Beirut Stock Exchange; and Legislative Decree No. 29 of 8/5/1967 defining the powers of the Government Commissioner to the Beirut Stock Exchange.
2. See Law No. 78 of 21/11/1987 on the regulation of the money-changing profession in Lebanon.
3. See the Regulation on Creditors and Auctions issued on 26/9/1934.
4. Regarding insurance contracts, see Article 9 et seq. of Decree No. 9812 of 5/4/1968 on the organisation of insurance entities, and Decision No. 109/L.B. of 21/7/1937 on the regulation of insurance companies and the collection of fees and savings.
5. See the Mining Regulations issued pursuant to Decision No. 113/L.B. of 9/8/1933.
The following are also deemed maritime commercial acts:
All acts performed by a merchant for the needs of his trade are also deemed commercial in the eyes of the law. In the presence of a partner, a merchant's acts shall be presumed to have been performed for that purpose, unless the contrary is proved.
A general partnership is one that operates under a specific firm name and is formed between two or more persons who are personally and jointly liable for the debts of the company.
The constitutive instrument may be notarised or privately signed. However, in the latter case, as many copies of the instrument must be drawn up as there are partners.
Within the month of incorporation of the company, a copy or an extract of the constitutive instrument must be filed with the clerk of the court of first instance of the district of the company's registered office.
Within the same period, the company must also be registered in the commercial register of its registered office district. Such publication shall be in summary form and shall contain all information useful for third parties to know, in particular:
If an amendment is subsequently made to the constitutive instrument, a new copy thereof must be filed with the court clerk, and registration in the commercial register is also required if the change affects matters that concern third parties.
Failure to file the constitutive instrument with the court clerk, or failure to register it in the commercial register, shall render the company null and void and shall make all partners jointly and severally liable towards third parties where damage has been caused to them.
The nullity arising from failure to publish is not extinguished by the mere passage of time, and any interested party may invoke it. Partners may not invoke it against third parties; however, if publication is made belatedly, only those who dealt with the company before the rectification may invoke the nullity to which the company was exposed.
Every partner in a general partnership is deemed to be carrying on trade personally under the company's firm name; accordingly, each partner acquires the legal status of a merchant. The bankruptcy of the company entails the personal bankruptcy of each partner.
The firm name (Raison Sociale) of the company is composed of the names of all partners or the names of some of them together with the word 'and Partners'. The firm name must at all times correspond to the company's current membership (Personnel Actuel). Any person extraneous to the company who knowingly consents to the inclusion of his name in the company's firm name shall become liable for its debts towards any person misled thereby.
Except for transfers expressly provided for in the constitutive instrument, no partner may assign his share in the company's capital to a third party without the consent of all partners and compliance with the publication formalities. However, a partner may assign to a third party the rights and benefits related to his shareholding, since such an arrangement is binding only between the contracting parties.
The right to manage the affairs of the company belongs to all partners, unless the company's articles or a subsequent instrument provide that management be entrusted to one or more partners or to another person, even an outsider to the company.
Managers (Gérants) may be removed in the same manner in which they were appointed; however, if the removal is wrongful, it may give rise to a claim for compensation under the conditions set out in Article 822 of the Code of Obligations. Where a new manager is appointed to replace a regular manager, this replacement must be published.
Managers may carry out all acts necessary for the normal operation of the company's enterprise, unless their authority is limited by the company's articles.
Managers may not enter into any agreement for their own account with the company, or any agreement in which they or any of them have a direct or indirect interest, without specific authorisation from the partners renewed as the case may be each year. Ordinary contracts relating to operations normally carried out by the company with its clients are exempt from this prohibition.
Likewise, managers may not manage an enterprise similar to that of the company unless they obtain authorisation renewed annually.
Where several managers exist, each of them has the right to object to transactions that the others intend to carry out. In such case, the decision shall be taken by majority vote of the said managers, unless the objection is based on the ground that the contemplated act is contrary to the company's articles, in which case it is for the court to assess the nature of the act.
The company shall be bound by acts performed by the managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use that signature in furtherance of their personal interests, unless the third party is in bad faith.
Creditors of the company may sue it; however, before doing so, they must send it a formal notice demanding payment. They may also sue any partner who was a member at the time of the contract. Such partners shall be jointly and severally obligated to make payment from their personal assets.
The general causes of dissolution applicable to all companies are:
A general partnership is also subject, in addition to the foregoing, to the following specific causes of dissolution:
Unless the company's articles provide otherwise, a general partnership, upon the death of one of its partners, shall continue among the surviving partners, unless the deceased leaves a spouse or descendants to whom his rights pass. If so, the company shall continue with the spouse or descendants of the partner, and they shall have the status of silent partners (commanditaires).
In all cases, the value of the rights of the deceased or excluded partner shall be determined by a special inventory, unless the company's articles provide for another method of valuation.
The dissolution of a company — except where dissolution occurs automatically pursuant to the constitutive instrument — must be published in the same manner and within the same period as the company itself. The same procedure applies upon the exclusion of a partner and upon the continuation of the company after the death of one of its members.
After dissolution, commercial companies retain their legal personality for the period required for liquidation, and only for the purposes of that liquidation.
If the company's articles do not provide for the appointment of the liquidator or liquidators, and the partners do not agree on their choice, they shall be appointed by the court in whose district the company's registered office is situated, from among its members.
The result of the selection or the court order appointing the liquidators must be published by those liquidators.
On assuming their duties, the liquidators must draw up an inventory of assets together with the managers of the company's affairs.
The liquidators shall collect the debts owed to the company by third parties or by the partners, pay the company's debts, sell its assets, and carry out all acts required by the liquidation. However, they may not continue to operate the company's enterprise, nor dispose of the company's establishment as a whole, except pursuant to a specific authorisation from the partners.
The liquidators must provide the partners, upon request, with all information on the state of the liquidation. However, no obstacles to the liquidation may be raised on account of unlawful claims.
The partition shall be carried out in accordance with the conditions of the partnership agreement and shall also be governed by the provisions of Articles 941 and 949 of the Code of Obligations.
In all commercial companies, and without prejudice to actions that may be brought against liquidators in their capacity as such, the actions of the company's creditors against a partner, his heirs, or his successors in title shall be extinguished by prescription after five years from the dissolution of the company, or from the departure of a partner with respect to actions directed against that partner. The prescription period shall run from the date of completion of publication in all cases where publication is required, and from the date of finalisation of liquidation for actions arising from the liquidation itself. Prescription may be suspended or interrupted in accordance with the rules of general law.
The proof of commercial contracts is not in principle subject to the exclusive rules established for civil contracts; accordingly, subject to the exceptions arising from special legal provisions, the contracts referred to may be proved by all means of evidence that the judge deems appropriate to accept in accordance with commercial custom and usage.
In commercial matters, the date of private instruments may be proved against third parties by all means of evidence. The date of negotiable instruments and the date of their endorsement shall be deemed valid until the contrary is proved.
Co-debtors under a commercial obligation are presumed to be jointly and severally bound by that obligation; this presumption also applies to guarantees of commercial debts.
The legal rate of interest in commercial matters is fixed at nine per cent.
For the purpose of establishing the fair price and market price, reference shall be made to stock exchange prices and mercuriales, unless there is a contrary agreement.
No commercial obligation to perform an act or a service shall be presumed to be gratuitous; if the parties do not specify a fee, commission, or brokerage, the remuneration customary in the profession shall be due.
In commercial matters, a court may not grant a time limit for rescission except in exceptional circumstances. A party who has applied to the court for rescission of the contract may not thereafter claim performance; however, a party who sought performance may subsequently opt for a claim for rescission. Performance of obligations after a rescission action has been brought shall not preclude the action.
The non-performance of one of the obligations under contracts with successive obligations entitles the party who fulfilled its obligations to request termination of the contract in respect of all obligations not yet performed, without prejudice to its right to claim damages.
In commercial matters, the right to bring a claim is extinguished by prescription after ten years if no shorter period is specified. If a judgment has been issued containing a decision, the claim arising from the res judicata shall be extinguished in all cases after ten years.
Sale(1), credit, transport undertakings(2), insurance undertakings(3), and all contracts whose rules are not determined by this Code are subject to the Code of Obligations and to custom. The special rules relating to public transport enterprises shall also apply to contracts of carriage. Stock exchange transactions, whether on securities or commodities, shall also be subject to special legislation.
The commercial pledge provided for in the following articles is one that secures a commercial debt.
Subject to the following provisions on delivery, the pledge may be proved by all means of evidence that the court deems necessary to accept. A pledge over a registered instrument shall be established by a transfer transaction recorded in the registers of the establishment that issued the instrument and on the instrument itself. For a promissory note(3), the pledge shall be established by an endorsement entered in the register.
A pledge agreement shall not produce its effect as a pledge if the pledged property remains in the possession of the debtor such that it appears to third parties as still part of his free assets from which he may obtain new credit; it is therefore necessary that the pledged property be delivered to the creditor, and even if it remains in the possession of the creditor or of a third party holding it for the creditor's account.
The pledgee must deliver to the debtor upon request a receipt specifying the nature, type, quantity, weight, and all distinguishing marks of the things delivered as pledge.
If the pledge is over fungible things or instruments, the pledge shall remain valid even if those things or instruments are replaced by things or instruments of the same type; if those things or instruments are non-fungible, the debtor may also recover them and replace them with the creditor's consent, provided that the pledge agreement is a notarial deed or a private instrument with certified date.
The creditor must, for the debtor's account, exercise all rights attaching to the things or instruments delivered to him as pledge. If what he received is an option credit instrument (Titres de crédit donnant droit à option), the debtor who wishes to exercise his option right must notify the creditor sufficiently in advance.
If the thing pledged is an instrument whose price has not been fully paid, the debtor, upon being called to pay, must remit the money to the creditor a few days at least before maturity, failing which the pledgee may proceed to sell the instrument.
In the event of non-payment at maturity, the creditor — after a period of two months running from the date of a simple notice sent to the debtor and to the third-party provider of the pledged property if any — may apply to the president of the enforcement department to order the sale of the pledged things by public auction. The creditor shall recover his debt from the proceeds of sale; any surplus shall be remitted to the debtor.
Cover is provided by the drawer or the person on whose account the bill is drawn; this shall not prevent the drawer acting for the account of a third party from remaining personally liable to endorsers and holders of the bill only. Cover exists if, at the maturity date of the bill, the drawee is indebted to the drawer or to the person on whose account the bill was drawn in an amount at least equal to the bill's value.
Acceptance of a bill implies the existence of cover. Such acceptance establishes cover in relation to endorsers. In the absence of acceptance, the drawer must, upon denial of the existence of cover, prove that the drawee had cover at the maturity date, failing which he shall be liable to guarantee the cover, even if the protest was raised after maturity.
A promissory note shall contain: - The words 'to order' or a statement in the text of the instrument itself in the language used for writing it. - An unconditional promise (La promesse pure et simple) to pay a specified sum. - A specification of the maturity date. - A specification of the place of payment. - The name of the person to whom or to whose order payment is to be made. - The date and place where the note is drawn. - The signature of the maker.
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a promissory note, except in the following cases: - A promissory note not specifying the maturity date shall be deemed payable at sight. - If no special place of payment is indicated, the place shown next to the maker's name shall be deemed the place of payment. - If no place of drawing is indicated, the instrument shall be deemed to have been drawn at the place indicated as the place of payment.
The provisions applicable to bills of exchange and relating to the following matters shall apply to promissory notes to the extent compatible with their nature: Endorsement (Articles 325 to 335) Maturity (Articles 348 to 352) Payment (Articles 353 to 363) Recourse for non-payment (Articles 365 to 376) Protest (Articles 377 to 382) Intervention (Articles 383 to 391) Copies (Articles 395 and 396) Alterations (Article 397) Prescription (Articles 398 and 399) Legal holidays, counting of periods, and prohibition on days of grace (Articles 400 to 402)
The provisions applicable to bills of exchange payable at the domicile of a third party or in a place other than the maker's domicile (Articles 317 and 342), and the provisions on interest stipulations (Article 318), discrepancies in amounts (Article 319), the effects of signatures in the case of unauthorised agents (Article 321), and other related provisions shall also apply to promissory notes.
The provisions on aval shall also apply to promissory notes (Articles 345 to 347). In the case specified in the last paragraph of Article 346, if the aval does not indicate for whose account it was given, it shall be deemed given for the maker's account.
The maker of a promissory note is bound in the same manner as the acceptor of a bill of exchange. A promissory note payable at a certain period after sight (Payable à un certain délai de vue) must be presented to its maker for authentication within the time limits specified in Article 338.
Commercial Agency, Commission Agency, and Brokerage
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
A joint-stock company is a company whose capital is divided into shares, i.e., negotiable instruments, which operates under a trade name, and which is formed among a minimum of three persons who hold shares in their own names and are not liable for the company's debts beyond the extent of their contributions.
Every joint-stock company, regardless of its object, is subject to the commercial law and its customs. One third of the capital of joint-stock companies whose object is the exploitation of a public utility or public service must be held as registered shares by Lebanese natural persons or by companies whose entire capital consists of registered shares or quotas owned entirely by Lebanese persons and whose articles require the transfer of shares or quotas therein only to Lebanese persons. Any transfer of such shares in a manner different from the preceding paragraph shall be absolutely null and void.
Every bill of exchange not expressly drawn 'not to order' is transferable by endorsement. If the drawer has inscribed on the bill the words 'not to order' or a similar expression, the bill is only transferable by way of an ordinary assignment in accordance with the rules applicable to that. Endorsement may be to the drawee's own order, whether he has accepted the bill or not, to the drawer himself, or to any other party bound by the bill; all such persons may re-endorse the bill.
Endorsement must be unconditional. Any condition attached to an endorsement shall be deemed void. A partial endorsement is null and void. An endorsement 'to bearer' shall be treated as a blank endorsement.
Endorsement must be written on the bill of exchange or on an allonge attached to it, and must bear the endorser's signature. The endorsement need not name the endorsee, or may consist solely of the endorser's signature (blank endorsement); in the latter case, the endorsement shall only be valid if written on the back of the bill or on the allonge.
Endorsement transfers all rights arising from the bill of exchange. If the endorsement is in blank, the holder may:
An endorser guarantees acceptance and payment unless there is a contrary agreement. He may prohibit further endorsement; in such case, he shall not be bound to guarantee against persons to whom the bill is subsequently endorsed.
The holder of a bill of exchange shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another endorsement, the signatory of that second endorsement shall be deemed to have acquired the bill by virtue of the blank endorsement. If a bill of exchange is taken from its holder by any event whatsoever, the holder who establishes his title in the manner described in the preceding paragraph shall not be required to surrender the bill unless he acquired it in bad faith or committed a gross error at the time of acquisition.
If it appears from the balance sheet submitted by the bankrupt, or from subsequent information, that the bankruptcy estate's assets do not exceed two thousand five hundred Lebanese pounds, or if the dividend to be distributed to creditors appears too small to justify the ordinary procedure, the court may, based on the delegated judge's report or of its own motion, substitute the summary procedure for the ordinary one.
The summary procedure described above differs from the ordinary procedure in the following characteristics:
Current Account
A limited partnership operating under a trade name comprises two categories of partners: firstly, general partners (Commandités) who alone have the right to conduct its business and who are personally and jointly liable for the company's debts; and secondly, silent partners (Commanditaires) who provide the capital and each of whom is liable only to the extent of his contribution.
There are two types of limited partnerships: the simple limited partnership and the limited partnership with shares (La Commandite simple et la Commandite par actions).
A limited partnership operates under a trade name that includes only the names of the general partners. If there is only one general partner, the word 'and Partners' may be added to his name. If a silent partner consents to the inclusion of his name in the company's trade name, he shall become liable as a general partner towards any bona fide third party.
General partners, whether all of them manage the company's affairs or whether one or some of them do so on behalf of all, are subject to the same legal rules applicable to members of a general partnership.
A silent partner may not intervene in the management of the company's affairs with respect to third parties, even if such intervention is based on a power of attorney. If he violates this prohibition, he shall become jointly and severally liable until the end together with the general partners for obligations arising from his managerial act; the liability imposed on him may be limited either to the results of the acts in which he intervened, or may extend to all the company's debts, in proportion to the number of those acts.
Simple limited partnerships are subject to the rules applicable to the formation and dissolution of general partnerships, even as regards silent partners.
In limited partnerships with shares, the capital is divided into shares, and the silent partner therein is subject to the same legal rules applicable to a shareholder in a joint-stock company.
Limited partnerships with shares, regardless of their object, are subject to commercial law and its customs.
The legal rules applicable to joint-stock companies shall apply to the formation and operation of limited partnerships with shares.
All obligations imposed by law on board members of a joint-stock company shall apply to managers of a limited partnership with shares.
The number of auditors must be at least three, including a court-appointed accountancy expert designated by the president of the court by a decision. General partners may not be selected as auditors. They shall meet as a supervisory council as often as required by the supervision and investigations they are required to conduct. The term of the supervisory council shall be determined in the company's articles, but the initial council may only be appointed for one year.
All general assembly resolutions, other than those relating to the ratification of managerial acts, shall implicitly require the personal consent of the general partners in accordance with the rules set out in the company's articles.
A current account exists whenever two persons, whose mutual business requires them to make reciprocal deliveries of funds, agree to convert their mutual debts into simple debit and credit entries forming a single account, so that only the final balance at the closing of that account constitutes a due and payable debt (Du compte courant).
The scope of the current account depends on the parties' wishes; they may make it cover all their transactions or only a specific type thereof. The current account may be maintained for both parties or for one party only; in the latter case, one party is not obliged to lend money to the other unless so agreed.
The existence of a current account does not negate the right to commissions and recovery of expenses on transactions relating to the current account; these shall be entered in the account unless there is a contrary agreement.
Payment by commercial instrument is only deemed final upon collection of its value unless there is a contrary agreement; if its value is not collected at maturity, the recipient may, while retaining it as security and exercising the rights attached to it, debit its value against the payor's account. In the event of the payor's bankruptcy, the recipient may reclaim the instrument, and its value may not be included in the current account.
Payments shall automatically generate interest in favour of the lender against the borrower, calculated at the legal rate unless otherwise specified by contract or custom.
Debts credited to either party in the current account shall lose their specific nature and individual identity upon entry; they shall no longer be capable of individual payment, set-off, legal action, or enforcement, nor shall they be separately extinguished by prescription. Personal or real security attaching to debts entered in the account shall be extinguished unless otherwise agreed.
Neither party shall be deemed a creditor or debtor of the other before the closing of the current account; it is solely the closing of the account that determines the state of the legal relationship between them, giving rise automatically to the global set-off of all account entries, and identifying the creditor and the debtor.
The account shall be closed and settled at the maturity dates agreed by contract or determined by local custom, or at the end of each six-month period. The resulting balance shall constitute a net, due, and payable debt that shall bear interest at the agreed current account rate from the date of settlement, whether transferred to a new account or not.
The contract shall terminate at the time stipulated by agreement; if no time limit has been agreed upon, it shall terminate by the wish of either party; it shall also terminate upon the death, incapacity, or bankruptcy of either party.
The drawer or holder may cross the cheque with the following consequences. Crossing is made by drawing two parallel lines on the face of the cheque; crossing may be general or special. It is general if there is no designation between the lines or merely the word 'banker' or an equivalent. It is special if the name of a banker is written between the lines.
The drawee may not pay a generally crossed cheque (À barrement général) except to a customer or to another banker. The drawee may not pay a specially crossed cheque except to the named banker. If the named banker is the drawee, payment may be made to a customer. A cheque bearing two special crossings may only be paid if the two crossings are for clearing purposes or in one of the other cases provided by law.
The drawer or holder of a cheque may prohibit cash payment by writing transversally on its face the expression 'to be credited to account' (A porter en compte) or an equivalent. In such case, the cheque may only be settled by book entry (credit to account, transfer, or set-off), which shall be equivalent to payment.
Any instrument by which the maker undertakes to deliver a specified sum of money or a quantity of fungible things at a specified place and time may be transferred by endorsement if it expressly bears the words 'to order'. Endorsement shall be subject to the provisions applicable to bills of exchange, unless otherwise provided by law, regulations, or the nature of the instrument.
If a bill of exchange, promissory note, or other endorsable instrument is delivered in payment of a debt, this shall not constitute novation of the contract unless the intention of the parties so requires.
The criminal court of first instance shall hear negligent bankruptcy cases(2) (Banqueroute simple) upon application of the trustees, any creditor, or the public prosecution. The penalty shall be imprisonment for between one month and two years.
Any merchant found in any of the following situations shall be deemed a negligent bankrupt:
Any merchant found in any of the following situations may be deemed a negligent bankrupt:
The costs of an action brought by the public prosecution for negligent bankruptcy may not in any case be charged to the mass of creditors. In the event of a settlement, the Treasury may not claim those costs from the settlement estate.
The costs of an action brought by the trustees on behalf of creditors shall be borne by the mass of creditors if the accused is acquitted, and by the Treasury if convicted, with the Treasury retaining its right of recourse against the convicted party.
The trustees may not bring an action for negligent bankruptcy, nor adopt the status of civil party plaintiff on behalf of the mass of creditors, unless authorised to do so by a resolution of the majority in number of creditors present at a duly convened creditors' meeting.
The costs of a criminal action brought by one of the creditors shall be paid by the Treasury if the accused is convicted, and by the creditor plaintiff if he is acquitted.
Any bankrupt merchant who has concealed his books, concealed part or all of his assets, fraudulently claimed debts that do not exist, whether in entries in his books, in notarial instruments, in private documents, or in letters, or who has removed himself from prosecution and refused to appear, shall be deemed guilty of fraudulent bankruptcy.
The costs of a fraudulent bankruptcy action may in no case be charged to the mass of creditors. If one or more creditors have adopted the status of civil party plaintiff, they shall bear the costs if the accused is acquitted, and the Treasury shall bear them if he is convicted, with the Treasury retaining its right of recourse against the convicted party.
The penalty for fraudulent bankruptcy (Banqueroute frauduleuse) shall be imposed on:
The bankrupt's spouse, ascendants, descendants, and in-laws of the same degree who concealed, attempted to conceal, or disposed of bankruptcy estate property without conspiring with the bankrupt shall be punished by the penalty for theft.
In the cases provided for in the preceding articles, the court of first instance or the court of appeal shall decide the following matters even in the event of an acquittal:
A trustee who commits embezzlement in the management of his duties shall be subject to the penalty prescribed for breach of trust.
Any creditor who reaches an agreement with the bankrupt or any other person for private benefits to be obtained in exchange for his vote at creditors' assemblies, or who enters into a private arrangement giving him a special benefit from the bankrupt's assets, shall be subject to the prescribed penalties.
In addition, the arrangements referred to above shall be declared null and void against all persons, including the bankrupt. The creditor must return to the mass of creditors the cash and amounts received pursuant to those arrangements.
All orders and judgments issued pursuant to the provisions of this chapter shall be posted and published in the manner prescribed for publishing the bankruptcy declaration judgment.
Prosecutions for negligent or fraudulent bankruptcy do not require any modification of the general rules applicable to the administration of the bankruptcy estate.
However, in such cases the trustees are required to deliver to the public prosecution all documents, instruments, papers, and information requested of them.
Documents, instruments, and papers delivered by the trustees during the investigation shall be placed in the court clerk's office; access thereto shall be granted upon the trustees' request, and they may take certified copies thereof.
Banking Operations
Any company may include in its articles a provision stipulating that its capital is variable, in which case it shall be subject to the provisions of the following articles in addition to the general rules applicable to it according to its specific form. That provision must be published.
When a company has variable capital, its capital may be increased, either by the admission of new partners or by additional contributions from existing partners, and may be reduced by the withdrawal by partners of all or part of their contributions. Capital increases and reductions shall be made freely and without the publication formalities required, unless the company's articles provide otherwise.
Repealed by Article 5 of Legislative Decree No. 54 of 16/6/1977.
The company's articles must specify a minimum amount below which the capital may not fall through the withdrawal of partners' contributions or their departure. That minimum may not be less than one-fifth of the company's capital, and this provision shall be mentioned in the company's articles for publication purposes.
The company's articles may contain a provision allowing the general assembly to decide, by the majority required for amending the articles, to exclude a partner or several partners without depriving them of their accrued rights in the reserve allocated to them.
A partner who leaves the company either voluntarily or pursuant to a general assembly resolution shall remain liable to the partners and to third parties for a period of three years for all obligations that existed at the time of his departure.
If a company has adopted the form of a joint-stock company, its shares must remain registered even after full payment of their price. The company's general assembly or board of directors may be granted the right to object to the transfer of such shares, provided that this right is not abused.
Regardless of the form of the company, it shall not be dissolved by the departure, bankruptcy, incapacity, loss of general legal capacity, or death of any of its partners; it shall remain in existence by operation of law among the remaining partners.
This Code shall apply to agricultural cooperative companies unless the provisions of their special law are contrary to it.
A bank(1) that receives a sum of money on deposit shall become its owner and must return its equivalent in a lump sum or in instalments upon the depositor's first demand, or in accordance with the notice or time-limit conditions specified in the contract. All bank transactions must be supported by written instruments.
If what is deposited at the bank consists of securities (Titre de crédit), the ownership of those securities shall remain with the depositor unless it is proved that the intention was otherwise. Such intention shall be presumed if the depositor has granted the bank in writing and without restriction the right to dispose of those securities, or has granted it the right to return securities of the same type. The provisions applicable to the loan of fungible things shall apply to such deposits.
The rules applicable to the hiring of things shall apply to deposits made in safe-deposit boxes or in compartments thereof. The bank shall be responsible for the safety of the hired boxes.
Under credit facility agreements, the credit provider (Créditeur) undertakes to place certain funds at the disposal of the beneficiary (Crédité), enabling him to draw upon them in a lump sum or in successive instalments according to his needs within a specified period. Amounts repaid or returned by the beneficiary during the term of the contract shall increase the credit available during the remaining period.
The credit provider may terminate the agreement if the beneficiary has become insolvent or was insolvent at the time of contracting without the credit provider's knowledge. If any material reduction in the personal or real security provided by the beneficiary occurs, the credit provider may request additional security or a reduction of the credit amount.
If the security provided is a mortgage, the mortgage registration made at the time of the agreement shall secure, from its date, all drawdowns subsequently made pursuant to the credit facility agreement.
If bank credit is earmarked to be paid to a third party and the bank confirms the credit to the beneficiary, it may no longer be revoked or modified without the beneficiary's consent; the bank becomes directly and irrevocably bound to accept the instruments (Effets) and deposits intended. The bank may recover amounts paid against the principal's account.
Banking operations not mentioned in this chapter are subject to the provisions of the Code of Obligations applicable to the various types of contracts arising from those operations, or to the contracts under which they fall.
Shares, bonds, annuities, and all other negotiable instruments (Des actions, obligations, rentes et tous autres titres négociables) issued in bulk and conferring on their holders equal rights to monetary value may be registered (nominatif), to order (à ordre), or to bearer (au porteur).
If the instrument is to bearer, it shall be transferred by mere delivery. Any holder shall be deemed entitled to exercise the rights attaching thereto; provided the debtor has not received a valid objection, payment made to the holder shall validly discharge the debtor, in good faith.
If the instrument is registered, the holder's right is established by registration in his name in the books of the issuing body. Ownership of such an instrument shall be transferred by this registration.
Transfer of a registered instrument shall be effected by a declaration recording the transfer in the books and signed by the transferor or a person authorised by him. The issuing body may, before registering the transfer, request from the person making the declaration proof of his identity.
Registered instruments may include detachable coupons conferring on their holder the right to collect maturities, distributions, and interest (these are called mixed instruments).
Negotiable securities instruments issued to order shall be transferred by endorsement. Their endorsement shall be governed by the same rules as the endorsement of bills of exchange, unless different provisions arise from the law, regulations, or the nature of the instrument.
After ten years from the declaration of bankruptcy, the bankrupt shall be automatically rehabilitated without any formality if he was not found guilty of negligent or fraudulent bankruptcy. Rehabilitation in this manner cannot be denied to the bankrupt on the grounds of his failing to pay his debts.
Rehabilitation shall occur automatically for a bankrupt who has paid all debts owed by him in principal, interest, and costs; interest shall not be demanded for a period exceeding five years. For the rehabilitation to take effect, the bankrupt must prove payment, which shall be confirmed by the delegated judge or, if the case has ended, by the president of the court.
Rehabilitation may also be granted to a bankrupt of recognised integrity:
Every rehabilitation application shall be filed with the attorney-general at the court that issued the bankruptcy judgment, together with the instruments and supporting documents. The attorney-general shall refer all papers to the court together with his reasoned opinion.
The court clerk shall send a registered letter notifying each creditor whose debt is verified against the bankruptcy estate, or recognised in a subsequent judicial decision, and who has not received full payment, of the rehabilitation application.
Any creditor who has not been fully paid the dividend stipulated in the settlement agreement or who has not fully released the debtor may, within one month of receiving such notice, file an objection to the rehabilitation with the court.
After expiry of the period, the results of the required investigations and the creditors' objections shall be referred to the attorney-general to whom the application was submitted; he shall forward them together with his reasoned opinion to the president of the court that issued the bankruptcy judgment.
The court shall, where appropriate, summon the rehabilitation applicant and the objectors and shall hear them in camera; the applicant may be assisted by counsel. In the case of full payment of debts, the court may limit itself to verifying the evidence of payment and rule accordingly.
If the application is refused, it may not be renewed until after one year. If the application is granted, the judgment issued by the court of first instance or the court of appeal shall be entered in the register of the bankruptcy court or the court having jurisdiction at the bankrupt's domicile.
A commercial rehabilitation application shall not be considered for fraudulent bankrupts, nor for persons convicted of theft, embezzlement, fraud, or breach of trust, unless they have first obtained their criminal rehabilitation.
Rehabilitation of the bankrupt may be granted after his death.
Commercial Instruments and Other Negotiable Instruments
Bill of Exchange (Lettre de Change / Seftaje)
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
Pursuant to the legal rules concerning formal requirements to be observed in general assembly deliberations, any resolution contrary to those requirements shall be null and void, provided it is established that the violation actually affected the decisive outcome. Any interested party may invoke this nullity before the competent authority. The nullity shall lapse upon rectification of the deliberations or after one year from the date on which the assembly was held without proper compliance.
Persons who fraudulently fabricate or attempt to fabricate a false majority at a shareholders' or bondholders' general assembly — in particular those who represent themselves as holding securities belonging to others who cannot vote, or who induce others by means of private benefits to vote in a specified manner or to abstain from voting, or who use any other illicit means — shall be liable to the prescribed penalties.
Joint-stock companies shall be dissolved upon expiry of the period for which they were formed, upon completion of the enterprise for which they were incorporated, or upon the impossibility of completing it. They shall also be dissolved by the shareholders' decision expressed at a general assembly in accordance with the conditions of Articles 202 and 204, and in all particular cases provided for in the articles.
In any event, if the board of directors fails to convene the assembly, or if the assembly cannot be validly constituted for lack of quorum, or if the assembly refuses to dissolve the company, every shareholder retains the right to apply to the competent court to take appropriate action or to dissolve the company.
The resolution adopted, whatever its nature, must be published.
Liquidation shall be conducted in principle in accordance with the rules provided for general partnerships.
If liquidators are not designated in the company's articles, they shall be appointed by the ordinary general assembly, unless the company is to be dissolved before its scheduled term, in which case the extraordinary general assembly shall appoint them at the same time. If the general assembly does not appoint the liquidators, their appointment shall rest exclusively with the competent court upon application by any interested party.
Auditors, joined by an expert appointed by the court, shall remain in office and shall supervise the liquidation.
Liquidators shall receive the accounts of administrative acts performed by board members and the general manager since the general assembly's approval of the last balance sheet until the opening of liquidation; they shall either approve them or refer any apparent problems to the competent court.
If the liquidation period exceeds one year, liquidators must draw up and publish the annual balance sheet.
Upon completion of liquidation, the liquidators shall draw up the final balance sheet, specifying each shareholder's share in the distribution of the company's assets.
Auditors shall prepare a report on the accounts submitted by the liquidators; the ordinary general assembly shall then approve them and resolve to grant a discharge to the liquidators or to object to the accounts, in which case the dispute shall be referred to the competent court.
A bill of exchange may be presented for acceptance to the drawee at his domicile at any time before maturity, either by the holder or by any holder for collection.
The drawer may stipulate in any bill of exchange that it be presented for acceptance, with or without a time limit. He may prohibit presentation for acceptance in the bill, unless the bill is payable at a third party's address, or in a place other than the drawee's domicile, or unless it is a bill payable at a certain time after sight.
Bills drawn at a period after sight must be presented for acceptance within one year of their date. The drawer may shorten or extend this period; endorsers may also shorten the periods referred to.
The drawee may request that the bill be presented to him a second time on the day following the first presentation; interested parties may not invoke this request as insufficient unless it is mentioned in the protest. The holder is not obliged to surrender a bill presented for acceptance to the drawee.
Acceptance is written on the bill of exchange and is expressed by the word 'accepted' or an equivalent; it is signed by the drawee, and the drawee's mere signature on the face of the bill is deemed acceptance. If the bill is payable at a period after sight, or if it must be presented for acceptance within a specified time by special stipulation, the acceptance must be dated on the day of presentation; failing this, the holder may, in order to preserve his rights against endorsers and the drawer, establish the omission by a protest on a specific date.
Acceptance shall be unconditional; however, the drawee may limit it to part of the amount. Any other modification of the bill's terms in the acceptance shall constitute a refusal; however, the acceptor shall be bound in accordance with the terms of his declaration.
If the drawer designates in the bill a place of payment other than the drawee's domicile without specifying a third party at whose address payment must be made, the drawee may designate that third party upon acceptance; failing such designation, the drawee shall be deemed to have undertaken to pay at the designated place himself.
The drawee's acceptance of the bill binds him to pay at maturity; in the event of non-payment, the holder — even if he is the drawer himself — has a direct action against the acceptor arising from the bill for everything that may be claimed pursuant to the applicable provisions.
If the drawee wrote an acceptance on the bill and then struck it out before returning the bill, refusal of acceptance shall be deemed to have occurred; the striking out shall be presumed to have been made before the return of the bill unless the contrary is proved. However, if the drawee notified his acceptance in writing to the holder or to any signatory of the bill, he shall be bound to those persons in accordance with the terms of his acceptance.
The deliberating creditors may not approve a post-bankruptcy settlement agreement unless the following conditions are met, failing which the agreement shall be null and void. The agreement shall only be concluded by a vote of creditors forming the majority in number and representing three-quarters of the total debt; the foregoing conditions being cumulative.
Creditors holding a mortgage(1) or movable pledge privilege may not vote unless they waive their securities in accordance with the conditions provided for in the chapter on preventive settlement.
The settlement agreement must be signed at the same session, failing which it shall be null and void. If only a majority in number, but not in amount, is obtained, or only a majority in amount is obtained, the session shall be adjourned for eight days and no further adjournment may be granted; in this second session the creditors who were present or represented at the first session may alone deliberate.
No settlement agreement may be concluded for a person convicted of fraudulent bankruptcy(1). If an investigation is ongoing regarding fraudulent bankruptcy, creditors shall be convened to decide whether they intend to deliberate on a settlement at the conclusion of the investigation.
If the bankrupt is convicted of negligent bankruptcy, a settlement agreement is possible. However, creditors may, in the case of ongoing criminal proceedings, defer deliberations until after the conclusion of those proceedings in accordance with the provisions of the preceding article.
In the case of a commercial company that has issued bonds, a settlement agreement may only be concluded if it is approved by the bondholders' assembly under the conditions and in the circumstances specified in the chapter on preventive settlement.
Any creditor entitled to participate in the settlement agreement and whose rights have been recognised, and the bondholders' assembly if one exists, may object to the settlement. The objection must be stated and the objectors must affix their signatures at the same session.
The ratification procedure shall be initiated before the court upon application of the most diligent party (A la requête de la partie la plus diligente); the court may not act before the expiry of the eight-day period referred to in Article 562, and must rule at the earliest at the session convened for that purpose.
In all cases, the delegated judge shall, before the court rules on ratification, prepare a report on the characteristics of the bankruptcy and the feasibility of accepting the settlement.
If the rules set forth above have not been observed, or if grounds relating to the public interest or the interests of creditors appear to preclude the settlement, the court must refuse ratification. It may also refuse to ratify a settlement agreement if the bankrupt is deemed undeserving of the benefit.
Ratification of the settlement agreement renders it binding on all creditors, whether listed in the balance sheet or not, and whether their debts have been verified or not. It is also enforceable against creditors residing outside Lebanese territory.
After the ratification judgment acquires the force of res judicata, the effects of the bankruptcy shall cease, subject to the continuation of the loss of political rights provided for in Article 500. The trustees whose duties have ended shall render their accounts to the bankrupt.
The settlement agreement involves above all payment of debts in instalments over successive periods, and in general the discharge of the debtor from a greater or lesser portion of his debt. However, this discharge leaves him with a natural obligation. The settlement agreement may also not include the bankrupt's final discharge for the written-off portion.
The mortgage created in favour of the mass of creditors (L'hypothèque de la masse) shall be retained as security for payment of the sum specified in the settlement agreement.
Creditors may also request one or more guarantees to secure performance of the settlement agreement.
Until the full amount provided for in the settlement agreement is paid, the debtor may not make any extraordinary disposition not required by the conduct of the trade itself, unless there is a contrary agreement. The provisions of Articles 466 and 467 shall apply to this effect.
No action to annul the settlement agreement after ratification shall be admissible unless it is based on fraud discovered after ratification and arising from the concealment of the bankrupt's assets or the exaggeration of debts owed by him. Every creditor may bring such an action within five years of the ratification.
If after ratification of the settlement agreement the bankrupt is prosecuted for fraudulent bankruptcy and a temporary or permanent arrest warrant is issued against him, the court may order any precautionary measures it is authorised to take. These measures shall be lifted if the bankrupt is ultimately acquitted.
If the bankrupt fails to perform the terms of the settlement agreement, an action may be brought before the court for the rescission (Résolution) of the agreement; any guarantors shall be summoned or invited to attend in the proper manner.
When the court becomes aware of the judgment ordering fraudulent bankruptcy(2), it shall proceed to appoint a delegated judge and one or more trustees. It shall also make this appointment in the order declaring the settlement annulled or rescinded, or in the judgment declaring the bankruptcy of a company whose partners are personally liable.
Verification of debt instruments filed pursuant to the preceding article shall be commenced without delay. There is no need to conduct a new verification of previously verified debts, subject to the right to reject or reduce debts and to provisionally admit or reject new ones.
After completion of the acts described above, creditors shall be convened to give their opinion on retaining the trustees or replacing them if no new settlement has been concluded.
Acts performed by the bankrupt after ratification of the settlement agreement and before its annulment or rescission shall only be voided in the event of fraud affecting creditors' rights.
Pre-settlement creditors shall retain all their rights against the bankrupt alone. With respect to the mass of creditors, they may only participate within the following limits: if they received nothing or were not fully satisfied under the previous settlement, they may participate for the portion of their debt for which they were not satisfied, together with all creditors under the new settlement.
If no settlement agreement is concluded, the creditors shall ipso jure enter into a state of union. The delegated judge shall immediately consult them regarding management acts and the retention or replacement of the bankruptcy trustees, and those creditors whose debts have been verified or provisionally admitted shall participate in deliberations.
Creditors shall be consulted as to whether it is possible to grant the bankrupt an allowance from the bankruptcy estate (Actif). If the majority of creditors present agree, an allowance may be granted; the delegated judge shall propose the amount, and the court shall fix it.
If a partnership is declared bankrupt, creditors may only conclude a settlement agreement with one or more partners. In such case, the totality of the company's assets shall remain subject to the creditors' union. The personal assets allocated to each individual partner under a settlement with that partner shall be withdrawn from the union.
The trustees shall represent the mass of creditors and carry out the liquidation acts. However, the creditors may authorise the trustees to continue operating the existing assets. The authorisation shall specify the duration and the scope of that operation.
If the trustees' acts give rise to obligations exceeding the value of the union's assets, only the creditors who authorised those acts shall be personally liable for the excess beyond their share in those assets; however, their liability shall not exceed their share in the union's assets.
The trustees shall proceed to collect outstanding debts. They may accept settlements on the same terms as were previously in use, notwithstanding any objection by the bankrupt. However, for disputes involving a lump sum, the delegated judge's authorisation is required.
The trustees must proceed to sell all movable assets, including the commercial enterprise(1), under the delegated judge's supervision and without the need to convene the creditors' assembly, in accordance with the forms prescribed for execution.
If no forced sale procedure has been completed before the union, the trustees alone shall be authorised to proceed with the sale and must commence it within eight days with the delegated judge's authorisation and through the enforcement department.
The trustees shall draw up the conditions of sale pursuant to which bidding shall take place, and shall include therein the particulars required by Article 744 of the Code of Civil Procedure(2). Articles 746 and 747 of the same Code shall also apply.
The delegated judge shall convene the creditors in union at least once during the first year, and also in subsequent years when circumstances require. The trustees must submit accounts of the administration at the meetings.
The bankruptcy estate assets shall be distributed among all creditors in proportion to each creditor's verified debt, after deducting the costs of administration, the allowances granted to the bankrupt or his family, and the amounts paid to preferential creditors.
For this purpose, the trustees shall submit monthly statements to the delegated judge on the state of the bankruptcy and the amounts deposited with the designated bank for receiving and paying enforcement funds; the delegated judge shall then order, as appropriate, the distribution of funds among creditors.
The trustees may not carry out any closing of a debt except against presentation of the instrument evidencing the debt; they shall note on the instrument the amount paid or ordered to be paid. If production of the instrument is not possible, the procedure prescribed by law for the circumstances shall apply.
After completion of the bankruptcy liquidation, the delegated judge shall convene the creditors for a final meeting; at this final meeting the trustees shall render their accounts, and the bankrupt shall be present or duly summoned. The creditors shall decide whether to discharge the trustees or to raise objections; in the latter case the dispute shall be referred to the competent court.
The delegated judge shall submit to the court the creditors' resolution concerning the excusing of the bankrupt, together with a report on the characteristics and circumstances of the bankruptcy. The court shall then issue its decision declaring the bankrupt excused or not excused.
Persons convicted of fraudulent bankruptcy(1), and persons convicted of forgery, theft, fraud, breach of trust, or embezzlement of public funds(2), may not be declared excused.
A settlement may be concluded involving the total or partial transfer of the bankrupt's assets. The conditions of this type of settlement are the same as those provided for the simple settlement agreement; however, the discharge of the bankrupt in respect of any shortfall resulting from the realisation of the assets shall not operate automatically but only if expressly agreed upon.
If at any time before ratification of the settlement or formation of the union it appears that the course of the bankruptcy proceedings has been suspended due to insufficiency of assets, the court may, based on the delegated judge's report or of its own motion, close the bankruptcy proceedings. In such case, each creditor shall recover his freedom to act individually.
The bankrupt or any interested person may at any time apply to the court to reverse the closure order if they prove the existence of sufficient assets to cover the bankruptcy costs, or if they deliver to the trustees the sufficient amount to cover such costs.
Payment of the whole or part of the amount of a bill of exchange may be guaranteed by an aval. Such guarantee may be given by a third party or by one of the signatories of the bill.
The aval is written on the bill or on an allonge, or in a separate instrument indicating the place where it was given. It is expressed by the words 'good for aval' or an equivalent expression and is signed by the aval provider. The aval shall be constituted by the mere signature of the aval provider on the face of the bill, except for the drawer's signature.
The aval provider is bound in the same manner as the person for whom he gave the aval. His obligation shall be valid even if the obligation which he guaranteed is void for any reason other than a defect in form. The aval provider who pays the bill acquires all rights arising from it against the person guaranteed and against those who are bound to that person under the bill.
The holder of a cheque may sue endorsers, the drawer, and other obligors if the cheque presented in due time is not paid and the refusal to pay is evidenced: - Either by an official document (protest). - Or by a declaration by the drawee dated and written on the cheque stating the date of presentation. - Or by a dated declaration from a clearing house stating that the cheque was delivered in time but not paid.
The protest or similar evidence must be raised before the expiry of the presentation period. If presentation is made on the last day of the period, the protest or similar evidence may be raised on the first following working day.
The holder of the cheque may claim from the person sued:
A person who paid the cheque may claim from those who guaranteed him:
If an insurmountable obstacle (a legal provision or other force majeure circumstances) prevents presentation of the cheque, protest, or similar evidence within the prescribed periods, those periods shall be extended. The holder must without delay notify his immediate endorser of the force majeure and note such notice on the cheque with a date and his signature; Article 367 shall apply. When the force majeure ceases, the holder must without delay present the cheque for payment and, if necessary, raise a protest or obtain similar evidence. If the force majeure persists for more than fifteen days from the date on which the holder notified his endorser, recourse may be exercised without presentment or protest.
A creditor who holds a debt instrument (Engagement) that is jointly and severally guaranteed or endorsed or signed for joint and several liability by the bankrupt and by co-obligors who are also bankrupt may participate in the distribution with every mass of creditors in proportion to their verified claims, without any deduction.
The claims of co-debtors under the same obligation against one another before the courts shall not be admissible unless the total of those claims from all co-debtors exceeds the principal debt.
If a creditor holds instruments jointly and severally binding the bankrupt and other persons, and has collected part of his debt before the bankruptcy, he may only participate in the mass of creditors for the balance remaining after deducting the collected portion.
Notwithstanding the settlement agreement, creditors retain the right to sue the bankrupt's co-obligors to claim the full debt owed by them; those co-obligors are entitled to intervene in the settlement ratification proceedings to protect their own interests.
Persons claiming ownership of assets in the bankrupt's possession may apply for their recovery; the trustees may accept such applications with the delegated judge's approval. If a dispute arises, the matter shall be referred to the competent court.
Recovery may also be specifically claimed for commercial instruments and other unaccepted documents found in the bankrupt's possession at the time of opening the bankruptcy proceedings if the owner delivered them to the bankrupt solely for a specific purpose.
Recovery of goods, in whole or in part, may also be claimed as long as they are identifiable in kind, if they were delivered to the bankrupt on deposit or for sale on account of the owner. Recovery of the price may also be claimed if the goods were sold and the price not remitted to the owner, provided payment was not made by set-off or by payment into the current account.
A seller may withhold delivery of goods and other movables sold if they have not been delivered to the bankrupt or dispatched to him, or to another person on his behalf.
The seller may recover goods dispatched to the bankrupt in order to exercise his right of retention, provided they have not been delivered to the bankrupt's warehouses or to a place where he has apparent control (Apparente disposition).
If the buyer received the goods before his bankruptcy, the seller may not invoke a claim for rescission, recovery, or any privilege whatsoever.
In cases where the seller may exercise his right of retention, the trustees may, after obtaining the delegated judge's authorisation, take delivery of the goods upon paying the price.
If the trustees do not take this step, the seller may rescind the sale, provided he reimburses the mass of creditors for any instalment already paid on account. He may also claim damages from the mass of creditors for any resulting loss.
The recovery rights of the non-bankrupt spouse shall be determined in accordance with the rules applicable to both spouses pursuant to their personal law and their marriage contract.
Creditors of the bankrupt who lawfully hold a pledge or a special privilege over a movable shall have their names entered in the register of the creditors' union only as a reminder.
The trustees may at any time, after obtaining the delegated judge's authorisation, recover pledged property for the benefit of the bankruptcy estate, upon payment of the debt.
If the trustees do not recover the pledged property and the creditor sells it, the trustees shall receive any surplus over the debt; if the price is less than the debt, the pledgee creditor shall participate in the remaining balance together with the ordinary creditors' union.
The trustees shall submit to the delegated judge a statement of the names of creditors claiming a privilege over movable property; the judge shall, where appropriate, authorise payment of their debts from the first available funds. If a dispute arises over the privilege itself, the delegated judge shall refer the matter to the competent court.
If distribution of the proceeds of immovables takes place before distribution of the proceeds of movables, or if both distributions occur simultaneously, creditors holding a privilege or mortgage over immovables who have not recovered all their debts from the immovables' proceeds shall participate in the distribution of the movables' proceeds in competition with unsecured creditors for what remains of their debts.
If one or more distributions of cash funds from the proceeds of movables are made before distribution of the proceeds of immovables, creditors holding a privilege or mortgage whose debts have been verified shall participate in the distribution proportionally to the portion of their debt not covered by the pledge or immovable security, after deducting the privileged portion up to the assessed value of their pledge or immovable security.
After the sale of immovables and final settlement of the accounts of privileged and mortgage creditors in order of their rank, any creditor who, based on his rank, is entitled to claim more than the value assigned to the asset subject to his security, may not recover the full debt from the proceeds of immovables beyond that value.
Mortgage creditors whose share in the distribution of immovable proceeds covers only part of their debts shall be subject to the following rule: their rights in the fund allocated to the ordinary creditors' union shall be proportional to the remainder of their debts not covered by the immovable proceeds, and the amount thus determined shall be added to their shares of the ordinary distribution fund.
Creditors who have no share in the distribution of immovable proceeds shall participate as ordinary creditors in the settlement and all acts relating to the ordinary creditors' union.
Part Five: Spouse's Rights.
Assets belonging to the non-bankrupt spouse that are proven to be acquired from sources independent of the bankrupt spouse's activities shall not form part of the bankruptcy estate, unless otherwise established pursuant to Articles 626 and 628.
Assets of the non-bankrupt spouse whose acquisition cannot be proved to have originated from sources independent of the bankrupt spouse shall be deemed part of the bankruptcy estate, unless the non-bankrupt spouse proves otherwise by any means of evidence.
If the non-bankrupt spouse has paid debts on account of the bankrupt spouse, he or she shall have a right of recourse against the bankruptcy estate for amounts paid, to the extent that such payments benefited the estate.
If the spouse was a merchant at the time of marriage, or was without a profession at that time, the immovable assets acquired by the non-bankrupt spouse after the marriage shall be subject to a compulsory mortgage created by operation of law for the benefit of the mass of creditors, from the date of the bankruptcy judgment.
The non-bankrupt spouse is also entitled to recover assets purchased during the marriage period if she proves that the purchase price came from her personal funds, independent of the bankrupt's assets.
A bill may be drawn payable in the following manners: - At sight - At a certain period after sight (À un certain délai de vue) - At a certain period from a specified date (À un certain délai de date) - At a fixed date (À jour fixe) Bills drawn at other maturity dates or in successive instalments shall be null and void.
A bill payable at sight is due upon presentation and must be presented for payment within one year of its date. The drawer may shorten this period or stipulate a longer one; endorsers may also shorten the periods. The drawer may stipulate that a bill payable at sight shall not be presented for payment before a fixed date, in which case the time limit for presentation shall run from that date.
The maturity of a bill drawn at a certain period after sight shall be determined either by the date of acceptance or by the date of the protest. If the acceptance is undated, the acceptance shall be deemed, as regards the acceptor, to have been given on the last day of the period prescribed for presentment.
A bill drawn for one or more months from a specified date or after sight shall mature on the corresponding date of the month in which payment falls due; if there is no corresponding date, maturity shall be on the last day of that month. If the bill is drawn for one or more months and a half from a specified date, the full months shall first be counted.
If a bill is payable on a fixed date in a place whose calendar differs from the calendar of the place of drawing, the maturity date shall be determined by reference to the calendar in force at the place of payment. If a bill is drawn between two localities with different calendars, the maturity date shall be fixed by converting the date of issue to the calendar in force at the place of payment and replacing it accordingly.
The holder of a bill payable on a fixed date, or at a certain period from a specified date, or after sight, must present the bill for payment on the day it falls due. Presentation of the bill to a clearing house shall be equivalent to presentation for payment.
Upon paying the bill, the drawee may require the holder to deliver it with a receipt notation. The holder may not refuse a partial payment. In the event of partial payment, the drawee may require a notation of such payment on the bill and a separate receipt.
The holder of a bill may not be compelled to accept payment before maturity. A drawee who pays before maturity shall do so at his own risk. One who pays at maturity shall be validly discharged unless he committed fraud or gross error; he must verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If a bill is drawn payable in a currency not in circulation at the place of payment, its value may be paid in the local currency at the exchange rate prevailing on the maturity date; if the debtor is in default, the holder may require payment in the local currency at either the maturity rate or the rate prevailing on the day of actual payment.
If the bill is not presented for payment on the maturity date, each debtor is entitled to deposit the amount with a bank authorised to accept state deposits; the costs and risks shall be borne by the holder. Once deposited, the debtor shall only be bound to deliver the deposit receipt.
An objection to payment shall not be accepted except in cases of loss or bankruptcy of the holder.
If a bill not subject to acceptance is lost, the owner is entitled to have it paid based on a second, third, or fourth copy.
If an accepted bill is lost, payment based on a second, third, or fourth copy may only be claimed by court order and upon provision of security.
If the person who lost the bill, whether accepted or not, cannot produce the second, third, or fourth copy, he may apply for payment of the lost bill and obtain such payment by court order upon the provision of security.
If payment requested pursuant to the two preceding articles is refused, the owner of the lost bill may preserve all his rights by means of a protest to be raised on the day following the maturity of the lost bill. The liabilities provided for in the applicable articles shall run from the date of that protest.
To obtain the second copy, the holder of the lost bill must approach the person who endorsed it directly, and that endorser must assist him in his own name and on his behalf before the endorser's immediate predecessor. Thus from endorser to endorser back to the drawer.
The guarantee obligation (L'engagement de la caution) referred to in Articles 360 and 361 shall be extinguished by prescription after three years if no claim or legal action has been filed within that period.
Except for bearer cheques, multiple identical copies may be drawn for any cheque issued in one country or part of a country that is to be cashed in another country or part of that same country, and vice versa. A cheque issued and payable in the same country or in different countries but in the same part of the world may not have multiple copies.
The holder may have recourse against endorsers, the drawer, and all other obligors: At maturity, if payment has not been made. Even before maturity: - If acceptance has been wholly or partially refused. - If the drawee has become bankrupt. - If the drawee has suspended payments even without a court declaration of bankruptcy. - If the drawer of a non-accepted bill has become bankrupt.
Refusal of acceptance or payment must be evidenced by an official act (protest for non-acceptance or for non-payment). The 'protest for non-acceptance' must be raised within the time limit prescribed for presenting the bill for acceptance; if the bill was presented for acceptance on the last day of that period, the protest may be raised on the following day. The 'protest for non-payment' of a bill payable on a fixed date or at a certain period from a fixed date must be raised on one of the two working days following maturity; for a bill payable at sight, the protest shall be raised in accordance with the conditions provided for the protest for non-acceptance.
The holder must send notice (Avis) of non-acceptance or non-payment to his immediate endorser and to the drawer on the four working days following the protest or the day of presentation if the bill contains a provision dispensing with protest. Each endorser must, within the two working days following receipt of the notice, inform his own endorser. Failure to give notice in due time does not deprive the holder of his right of recourse; however, the party who fails to give notice shall be liable for any damage caused by such failure, up to the amount of the bill.
If the drawer, an endorser, or an aval provider has inscribed on the bill alongside his signature the words 'no expenses' or 'without protest' or an equivalent expression, the holder, if he wishes to exercise recourse, shall be dispensed from raising a protest or a similar act for the purpose of exercising his right of recourse. This clause does not dispense the holder from presenting the bill within the prescribed periods or from giving the required notices; if the holder fails to do so, he shall bear the consequences.
All persons who drew, accepted, endorsed, or guaranteed a bill of exchange are jointly and severally liable to the holder. The holder may sue all such persons individually or collectively without being required to observe the order in which they assumed their obligations. This right is available to any signatory who has paid the bill.
The holder may claim from the person he sues:
A person who paid the bill may claim from those who guaranteed him:
Every obligor against whom an action has been brought or who is exposed to legal proceedings is entitled to receive, in exchange for his payment, the bill together with the protest and a receipted statement of account. Every endorser who paid the bill is entitled to strike out his own endorsement and those of subsequent endorsers.
If an action is brought following partial acceptance, the person who pays the unaccepted part is entitled to have this payment noted on the bill and to receive a receipt for the amount paid; on the other hand, the holder must deliver him a certified copy of the bill together with the protest.
Upon expiry of the following time limits:
If the bill is not presented for acceptance within the time limit fixed by the drawer, the holder shall lose his rights of recourse for non-payment and non-acceptance within the limits specified in the preceding article, unless it appears from the terms of the stipulation that the drawer merely intended to release himself from the guarantee of acceptance.
If an insurmountable obstacle (such as a legal provision in a state or other force majeure circumstances) prevents presentation of the bill or raising of the protest within the prescribed periods, those periods shall be extended. The holder must notify his immediate endorser without delay of the force majeure, and note such notice on the bill with a date and his signature; Articles 367 and 368 shall apply. When the force majeure ceases, the holder must present the bill for acceptance or payment without delay, and, if necessary, raise a protest. If the force majeure persists for more than thirty days from maturity, recourse may be exercised without either presentment or protest.
A protest for non-acceptance or non-payment is raised by a notary or one of his assistants; it must be addressed to the domicile of the person who was required to pay the bill, or to his last known domicile, or to the domicile of each of the persons at whose addresses the bill is domiciled and to the domicile of the other persons named therein.
The protest document shall contain a verbatim copy of the bill, its acceptance, endorsements, and instructions (Recommendations) indicated therein, and the formal demand for payment; it shall state whether the person required to pay was present or absent, and shall note the reply received or the reason for receiving no reply, as well as whether the required persons signed the document or refused to sign.
No act performed by the holder can substitute for raising a protest, except in the case provided for in Articles 360 et seq. relating to loss of the bill.(1)
The notary must retain a verbatim copy of the protests and record their full text in chronological order in a special register, failing which he shall be liable for damages caused to the parties concerned.
Any person having a right of recourse may, unless there is a contrary provision, recover his money through a new bill (re-exchange) (Retrait) drawn on one of his guarantors and payable at sight at that guarantor's domicile. The re-exchange bill shall include, in addition to the amounts specified in Articles 370 and 371, a brokerage commission and stamp duty.
Re-exchange bills may not be cumulated (Les rechanges ne peuvent être cumulés); each endorser is bound by only one re-exchange bill, as is the drawer.
Payment by delivery of a cheque accepted by the creditor shall not constitute novation of the debt contract (Novation); the original debt shall remain intact with all its guarantees until the said cheque is cashed.
Notwithstanding the formalities required for a recourse action, the holder of a protested cheque may, after obtaining authorisation from the president of the enforcement department, provisionally seize the drawer's and endorsers' movables without being required to produce a court order.
A person who issues a cheque without indicating the place of issue, the date, or who states an incorrect date shall be liable to a fine equivalent to one per cent of the cheque's amount, which may not be less than five Lebanese pounds. The same fine shall apply without recourse against the person who endorses the cheque.
Every banker who holds cover shall deliver to his client blank cheque forms payable from the bank's cash. He is required to state on each form the name of the person to whom it is delivered; otherwise he shall be liable to a fine of one Lebanese pound per violation.
The offence of drawing a cheque without cover is penalised under Article 666 of the Penal Code.
A drawee who knowingly declares that less cover exists than is actually available shall be liable to a fine of twenty-five to fifty Lebanese pounds.
In addition to the foregoing, the following articles of this Code shall apply to cheques to the extent that their provisions are not inconsistent with the nature of that instrument: Articles 319 to 321, 327 to 329, 331, 332, 335, 345 to 347, and the second paragraph of Article 354.
The drawer, one of the endorsers, or one of the aval providers may designate a person for acceptance or payment in case of need. Under the conditions specified below, a bill of exchange may be accepted or paid by a person who intervenes for the benefit of a debtor liable to recourse. The intervener may be any person, including the drawee, or a person already obligated by the bill.
Acceptance by intervention may occur in all cases where recourse is permissible before maturity on a bill that may be presented for acceptance. If a person is designated in the bill for acceptance or payment in case of need at the place of payment, the holder may not exercise recourse before maturity against the person who made the designation, or against subsequent signatories, unless the bill has been presented to the designated person and such person has refused acceptance.
Acceptance by intervention shall be noted on the bill and signed by the intervener, who shall indicate the person for whose account it was given; failing such indication, the acceptance shall be deemed given for the drawer's account.
A person who accepted the bill by intervention shall be bound to the holder and to endorsers subsequent to the person for whose account he intervened, in the same manner as that person. Notwithstanding acceptance by intervention, the person for whose account it was given and those who guaranteed him retain their recourse rights against the person who accepted by intervention.
Payment by intervention may occur in all cases where the holder has a right of recourse, whether at or before maturity. Payment must cover all amounts payable to the person on whose account it is made. It must be effected not later than the day following the last day allowed for raising a protest.
If the interveners who accepted the bill reside at the place of payment, or if persons residing at that place have been designated in the bill to pay in case of need, the holder must present the bill to all such persons and raise a protest if necessary.
A holder who refuses payment by an intervener shall lose his right of recourse against persons who would thereby be released.
Payment by intervention must be evidenced by a receipt notation on the bill specifying the person for whose account it was given; failing such indication, the payment shall be deemed made for the drawer's account. The bill and the protest document must be delivered to the intervener.
A person who pays by intervention acquires the rights arising from the bill against the person for whose account the payment was made and against endorsers who are obligated to that person under the bill; however, he may not re-endorse the bill. Endorsers subsequent to the person for whose account payment was made shall be released.
A bill of exchange may be drawn in several identical copies. The copies must be numbered in the text of the bill itself; otherwise each copy shall be deemed a separate independent bill. Any holder of a bill not specifying that it was drawn in a single copy may require delivery of additional copies at his own expense.
Payment made on the basis of one copy releases the obligation, even if it is not stipulated that such payment invalidates the other copies; however, the drawee remains bound by each copy he accepted and was unable to recover. An endorser who transferred copies to different persons and those persons' endorsers shall be bound under all copies bearing their signatures that have not been returned.
A person who sent one copy for acceptance must indicate on the other copies the name of the person holding that copy; the holder must deliver it to the lawful holder of another copy. If he refuses, the holder may not exercise recourse until he has established by protest that the copy sent for acceptance was not delivered despite his demand.
Every holder of a bill of exchange is entitled to make duplicates thereof. The duplicate must accurately reproduce all entries in the original bill, together with the endorsements and all conditions written thereon, and must indicate where the original ends. Duplicates may be endorsed and guaranteed like the original.
The original bill must be identified in the duplicate; the holder of the original is bound to deliver it to the lawful holder of the duplicate. If he refuses, the holder of the duplicate may not exercise recourse against endorsers of the duplicate or their guarantors until he establishes by protest that the original was not delivered to him.
If the text of a bill of exchange is altered, signatories after the alteration shall be bound in accordance with the altered text; prior signatories shall be bound in accordance with the original text.
All rights of action arising from a bill of exchange against the acceptor shall be extinguished by prescription three years from the maturity date. The holder's rights of action against endorsers and the drawer shall be extinguished by prescription one year from the date of a duly raised protest, or from the maturity date if a 'no expenses' clause was inserted. The rights of action of endorsers against each other and against the drawer shall be extinguished by prescription six months from the date on which the endorser paid or was sued.
The prescription period shall only run, in the case of legal proceedings, from the date of the last judicial act; and prescription shall not apply if a judgment has been issued or the debt has been acknowledged in a separate instrument. Interruption of prescription shall only take effect against the person in respect of whom the act of interruption was carried out.
A bill of exchange falling due on a legal holiday may not be demanded for payment until the first working day following. Likewise, all acts relating to the bill of exchange, and in particular its presentment for acceptance and the protest, may not be carried out except on a working day.
The day constituting the starting point of legal or agreed periods shall not be included in the calculation.
No one-day payment period may be granted by law or by the courts except in the cases provided for in Articles 365 and 376.
This Code sets forth, on one hand, the rules governing commercial acts performed by any person regardless of their legal capacity, and on the other hand, the provisions applicable to persons who have adopted commerce as their profession.
Where this Code contains no provision, the rules of general law shall apply to commercial matters, provided that such rules are applied only to the extent that they are consistent with the principles specific to commercial law.
Where no statutory provision can be applied, the judge may be guided by jurisprudential precedents and the requirements of good commercial faith and equity.
When determining the effects of a commercial act, the judge shall apply established custom, unless it appears that the contracting parties intended to derogate from the rules of custom, or where custom conflicts with mandatory statutory provisions. Special custom and local custom shall prevail over general custom.
Commercial exchanges(1), fairs, markets, public warehouses, storehouses, and other establishments designated for trade are subject, as required, to special laws and regulations.
The rules set forth in the Code of Obligations and Contracts regarding the contract of partnership shall apply to commercial companies, provided that such rules are not expressly or implicitly contrary to the rules of this Code. Without prejudice to the rights of bona fide third parties, if the number of partners or shareholders in commercial companies of any type falls below the number required by law for each type, dissolution of the company must be declared by a decision of the remaining partners within three months of the occurrence of the cause referred to, unless the deficiency is remedied. The court, upon request by any interested party, shall declare the dissolution of the company after the expiry of the three-month period for remediation.
All commercial companies, other than joint ventures, must be evidenced by a written instrument; however, third parties may, as the case may be, prove the existence of the company or of any provision relating thereto by all means. All companies incorporated in Lebanon must have their principal office therein, and are deemed to be of Lebanese nationality notwithstanding any contrary provision.
The constitutive instruments of all commercial companies — other than joint ventures — must be published by completing the procedures described below, failing which they shall be null and void.
A change in the form of a company does not create a new legal personality; the legal personality remains, and the new company continues with the same legal personality as before the transformation. Such change shall not be enforceable against third parties except from the date of registration in the commercial register and upon expiry of one month from the announcement of the change in the Official Gazette and in a local daily newspaper designated by the judge supervising the commercial register. Persons who acted in the name of a company in the course of its formation, before it acquired legal personality, shall be personally and jointly liable for the acts performed, unless the company, after its incorporation, assumes responsibility for those acts, in which case those acts shall be deemed to have been approved by the company from the date they occurred.
Every merchant, before suspending payments or within the ten days following such suspension, may apply to the court of first instance in the district where his principal establishment is located and request it to convene his creditors in order to discuss and deliberate on a proposed preventive settlement.
The merchant must submit in support of his application: his commercial books(3), properly kept for at least three years or since the commencement of his commercial activity if it has been less than three years; a balance sheet; a list of creditors with their addresses and the amount of each debt; a list of debtors; and a brief explanatory statement of the situation.
The court, after hearing the public prosecutor, shall rule in chambers to reject the application: - If the applicant has not filed the books and documents referred to in the preceding article. - If he was previously adjudicated bankrupt and has not been rehabilitated. - If he has already been granted a preventive settlement. - If he has been convicted of negligent or fraudulent bankruptcy.
If the court finds the application to comply with the law and to merit consideration, it shall issue, by an unappealable order, a summons for creditors to appear before a delegated judge to discuss and deliberate on the proposed preventive settlement. This judge shall be one of the court members specially designated by the court for that purpose.
The court's order shall be published by the clerk by means of notices posted at the court's door, and an extract of the same order shall subsequently be published in the Official Gazette and in a daily newspaper. If the list of creditors is incomplete, or if broader publication is warranted, the court shall order publication in additional newspapers.
From the date of filing the application until the order ratifying the settlement acquires the force of res judicata, no creditor whose debt predates the order may commence or continue enforcement proceedings or acquire any lien(1) or privilege, unless the court expressly authorises it.
During the preventive settlement procedure, the debtor shall remain in possession of his assets and shall be permitted to carry out all normal acts relating to his commerce, subject to the supervision of the appointed official and under the direction of the delegated judge. Both may object to any act they deem improper.
Gifts(3) and other gratuitous acts or acts of guarantee performed by the debtor during the preventive settlement procedure may not be enforced against creditors. The same principle applies if the debtor makes payments on debts not yet due.
If the debtor violates the provisions of the two preceding articles, or if it is established that he concealed part of his assets, omitted to declare some of his creditors, or committed any fraud, the delegated judge shall refer the matter to the chamber of deliberation, which may declare him bankrupt.
The supervisor, after examining the debtor's books and documents and based on the information he was able to gather, shall verify the accuracy of the creditors' and debtors' list, make all necessary corrections thereto, and indicate the amounts of debts, their nature, and their seniority.
The delegated judge shall preside over the creditors' meeting. Each creditor may appoint a special proxy bearing a written power of attorney; this power may be written without formality on the letter of summons or on a telegram. The debtor or his representative must attend the meeting.
Every creditor may state the reasons why he believes a particular debt is disputed, or why the debtor is not entitled to the indulgence sought, or why the proposals are not worthy of acceptance. Creditors may also raise individual objections.
The preventive settlement must be approved by a majority of creditors who participated in the vote, and that majority must represent at least three-quarters of the unsecured and unencumbered debts (those not secured by movable or immovable pledge)(1).
The debts of the debtor's spouse and those of his relatives and in-laws up to the fourth degree shall not be counted in calculating the majority described in the preceding article. Persons who acquired such debts by assignment within six months preceding the filing of the application for preventive settlement shall also be excluded from voting.
The delegated judge shall record in the minutes those who accepted the settlement; they must all sign the minutes. Persons who expressed their acceptance by letter or telegram addressed to the delegated judge or the clerk before the meeting shall be counted toward the majority.
Before the signatures are collected, the delegated judge shall issue an order recorded in the minutes summoning the interested parties to attend a hearing before the court within a period not exceeding twenty days for the ratification of the settlement.
The supervisor must file with the court clerk, three days before the designated hearing, his reasoned submissions on the feasibility of accepting the settlement. At the hearing, the delegated judge shall present a report, and the debtor and creditors shall be entitled to intervene.
In the ratification order, the court may provisionally assess, based on indications, the declared debts and their amounts, in order to verify the existence of the required majority, subject to any subsequent definitive judgments on those debts.
If the court finds that the debtor deserves to benefit from the settlement, and that the objections set forth in the preceding articles do not eliminate the required majority, and that the settlement terms are not less than the legal minimum and do not contain illegal conditions, it shall issue a decision ratifying the settlement. Otherwise, it shall refuse ratification.
Unless there is a contrary agreement in the settlement agreement or in another decision taken under the conditions described above and confirmed by the court, the debtor may not, before fully performing all his obligations under the settlement agreement, sell or mortgage his immovable property or surrender his assets.
Orders granting or refusing ratification of the settlement must be published in accordance with the rules that will be specified below for the announcement of bankruptcy.
Dissenting creditors may object to ratification of the settlement within five days of the date of closing the final minutes; the objection must state its grounds and must be notified to the debtor and to the supervisor. No further objection may be lodged after the five-day period has expired.
Ratification of the preventive settlement renders it binding on all creditors. Creditors, even those who voluntarily consented to the settlement, shall retain all their rights in full against co-debtors, guarantors, and others jointly liable for the debtor's debts.
A settlement granted to a company shall benefit partners who are personally liable for the company's debts, unless there is a contrary provision.
In any commercial company that has issued bonds representing more than twenty per cent of its total debts, a settlement may only be granted if the bondholders' assembly approves the proposals by a resolution adopted under the conditions of the general assembly of bondholders.
If it is worthwhile to convene the bondholders' assembly, the period previously set for convening creditors may be extended to sixty days.
Holders of bonds with a redemption premium (Les porteurs d'obligations avec prime de remboursement) may not only claim the issuance price; they must add to it the portion of the premium that has accrued at the date the settlement proposal was filed.
Upon application by any creditor within three years from the date of publication of the ratification order, the court may annul the settlement and declare the debtor bankrupt if it is established that he exaggerated or fraudulently manipulated the debts attributed to him in the settlement proposal.
If the debtor fails to fulfil all obligations set out in the settlement agreement, every creditor, after pursuing the guarantors and exercising the rights provided as security, may request the rescission (Faire résoudre) of the settlement and the declaration of bankruptcy.
The settlement agreement may stipulate that the merchant shall not be finally discharged from the portion of his debt written off under the settlement unless he remains insolvent. However, the duration of this condition must be fixed at five years, and it must also be stipulated that the debtor may be finally discharged before the expiry of that period if he proves his solvency.
Promissory Note (Snad li-Amr)
The following acts are deemed commercial by their very nature (Nature propre), as are all acts that may be considered analogous to them by reason of their similar characteristics and purposes (Caractères identiques):
1. See Legislative Decree No. 120 of 16/9/1983 on the organisation of the Beirut Stock Exchange; Decree No. 4808 of 29/1/1982 on the internal regulations of the Beirut Stock Exchange; and Legislative Decree No. 29 of 8/5/1967 defining the powers of the Government Commissioner to the Beirut Stock Exchange.
2. See Law No. 78 of 21/11/1987 on the regulation of the money-changing profession in Lebanon.
3. See the Regulation on Creditors and Auctions issued on 26/9/1934.
4. Regarding insurance contracts, see Article 9 et seq. of Decree No. 9812 of 5/4/1968 on the organisation of insurance entities, and Decision No. 109/L.B. of 21/7/1937 on the regulation of insurance companies and the collection of fees and savings.
5. See the Mining Regulations issued pursuant to Decision No. 113/L.B. of 9/8/1933.
The following are also deemed maritime commercial acts:
All acts performed by a merchant for the needs of his trade are also deemed commercial in the eyes of the law. In the presence of a partner, a merchant's acts shall be presumed to have been performed for that purpose, unless the contrary is proved.
A general partnership is one that operates under a specific firm name and is formed between two or more persons who are personally and jointly liable for the debts of the company.
The constitutive instrument may be notarised or privately signed. However, in the latter case, as many copies of the instrument must be drawn up as there are partners.
Within the month of incorporation of the company, a copy or an extract of the constitutive instrument must be filed with the clerk of the court of first instance of the district of the company's registered office.
Within the same period, the company must also be registered in the commercial register of its registered office district. Such publication shall be in summary form and shall contain all information useful for third parties to know, in particular:
If an amendment is subsequently made to the constitutive instrument, a new copy thereof must be filed with the court clerk, and registration in the commercial register is also required if the change affects matters that concern third parties.
Failure to file the constitutive instrument with the court clerk, or failure to register it in the commercial register, shall render the company null and void and shall make all partners jointly and severally liable towards third parties where damage has been caused to them.
The nullity arising from failure to publish is not extinguished by the mere passage of time, and any interested party may invoke it. Partners may not invoke it against third parties; however, if publication is made belatedly, only those who dealt with the company before the rectification may invoke the nullity to which the company was exposed.
Every partner in a general partnership is deemed to be carrying on trade personally under the company's firm name; accordingly, each partner acquires the legal status of a merchant. The bankruptcy of the company entails the personal bankruptcy of each partner.
The firm name (Raison Sociale) of the company is composed of the names of all partners or the names of some of them together with the word 'and Partners'. The firm name must at all times correspond to the company's current membership (Personnel Actuel). Any person extraneous to the company who knowingly consents to the inclusion of his name in the company's firm name shall become liable for its debts towards any person misled thereby.
Except for transfers expressly provided for in the constitutive instrument, no partner may assign his share in the company's capital to a third party without the consent of all partners and compliance with the publication formalities. However, a partner may assign to a third party the rights and benefits related to his shareholding, since such an arrangement is binding only between the contracting parties.
The right to manage the affairs of the company belongs to all partners, unless the company's articles or a subsequent instrument provide that management be entrusted to one or more partners or to another person, even an outsider to the company.
Managers (Gérants) may be removed in the same manner in which they were appointed; however, if the removal is wrongful, it may give rise to a claim for compensation under the conditions set out in Article 822 of the Code of Obligations. Where a new manager is appointed to replace a regular manager, this replacement must be published.
Managers may carry out all acts necessary for the normal operation of the company's enterprise, unless their authority is limited by the company's articles.
Managers may not enter into any agreement for their own account with the company, or any agreement in which they or any of them have a direct or indirect interest, without specific authorisation from the partners renewed as the case may be each year. Ordinary contracts relating to operations normally carried out by the company with its clients are exempt from this prohibition.
Likewise, managers may not manage an enterprise similar to that of the company unless they obtain authorisation renewed annually.
Where several managers exist, each of them has the right to object to transactions that the others intend to carry out. In such case, the decision shall be taken by majority vote of the said managers, unless the objection is based on the ground that the contemplated act is contrary to the company's articles, in which case it is for the court to assess the nature of the act.
The company shall be bound by acts performed by the managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use that signature in furtherance of their personal interests, unless the third party is in bad faith.
Creditors of the company may sue it; however, before doing so, they must send it a formal notice demanding payment. They may also sue any partner who was a member at the time of the contract. Such partners shall be jointly and severally obligated to make payment from their personal assets.
The general causes of dissolution applicable to all companies are:
A general partnership is also subject, in addition to the foregoing, to the following specific causes of dissolution:
Unless the company's articles provide otherwise, a general partnership, upon the death of one of its partners, shall continue among the surviving partners, unless the deceased leaves a spouse or descendants to whom his rights pass. If so, the company shall continue with the spouse or descendants of the partner, and they shall have the status of silent partners (commanditaires).
In all cases, the value of the rights of the deceased or excluded partner shall be determined by a special inventory, unless the company's articles provide for another method of valuation.
The dissolution of a company — except where dissolution occurs automatically pursuant to the constitutive instrument — must be published in the same manner and within the same period as the company itself. The same procedure applies upon the exclusion of a partner and upon the continuation of the company after the death of one of its members.
After dissolution, commercial companies retain their legal personality for the period required for liquidation, and only for the purposes of that liquidation.
If the company's articles do not provide for the appointment of the liquidator or liquidators, and the partners do not agree on their choice, they shall be appointed by the court in whose district the company's registered office is situated, from among its members.
The result of the selection or the court order appointing the liquidators must be published by those liquidators.
On assuming their duties, the liquidators must draw up an inventory of assets together with the managers of the company's affairs.
The liquidators shall collect the debts owed to the company by third parties or by the partners, pay the company's debts, sell its assets, and carry out all acts required by the liquidation. However, they may not continue to operate the company's enterprise, nor dispose of the company's establishment as a whole, except pursuant to a specific authorisation from the partners.
The liquidators must provide the partners, upon request, with all information on the state of the liquidation. However, no obstacles to the liquidation may be raised on account of unlawful claims.
The partition shall be carried out in accordance with the conditions of the partnership agreement and shall also be governed by the provisions of Articles 941 and 949 of the Code of Obligations.
In all commercial companies, and without prejudice to actions that may be brought against liquidators in their capacity as such, the actions of the company's creditors against a partner, his heirs, or his successors in title shall be extinguished by prescription after five years from the dissolution of the company, or from the departure of a partner with respect to actions directed against that partner. The prescription period shall run from the date of completion of publication in all cases where publication is required, and from the date of finalisation of liquidation for actions arising from the liquidation itself. Prescription may be suspended or interrupted in accordance with the rules of general law.
The proof of commercial contracts is not in principle subject to the exclusive rules established for civil contracts; accordingly, subject to the exceptions arising from special legal provisions, the contracts referred to may be proved by all means of evidence that the judge deems appropriate to accept in accordance with commercial custom and usage.
In commercial matters, the date of private instruments may be proved against third parties by all means of evidence. The date of negotiable instruments and the date of their endorsement shall be deemed valid until the contrary is proved.
Co-debtors under a commercial obligation are presumed to be jointly and severally bound by that obligation; this presumption also applies to guarantees of commercial debts.
The legal rate of interest in commercial matters is fixed at nine per cent.
For the purpose of establishing the fair price and market price, reference shall be made to stock exchange prices and mercuriales, unless there is a contrary agreement.
No commercial obligation to perform an act or a service shall be presumed to be gratuitous; if the parties do not specify a fee, commission, or brokerage, the remuneration customary in the profession shall be due.
In commercial matters, a court may not grant a time limit for rescission except in exceptional circumstances. A party who has applied to the court for rescission of the contract may not thereafter claim performance; however, a party who sought performance may subsequently opt for a claim for rescission. Performance of obligations after a rescission action has been brought shall not preclude the action.
The non-performance of one of the obligations under contracts with successive obligations entitles the party who fulfilled its obligations to request termination of the contract in respect of all obligations not yet performed, without prejudice to its right to claim damages.
In commercial matters, the right to bring a claim is extinguished by prescription after ten years if no shorter period is specified. If a judgment has been issued containing a decision, the claim arising from the res judicata shall be extinguished in all cases after ten years.
Sale(1), credit, transport undertakings(2), insurance undertakings(3), and all contracts whose rules are not determined by this Code are subject to the Code of Obligations and to custom. The special rules relating to public transport enterprises shall also apply to contracts of carriage. Stock exchange transactions, whether on securities or commodities, shall also be subject to special legislation.
The commercial pledge provided for in the following articles is one that secures a commercial debt.
Subject to the following provisions on delivery, the pledge may be proved by all means of evidence that the court deems necessary to accept. A pledge over a registered instrument shall be established by a transfer transaction recorded in the registers of the establishment that issued the instrument and on the instrument itself. For a promissory note(3), the pledge shall be established by an endorsement entered in the register.
A pledge agreement shall not produce its effect as a pledge if the pledged property remains in the possession of the debtor such that it appears to third parties as still part of his free assets from which he may obtain new credit; it is therefore necessary that the pledged property be delivered to the creditor, and even if it remains in the possession of the creditor or of a third party holding it for the creditor's account.
The pledgee must deliver to the debtor upon request a receipt specifying the nature, type, quantity, weight, and all distinguishing marks of the things delivered as pledge.
If the pledge is over fungible things or instruments, the pledge shall remain valid even if those things or instruments are replaced by things or instruments of the same type; if those things or instruments are non-fungible, the debtor may also recover them and replace them with the creditor's consent, provided that the pledge agreement is a notarial deed or a private instrument with certified date.
The creditor must, for the debtor's account, exercise all rights attaching to the things or instruments delivered to him as pledge. If what he received is an option credit instrument (Titres de crédit donnant droit à option), the debtor who wishes to exercise his option right must notify the creditor sufficiently in advance.
If the thing pledged is an instrument whose price has not been fully paid, the debtor, upon being called to pay, must remit the money to the creditor a few days at least before maturity, failing which the pledgee may proceed to sell the instrument.
In the event of non-payment at maturity, the creditor — after a period of two months running from the date of a simple notice sent to the debtor and to the third-party provider of the pledged property if any — may apply to the president of the enforcement department to order the sale of the pledged things by public auction. The creditor shall recover his debt from the proceeds of sale; any surplus shall be remitted to the debtor.
Cover is provided by the drawer or the person on whose account the bill is drawn; this shall not prevent the drawer acting for the account of a third party from remaining personally liable to endorsers and holders of the bill only. Cover exists if, at the maturity date of the bill, the drawee is indebted to the drawer or to the person on whose account the bill was drawn in an amount at least equal to the bill's value.
Acceptance of a bill implies the existence of cover. Such acceptance establishes cover in relation to endorsers. In the absence of acceptance, the drawer must, upon denial of the existence of cover, prove that the drawee had cover at the maturity date, failing which he shall be liable to guarantee the cover, even if the protest was raised after maturity.
A promissory note shall contain: - The words 'to order' or a statement in the text of the instrument itself in the language used for writing it. - An unconditional promise (La promesse pure et simple) to pay a specified sum. - A specification of the maturity date. - A specification of the place of payment. - The name of the person to whom or to whose order payment is to be made. - The date and place where the note is drawn. - The signature of the maker.
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a promissory note, except in the following cases: - A promissory note not specifying the maturity date shall be deemed payable at sight. - If no special place of payment is indicated, the place shown next to the maker's name shall be deemed the place of payment. - If no place of drawing is indicated, the instrument shall be deemed to have been drawn at the place indicated as the place of payment.
The provisions applicable to bills of exchange and relating to the following matters shall apply to promissory notes to the extent compatible with their nature: Endorsement (Articles 325 to 335) Maturity (Articles 348 to 352) Payment (Articles 353 to 363) Recourse for non-payment (Articles 365 to 376) Protest (Articles 377 to 382) Intervention (Articles 383 to 391) Copies (Articles 395 and 396) Alterations (Article 397) Prescription (Articles 398 and 399) Legal holidays, counting of periods, and prohibition on days of grace (Articles 400 to 402)
The provisions applicable to bills of exchange payable at the domicile of a third party or in a place other than the maker's domicile (Articles 317 and 342), and the provisions on interest stipulations (Article 318), discrepancies in amounts (Article 319), the effects of signatures in the case of unauthorised agents (Article 321), and other related provisions shall also apply to promissory notes.
The provisions on aval shall also apply to promissory notes (Articles 345 to 347). In the case specified in the last paragraph of Article 346, if the aval does not indicate for whose account it was given, it shall be deemed given for the maker's account.
The maker of a promissory note is bound in the same manner as the acceptor of a bill of exchange. A promissory note payable at a certain period after sight (Payable à un certain délai de vue) must be presented to its maker for authentication within the time limits specified in Article 338.
Cheque
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
Pursuant to the legal rules concerning formal requirements to be observed in general assembly deliberations, any resolution contrary to those requirements shall be null and void, provided it is established that the violation actually affected the decisive outcome. Any interested party may invoke this nullity before the competent authority. The nullity shall lapse upon rectification of the deliberations or after one year from the date on which the assembly was held without proper compliance.
Persons who fraudulently fabricate or attempt to fabricate a false majority at a shareholders' or bondholders' general assembly — in particular those who represent themselves as holding securities belonging to others who cannot vote, or who induce others by means of private benefits to vote in a specified manner or to abstain from voting, or who use any other illicit means — shall be liable to the prescribed penalties.
Joint-stock companies shall be dissolved upon expiry of the period for which they were formed, upon completion of the enterprise for which they were incorporated, or upon the impossibility of completing it. They shall also be dissolved by the shareholders' decision expressed at a general assembly in accordance with the conditions of Articles 202 and 204, and in all particular cases provided for in the articles.
In any event, if the board of directors fails to convene the assembly, or if the assembly cannot be validly constituted for lack of quorum, or if the assembly refuses to dissolve the company, every shareholder retains the right to apply to the competent court to take appropriate action or to dissolve the company.
The resolution adopted, whatever its nature, must be published.
Liquidation shall be conducted in principle in accordance with the rules provided for general partnerships.
If liquidators are not designated in the company's articles, they shall be appointed by the ordinary general assembly, unless the company is to be dissolved before its scheduled term, in which case the extraordinary general assembly shall appoint them at the same time. If the general assembly does not appoint the liquidators, their appointment shall rest exclusively with the competent court upon application by any interested party.
Auditors, joined by an expert appointed by the court, shall remain in office and shall supervise the liquidation.
Liquidators shall receive the accounts of administrative acts performed by board members and the general manager since the general assembly's approval of the last balance sheet until the opening of liquidation; they shall either approve them or refer any apparent problems to the competent court.
If the liquidation period exceeds one year, liquidators must draw up and publish the annual balance sheet.
Upon completion of liquidation, the liquidators shall draw up the final balance sheet, specifying each shareholder's share in the distribution of the company's assets.
Auditors shall prepare a report on the accounts submitted by the liquidators; the ordinary general assembly shall then approve them and resolve to grant a discharge to the liquidators or to object to the accounts, in which case the dispute shall be referred to the competent court.
A bill of exchange may be presented for acceptance to the drawee at his domicile at any time before maturity, either by the holder or by any holder for collection.
The drawer may stipulate in any bill of exchange that it be presented for acceptance, with or without a time limit. He may prohibit presentation for acceptance in the bill, unless the bill is payable at a third party's address, or in a place other than the drawee's domicile, or unless it is a bill payable at a certain time after sight.
Bills drawn at a period after sight must be presented for acceptance within one year of their date. The drawer may shorten or extend this period; endorsers may also shorten the periods referred to.
The drawee may request that the bill be presented to him a second time on the day following the first presentation; interested parties may not invoke this request as insufficient unless it is mentioned in the protest. The holder is not obliged to surrender a bill presented for acceptance to the drawee.
Acceptance is written on the bill of exchange and is expressed by the word 'accepted' or an equivalent; it is signed by the drawee, and the drawee's mere signature on the face of the bill is deemed acceptance. If the bill is payable at a period after sight, or if it must be presented for acceptance within a specified time by special stipulation, the acceptance must be dated on the day of presentation; failing this, the holder may, in order to preserve his rights against endorsers and the drawer, establish the omission by a protest on a specific date.
Acceptance shall be unconditional; however, the drawee may limit it to part of the amount. Any other modification of the bill's terms in the acceptance shall constitute a refusal; however, the acceptor shall be bound in accordance with the terms of his declaration.
If the drawer designates in the bill a place of payment other than the drawee's domicile without specifying a third party at whose address payment must be made, the drawee may designate that third party upon acceptance; failing such designation, the drawee shall be deemed to have undertaken to pay at the designated place himself.
The drawee's acceptance of the bill binds him to pay at maturity; in the event of non-payment, the holder — even if he is the drawer himself — has a direct action against the acceptor arising from the bill for everything that may be claimed pursuant to the applicable provisions.
If the drawee wrote an acceptance on the bill and then struck it out before returning the bill, refusal of acceptance shall be deemed to have occurred; the striking out shall be presumed to have been made before the return of the bill unless the contrary is proved. However, if the drawee notified his acceptance in writing to the holder or to any signatory of the bill, he shall be bound to those persons in accordance with the terms of his acceptance.
The deliberating creditors may not approve a post-bankruptcy settlement agreement unless the following conditions are met, failing which the agreement shall be null and void. The agreement shall only be concluded by a vote of creditors forming the majority in number and representing three-quarters of the total debt; the foregoing conditions being cumulative.
Creditors holding a mortgage(1) or movable pledge privilege may not vote unless they waive their securities in accordance with the conditions provided for in the chapter on preventive settlement.
The settlement agreement must be signed at the same session, failing which it shall be null and void. If only a majority in number, but not in amount, is obtained, or only a majority in amount is obtained, the session shall be adjourned for eight days and no further adjournment may be granted; in this second session the creditors who were present or represented at the first session may alone deliberate.
No settlement agreement may be concluded for a person convicted of fraudulent bankruptcy(1). If an investigation is ongoing regarding fraudulent bankruptcy, creditors shall be convened to decide whether they intend to deliberate on a settlement at the conclusion of the investigation.
If the bankrupt is convicted of negligent bankruptcy, a settlement agreement is possible. However, creditors may, in the case of ongoing criminal proceedings, defer deliberations until after the conclusion of those proceedings in accordance with the provisions of the preceding article.
In the case of a commercial company that has issued bonds, a settlement agreement may only be concluded if it is approved by the bondholders' assembly under the conditions and in the circumstances specified in the chapter on preventive settlement.
Any creditor entitled to participate in the settlement agreement and whose rights have been recognised, and the bondholders' assembly if one exists, may object to the settlement. The objection must be stated and the objectors must affix their signatures at the same session.
The ratification procedure shall be initiated before the court upon application of the most diligent party (A la requête de la partie la plus diligente); the court may not act before the expiry of the eight-day period referred to in Article 562, and must rule at the earliest at the session convened for that purpose.
In all cases, the delegated judge shall, before the court rules on ratification, prepare a report on the characteristics of the bankruptcy and the feasibility of accepting the settlement.
If the rules set forth above have not been observed, or if grounds relating to the public interest or the interests of creditors appear to preclude the settlement, the court must refuse ratification. It may also refuse to ratify a settlement agreement if the bankrupt is deemed undeserving of the benefit.
Ratification of the settlement agreement renders it binding on all creditors, whether listed in the balance sheet or not, and whether their debts have been verified or not. It is also enforceable against creditors residing outside Lebanese territory.
After the ratification judgment acquires the force of res judicata, the effects of the bankruptcy shall cease, subject to the continuation of the loss of political rights provided for in Article 500. The trustees whose duties have ended shall render their accounts to the bankrupt.
The settlement agreement involves above all payment of debts in instalments over successive periods, and in general the discharge of the debtor from a greater or lesser portion of his debt. However, this discharge leaves him with a natural obligation. The settlement agreement may also not include the bankrupt's final discharge for the written-off portion.
The mortgage created in favour of the mass of creditors (L'hypothèque de la masse) shall be retained as security for payment of the sum specified in the settlement agreement.
Creditors may also request one or more guarantees to secure performance of the settlement agreement.
Until the full amount provided for in the settlement agreement is paid, the debtor may not make any extraordinary disposition not required by the conduct of the trade itself, unless there is a contrary agreement. The provisions of Articles 466 and 467 shall apply to this effect.
No action to annul the settlement agreement after ratification shall be admissible unless it is based on fraud discovered after ratification and arising from the concealment of the bankrupt's assets or the exaggeration of debts owed by him. Every creditor may bring such an action within five years of the ratification.
If after ratification of the settlement agreement the bankrupt is prosecuted for fraudulent bankruptcy and a temporary or permanent arrest warrant is issued against him, the court may order any precautionary measures it is authorised to take. These measures shall be lifted if the bankrupt is ultimately acquitted.
If the bankrupt fails to perform the terms of the settlement agreement, an action may be brought before the court for the rescission (Résolution) of the agreement; any guarantors shall be summoned or invited to attend in the proper manner.
When the court becomes aware of the judgment ordering fraudulent bankruptcy(2), it shall proceed to appoint a delegated judge and one or more trustees. It shall also make this appointment in the order declaring the settlement annulled or rescinded, or in the judgment declaring the bankruptcy of a company whose partners are personally liable.
Verification of debt instruments filed pursuant to the preceding article shall be commenced without delay. There is no need to conduct a new verification of previously verified debts, subject to the right to reject or reduce debts and to provisionally admit or reject new ones.
After completion of the acts described above, creditors shall be convened to give their opinion on retaining the trustees or replacing them if no new settlement has been concluded.
Acts performed by the bankrupt after ratification of the settlement agreement and before its annulment or rescission shall only be voided in the event of fraud affecting creditors' rights.
Pre-settlement creditors shall retain all their rights against the bankrupt alone. With respect to the mass of creditors, they may only participate within the following limits: if they received nothing or were not fully satisfied under the previous settlement, they may participate for the portion of their debt for which they were not satisfied, together with all creditors under the new settlement.
If no settlement agreement is concluded, the creditors shall ipso jure enter into a state of union. The delegated judge shall immediately consult them regarding management acts and the retention or replacement of the bankruptcy trustees, and those creditors whose debts have been verified or provisionally admitted shall participate in deliberations.
Creditors shall be consulted as to whether it is possible to grant the bankrupt an allowance from the bankruptcy estate (Actif). If the majority of creditors present agree, an allowance may be granted; the delegated judge shall propose the amount, and the court shall fix it.
If a partnership is declared bankrupt, creditors may only conclude a settlement agreement with one or more partners. In such case, the totality of the company's assets shall remain subject to the creditors' union. The personal assets allocated to each individual partner under a settlement with that partner shall be withdrawn from the union.
The trustees shall represent the mass of creditors and carry out the liquidation acts. However, the creditors may authorise the trustees to continue operating the existing assets. The authorisation shall specify the duration and the scope of that operation.
If the trustees' acts give rise to obligations exceeding the value of the union's assets, only the creditors who authorised those acts shall be personally liable for the excess beyond their share in those assets; however, their liability shall not exceed their share in the union's assets.
The trustees shall proceed to collect outstanding debts. They may accept settlements on the same terms as were previously in use, notwithstanding any objection by the bankrupt. However, for disputes involving a lump sum, the delegated judge's authorisation is required.
The trustees must proceed to sell all movable assets, including the commercial enterprise(1), under the delegated judge's supervision and without the need to convene the creditors' assembly, in accordance with the forms prescribed for execution.
If no forced sale procedure has been completed before the union, the trustees alone shall be authorised to proceed with the sale and must commence it within eight days with the delegated judge's authorisation and through the enforcement department.
The trustees shall draw up the conditions of sale pursuant to which bidding shall take place, and shall include therein the particulars required by Article 744 of the Code of Civil Procedure(2). Articles 746 and 747 of the same Code shall also apply.
The delegated judge shall convene the creditors in union at least once during the first year, and also in subsequent years when circumstances require. The trustees must submit accounts of the administration at the meetings.
The bankruptcy estate assets shall be distributed among all creditors in proportion to each creditor's verified debt, after deducting the costs of administration, the allowances granted to the bankrupt or his family, and the amounts paid to preferential creditors.
For this purpose, the trustees shall submit monthly statements to the delegated judge on the state of the bankruptcy and the amounts deposited with the designated bank for receiving and paying enforcement funds; the delegated judge shall then order, as appropriate, the distribution of funds among creditors.
The trustees may not carry out any closing of a debt except against presentation of the instrument evidencing the debt; they shall note on the instrument the amount paid or ordered to be paid. If production of the instrument is not possible, the procedure prescribed by law for the circumstances shall apply.
After completion of the bankruptcy liquidation, the delegated judge shall convene the creditors for a final meeting; at this final meeting the trustees shall render their accounts, and the bankrupt shall be present or duly summoned. The creditors shall decide whether to discharge the trustees or to raise objections; in the latter case the dispute shall be referred to the competent court.
The delegated judge shall submit to the court the creditors' resolution concerning the excusing of the bankrupt, together with a report on the characteristics and circumstances of the bankruptcy. The court shall then issue its decision declaring the bankrupt excused or not excused.
Persons convicted of fraudulent bankruptcy(1), and persons convicted of forgery, theft, fraud, breach of trust, or embezzlement of public funds(2), may not be declared excused.
A settlement may be concluded involving the total or partial transfer of the bankrupt's assets. The conditions of this type of settlement are the same as those provided for the simple settlement agreement; however, the discharge of the bankrupt in respect of any shortfall resulting from the realisation of the assets shall not operate automatically but only if expressly agreed upon.
If at any time before ratification of the settlement or formation of the union it appears that the course of the bankruptcy proceedings has been suspended due to insufficiency of assets, the court may, based on the delegated judge's report or of its own motion, close the bankruptcy proceedings. In such case, each creditor shall recover his freedom to act individually.
The bankrupt or any interested person may at any time apply to the court to reverse the closure order if they prove the existence of sufficient assets to cover the bankruptcy costs, or if they deliver to the trustees the sufficient amount to cover such costs.
Payment of the whole or part of the amount of a bill of exchange may be guaranteed by an aval. Such guarantee may be given by a third party or by one of the signatories of the bill.
The aval is written on the bill or on an allonge, or in a separate instrument indicating the place where it was given. It is expressed by the words 'good for aval' or an equivalent expression and is signed by the aval provider. The aval shall be constituted by the mere signature of the aval provider on the face of the bill, except for the drawer's signature.
The aval provider is bound in the same manner as the person for whom he gave the aval. His obligation shall be valid even if the obligation which he guaranteed is void for any reason other than a defect in form. The aval provider who pays the bill acquires all rights arising from it against the person guaranteed and against those who are bound to that person under the bill.
The holder of a cheque may sue endorsers, the drawer, and other obligors if the cheque presented in due time is not paid and the refusal to pay is evidenced: - Either by an official document (protest). - Or by a declaration by the drawee dated and written on the cheque stating the date of presentation. - Or by a dated declaration from a clearing house stating that the cheque was delivered in time but not paid.
The protest or similar evidence must be raised before the expiry of the presentation period. If presentation is made on the last day of the period, the protest or similar evidence may be raised on the first following working day.
The holder of the cheque may claim from the person sued:
A person who paid the cheque may claim from those who guaranteed him:
If an insurmountable obstacle (a legal provision or other force majeure circumstances) prevents presentation of the cheque, protest, or similar evidence within the prescribed periods, those periods shall be extended. The holder must without delay notify his immediate endorser of the force majeure and note such notice on the cheque with a date and his signature; Article 367 shall apply. When the force majeure ceases, the holder must without delay present the cheque for payment and, if necessary, raise a protest or obtain similar evidence. If the force majeure persists for more than fifteen days from the date on which the holder notified his endorser, recourse may be exercised without presentment or protest.
A creditor who holds a debt instrument (Engagement) that is jointly and severally guaranteed or endorsed or signed for joint and several liability by the bankrupt and by co-obligors who are also bankrupt may participate in the distribution with every mass of creditors in proportion to their verified claims, without any deduction.
The claims of co-debtors under the same obligation against one another before the courts shall not be admissible unless the total of those claims from all co-debtors exceeds the principal debt.
If a creditor holds instruments jointly and severally binding the bankrupt and other persons, and has collected part of his debt before the bankruptcy, he may only participate in the mass of creditors for the balance remaining after deducting the collected portion.
Notwithstanding the settlement agreement, creditors retain the right to sue the bankrupt's co-obligors to claim the full debt owed by them; those co-obligors are entitled to intervene in the settlement ratification proceedings to protect their own interests.
Persons claiming ownership of assets in the bankrupt's possession may apply for their recovery; the trustees may accept such applications with the delegated judge's approval. If a dispute arises, the matter shall be referred to the competent court.
Recovery may also be specifically claimed for commercial instruments and other unaccepted documents found in the bankrupt's possession at the time of opening the bankruptcy proceedings if the owner delivered them to the bankrupt solely for a specific purpose.
Recovery of goods, in whole or in part, may also be claimed as long as they are identifiable in kind, if they were delivered to the bankrupt on deposit or for sale on account of the owner. Recovery of the price may also be claimed if the goods were sold and the price not remitted to the owner, provided payment was not made by set-off or by payment into the current account.
A seller may withhold delivery of goods and other movables sold if they have not been delivered to the bankrupt or dispatched to him, or to another person on his behalf.
The seller may recover goods dispatched to the bankrupt in order to exercise his right of retention, provided they have not been delivered to the bankrupt's warehouses or to a place where he has apparent control (Apparente disposition).
If the buyer received the goods before his bankruptcy, the seller may not invoke a claim for rescission, recovery, or any privilege whatsoever.
In cases where the seller may exercise his right of retention, the trustees may, after obtaining the delegated judge's authorisation, take delivery of the goods upon paying the price.
If the trustees do not take this step, the seller may rescind the sale, provided he reimburses the mass of creditors for any instalment already paid on account. He may also claim damages from the mass of creditors for any resulting loss.
The recovery rights of the non-bankrupt spouse shall be determined in accordance with the rules applicable to both spouses pursuant to their personal law and their marriage contract.
Creditors of the bankrupt who lawfully hold a pledge or a special privilege over a movable shall have their names entered in the register of the creditors' union only as a reminder.
The trustees may at any time, after obtaining the delegated judge's authorisation, recover pledged property for the benefit of the bankruptcy estate, upon payment of the debt.
If the trustees do not recover the pledged property and the creditor sells it, the trustees shall receive any surplus over the debt; if the price is less than the debt, the pledgee creditor shall participate in the remaining balance together with the ordinary creditors' union.
The trustees shall submit to the delegated judge a statement of the names of creditors claiming a privilege over movable property; the judge shall, where appropriate, authorise payment of their debts from the first available funds. If a dispute arises over the privilege itself, the delegated judge shall refer the matter to the competent court.
If distribution of the proceeds of immovables takes place before distribution of the proceeds of movables, or if both distributions occur simultaneously, creditors holding a privilege or mortgage over immovables who have not recovered all their debts from the immovables' proceeds shall participate in the distribution of the movables' proceeds in competition with unsecured creditors for what remains of their debts.
If one or more distributions of cash funds from the proceeds of movables are made before distribution of the proceeds of immovables, creditors holding a privilege or mortgage whose debts have been verified shall participate in the distribution proportionally to the portion of their debt not covered by the pledge or immovable security, after deducting the privileged portion up to the assessed value of their pledge or immovable security.
After the sale of immovables and final settlement of the accounts of privileged and mortgage creditors in order of their rank, any creditor who, based on his rank, is entitled to claim more than the value assigned to the asset subject to his security, may not recover the full debt from the proceeds of immovables beyond that value.
Mortgage creditors whose share in the distribution of immovable proceeds covers only part of their debts shall be subject to the following rule: their rights in the fund allocated to the ordinary creditors' union shall be proportional to the remainder of their debts not covered by the immovable proceeds, and the amount thus determined shall be added to their shares of the ordinary distribution fund.
Creditors who have no share in the distribution of immovable proceeds shall participate as ordinary creditors in the settlement and all acts relating to the ordinary creditors' union.
Part Five: Spouse's Rights.
Assets belonging to the non-bankrupt spouse that are proven to be acquired from sources independent of the bankrupt spouse's activities shall not form part of the bankruptcy estate, unless otherwise established pursuant to Articles 626 and 628.
Assets of the non-bankrupt spouse whose acquisition cannot be proved to have originated from sources independent of the bankrupt spouse shall be deemed part of the bankruptcy estate, unless the non-bankrupt spouse proves otherwise by any means of evidence.
If the non-bankrupt spouse has paid debts on account of the bankrupt spouse, he or she shall have a right of recourse against the bankruptcy estate for amounts paid, to the extent that such payments benefited the estate.
If the spouse was a merchant at the time of marriage, or was without a profession at that time, the immovable assets acquired by the non-bankrupt spouse after the marriage shall be subject to a compulsory mortgage created by operation of law for the benefit of the mass of creditors, from the date of the bankruptcy judgment.
The non-bankrupt spouse is also entitled to recover assets purchased during the marriage period if she proves that the purchase price came from her personal funds, independent of the bankrupt's assets.
A bill may be drawn payable in the following manners: - At sight - At a certain period after sight (À un certain délai de vue) - At a certain period from a specified date (À un certain délai de date) - At a fixed date (À jour fixe) Bills drawn at other maturity dates or in successive instalments shall be null and void.
A bill payable at sight is due upon presentation and must be presented for payment within one year of its date. The drawer may shorten this period or stipulate a longer one; endorsers may also shorten the periods. The drawer may stipulate that a bill payable at sight shall not be presented for payment before a fixed date, in which case the time limit for presentation shall run from that date.
The maturity of a bill drawn at a certain period after sight shall be determined either by the date of acceptance or by the date of the protest. If the acceptance is undated, the acceptance shall be deemed, as regards the acceptor, to have been given on the last day of the period prescribed for presentment.
A bill drawn for one or more months from a specified date or after sight shall mature on the corresponding date of the month in which payment falls due; if there is no corresponding date, maturity shall be on the last day of that month. If the bill is drawn for one or more months and a half from a specified date, the full months shall first be counted.
If a bill is payable on a fixed date in a place whose calendar differs from the calendar of the place of drawing, the maturity date shall be determined by reference to the calendar in force at the place of payment. If a bill is drawn between two localities with different calendars, the maturity date shall be fixed by converting the date of issue to the calendar in force at the place of payment and replacing it accordingly.
The holder of a bill payable on a fixed date, or at a certain period from a specified date, or after sight, must present the bill for payment on the day it falls due. Presentation of the bill to a clearing house shall be equivalent to presentation for payment.
Upon paying the bill, the drawee may require the holder to deliver it with a receipt notation. The holder may not refuse a partial payment. In the event of partial payment, the drawee may require a notation of such payment on the bill and a separate receipt.
The holder of a bill may not be compelled to accept payment before maturity. A drawee who pays before maturity shall do so at his own risk. One who pays at maturity shall be validly discharged unless he committed fraud or gross error; he must verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If a bill is drawn payable in a currency not in circulation at the place of payment, its value may be paid in the local currency at the exchange rate prevailing on the maturity date; if the debtor is in default, the holder may require payment in the local currency at either the maturity rate or the rate prevailing on the day of actual payment.
If the bill is not presented for payment on the maturity date, each debtor is entitled to deposit the amount with a bank authorised to accept state deposits; the costs and risks shall be borne by the holder. Once deposited, the debtor shall only be bound to deliver the deposit receipt.
An objection to payment shall not be accepted except in cases of loss or bankruptcy of the holder.
If a bill not subject to acceptance is lost, the owner is entitled to have it paid based on a second, third, or fourth copy.
If an accepted bill is lost, payment based on a second, third, or fourth copy may only be claimed by court order and upon provision of security.
If the person who lost the bill, whether accepted or not, cannot produce the second, third, or fourth copy, he may apply for payment of the lost bill and obtain such payment by court order upon the provision of security.
If payment requested pursuant to the two preceding articles is refused, the owner of the lost bill may preserve all his rights by means of a protest to be raised on the day following the maturity of the lost bill. The liabilities provided for in the applicable articles shall run from the date of that protest.
To obtain the second copy, the holder of the lost bill must approach the person who endorsed it directly, and that endorser must assist him in his own name and on his behalf before the endorser's immediate predecessor. Thus from endorser to endorser back to the drawer.
The guarantee obligation (L'engagement de la caution) referred to in Articles 360 and 361 shall be extinguished by prescription after three years if no claim or legal action has been filed within that period.
Except for bearer cheques, multiple identical copies may be drawn for any cheque issued in one country or part of a country that is to be cashed in another country or part of that same country, and vice versa. A cheque issued and payable in the same country or in different countries but in the same part of the world may not have multiple copies.
The right of the cheque holder to bring an action against endorsers, the drawer, and other obligors shall be extinguished by prescription six months from the expiry of the presentation period. The right of obligors who have paid the cheque to sue each other shall be extinguished by prescription six months from the date on which the obligor paid or was sued.
Presentation of the cheque and protest may only be carried out on a working day. If the last day of the period prescribed by law for acts relating to the cheque — in particular its presentation, protest, or similar document — falls on a legal holiday, those periods shall be extended to the first following working day; holidays occurring within those periods shall be included in calculating them.
The holder may have recourse against endorsers, the drawer, and all other obligors: At maturity, if payment has not been made. Even before maturity: - If acceptance has been wholly or partially refused. - If the drawee has become bankrupt. - If the drawee has suspended payments even without a court declaration of bankruptcy. - If the drawer of a non-accepted bill has become bankrupt.
Refusal of acceptance or payment must be evidenced by an official act (protest for non-acceptance or for non-payment). The 'protest for non-acceptance' must be raised within the time limit prescribed for presenting the bill for acceptance; if the bill was presented for acceptance on the last day of that period, the protest may be raised on the following day. The 'protest for non-payment' of a bill payable on a fixed date or at a certain period from a fixed date must be raised on one of the two working days following maturity; for a bill payable at sight, the protest shall be raised in accordance with the conditions provided for the protest for non-acceptance.
The holder must send notice (Avis) of non-acceptance or non-payment to his immediate endorser and to the drawer on the four working days following the protest or the day of presentation if the bill contains a provision dispensing with protest. Each endorser must, within the two working days following receipt of the notice, inform his own endorser. Failure to give notice in due time does not deprive the holder of his right of recourse; however, the party who fails to give notice shall be liable for any damage caused by such failure, up to the amount of the bill.
If the drawer, an endorser, or an aval provider has inscribed on the bill alongside his signature the words 'no expenses' or 'without protest' or an equivalent expression, the holder, if he wishes to exercise recourse, shall be dispensed from raising a protest or a similar act for the purpose of exercising his right of recourse. This clause does not dispense the holder from presenting the bill within the prescribed periods or from giving the required notices; if the holder fails to do so, he shall bear the consequences.
All persons who drew, accepted, endorsed, or guaranteed a bill of exchange are jointly and severally liable to the holder. The holder may sue all such persons individually or collectively without being required to observe the order in which they assumed their obligations. This right is available to any signatory who has paid the bill.
The holder may claim from the person he sues:
A person who paid the bill may claim from those who guaranteed him:
Every obligor against whom an action has been brought or who is exposed to legal proceedings is entitled to receive, in exchange for his payment, the bill together with the protest and a receipted statement of account. Every endorser who paid the bill is entitled to strike out his own endorsement and those of subsequent endorsers.
If an action is brought following partial acceptance, the person who pays the unaccepted part is entitled to have this payment noted on the bill and to receive a receipt for the amount paid; on the other hand, the holder must deliver him a certified copy of the bill together with the protest.
Upon expiry of the following time limits:
If the bill is not presented for acceptance within the time limit fixed by the drawer, the holder shall lose his rights of recourse for non-payment and non-acceptance within the limits specified in the preceding article, unless it appears from the terms of the stipulation that the drawer merely intended to release himself from the guarantee of acceptance.
If an insurmountable obstacle (such as a legal provision in a state or other force majeure circumstances) prevents presentation of the bill or raising of the protest within the prescribed periods, those periods shall be extended. The holder must notify his immediate endorser without delay of the force majeure, and note such notice on the bill with a date and his signature; Articles 367 and 368 shall apply. When the force majeure ceases, the holder must present the bill for acceptance or payment without delay, and, if necessary, raise a protest. If the force majeure persists for more than thirty days from maturity, recourse may be exercised without either presentment or protest.
A protest for non-acceptance or non-payment is raised by a notary or one of his assistants; it must be addressed to the domicile of the person who was required to pay the bill, or to his last known domicile, or to the domicile of each of the persons at whose addresses the bill is domiciled and to the domicile of the other persons named therein.
The protest document shall contain a verbatim copy of the bill, its acceptance, endorsements, and instructions (Recommendations) indicated therein, and the formal demand for payment; it shall state whether the person required to pay was present or absent, and shall note the reply received or the reason for receiving no reply, as well as whether the required persons signed the document or refused to sign.
No act performed by the holder can substitute for raising a protest, except in the case provided for in Articles 360 et seq. relating to loss of the bill.(1)
The notary must retain a verbatim copy of the protests and record their full text in chronological order in a special register, failing which he shall be liable for damages caused to the parties concerned.
Any person having a right of recourse may, unless there is a contrary provision, recover his money through a new bill (re-exchange) (Retrait) drawn on one of his guarantors and payable at sight at that guarantor's domicile. The re-exchange bill shall include, in addition to the amounts specified in Articles 370 and 371, a brokerage commission and stamp duty.
Re-exchange bills may not be cumulated (Les rechanges ne peuvent être cumulés); each endorser is bound by only one re-exchange bill, as is the drawer.
Payment by delivery of a cheque accepted by the creditor shall not constitute novation of the debt contract (Novation); the original debt shall remain intact with all its guarantees until the said cheque is cashed.
Notwithstanding the formalities required for a recourse action, the holder of a protested cheque may, after obtaining authorisation from the president of the enforcement department, provisionally seize the drawer's and endorsers' movables without being required to produce a court order.
A person who issues a cheque without indicating the place of issue, the date, or who states an incorrect date shall be liable to a fine equivalent to one per cent of the cheque's amount, which may not be less than five Lebanese pounds. The same fine shall apply without recourse against the person who endorses the cheque.
Every banker who holds cover shall deliver to his client blank cheque forms payable from the bank's cash. He is required to state on each form the name of the person to whom it is delivered; otherwise he shall be liable to a fine of one Lebanese pound per violation.
The offence of drawing a cheque without cover is penalised under Article 666 of the Penal Code.
A drawee who knowingly declares that less cover exists than is actually available shall be liable to a fine of twenty-five to fifty Lebanese pounds.
In addition to the foregoing, the following articles of this Code shall apply to cheques to the extent that their provisions are not inconsistent with the nature of that instrument: Articles 319 to 321, 327 to 329, 331, 332, 335, 345 to 347, and the second paragraph of Article 354.
A joint-stock company is a company whose capital is divided into shares, i.e., negotiable instruments, which operates under a trade name, and which is formed among a minimum of three persons who hold shares in their own names and are not liable for the company's debts beyond the extent of their contributions.
Every joint-stock company, regardless of its object, is subject to the commercial law and its customs. One third of the capital of joint-stock companies whose object is the exploitation of a public utility or public service must be held as registered shares by Lebanese natural persons or by companies whose entire capital consists of registered shares or quotas owned entirely by Lebanese persons and whose articles require the transfer of shares or quotas therein only to Lebanese persons. Any transfer of such shares in a manner different from the preceding paragraph shall be absolutely null and void.
Every bill of exchange not expressly drawn 'not to order' is transferable by endorsement. If the drawer has inscribed on the bill the words 'not to order' or a similar expression, the bill is only transferable by way of an ordinary assignment in accordance with the rules applicable to that. Endorsement may be to the drawee's own order, whether he has accepted the bill or not, to the drawer himself, or to any other party bound by the bill; all such persons may re-endorse the bill.
Endorsement must be unconditional. Any condition attached to an endorsement shall be deemed void. A partial endorsement is null and void. An endorsement 'to bearer' shall be treated as a blank endorsement.
Endorsement must be written on the bill of exchange or on an allonge attached to it, and must bear the endorser's signature. The endorsement need not name the endorsee, or may consist solely of the endorser's signature (blank endorsement); in the latter case, the endorsement shall only be valid if written on the back of the bill or on the allonge.
Endorsement transfers all rights arising from the bill of exchange. If the endorsement is in blank, the holder may:
An endorser guarantees acceptance and payment unless there is a contrary agreement. He may prohibit further endorsement; in such case, he shall not be bound to guarantee against persons to whom the bill is subsequently endorsed.
The holder of a bill of exchange shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another endorsement, the signatory of that second endorsement shall be deemed to have acquired the bill by virtue of the blank endorsement. If a bill of exchange is taken from its holder by any event whatsoever, the holder who establishes his title in the manner described in the preceding paragraph shall not be required to surrender the bill unless he acquired it in bad faith or committed a gross error at the time of acquisition.
If it appears from the balance sheet submitted by the bankrupt, or from subsequent information, that the bankruptcy estate's assets do not exceed two thousand five hundred Lebanese pounds, or if the dividend to be distributed to creditors appears too small to justify the ordinary procedure, the court may, based on the delegated judge's report or of its own motion, substitute the summary procedure for the ordinary one.
The summary procedure described above differs from the ordinary procedure in the following characteristics:
Other Negotiable Instruments
A limited partnership operating under a trade name comprises two categories of partners: firstly, general partners (Commandités) who alone have the right to conduct its business and who are personally and jointly liable for the company's debts; and secondly, silent partners (Commanditaires) who provide the capital and each of whom is liable only to the extent of his contribution.
There are two types of limited partnerships: the simple limited partnership and the limited partnership with shares (La Commandite simple et la Commandite par actions).
A limited partnership operates under a trade name that includes only the names of the general partners. If there is only one general partner, the word 'and Partners' may be added to his name. If a silent partner consents to the inclusion of his name in the company's trade name, he shall become liable as a general partner towards any bona fide third party.
General partners, whether all of them manage the company's affairs or whether one or some of them do so on behalf of all, are subject to the same legal rules applicable to members of a general partnership.
A silent partner may not intervene in the management of the company's affairs with respect to third parties, even if such intervention is based on a power of attorney. If he violates this prohibition, he shall become jointly and severally liable until the end together with the general partners for obligations arising from his managerial act; the liability imposed on him may be limited either to the results of the acts in which he intervened, or may extend to all the company's debts, in proportion to the number of those acts.
Simple limited partnerships are subject to the rules applicable to the formation and dissolution of general partnerships, even as regards silent partners.
In limited partnerships with shares, the capital is divided into shares, and the silent partner therein is subject to the same legal rules applicable to a shareholder in a joint-stock company.
Limited partnerships with shares, regardless of their object, are subject to commercial law and its customs.
The legal rules applicable to joint-stock companies shall apply to the formation and operation of limited partnerships with shares.
All obligations imposed by law on board members of a joint-stock company shall apply to managers of a limited partnership with shares.
The number of auditors must be at least three, including a court-appointed accountancy expert designated by the president of the court by a decision. General partners may not be selected as auditors. They shall meet as a supervisory council as often as required by the supervision and investigations they are required to conduct. The term of the supervisory council shall be determined in the company's articles, but the initial council may only be appointed for one year.
All general assembly resolutions, other than those relating to the ratification of managerial acts, shall implicitly require the personal consent of the general partners in accordance with the rules set out in the company's articles.
A current account exists whenever two persons, whose mutual business requires them to make reciprocal deliveries of funds, agree to convert their mutual debts into simple debit and credit entries forming a single account, so that only the final balance at the closing of that account constitutes a due and payable debt (Du compte courant).
The scope of the current account depends on the parties' wishes; they may make it cover all their transactions or only a specific type thereof. The current account may be maintained for both parties or for one party only; in the latter case, one party is not obliged to lend money to the other unless so agreed.
The existence of a current account does not negate the right to commissions and recovery of expenses on transactions relating to the current account; these shall be entered in the account unless there is a contrary agreement.
Payment by commercial instrument is only deemed final upon collection of its value unless there is a contrary agreement; if its value is not collected at maturity, the recipient may, while retaining it as security and exercising the rights attached to it, debit its value against the payor's account. In the event of the payor's bankruptcy, the recipient may reclaim the instrument, and its value may not be included in the current account.
Payments shall automatically generate interest in favour of the lender against the borrower, calculated at the legal rate unless otherwise specified by contract or custom.
Debts credited to either party in the current account shall lose their specific nature and individual identity upon entry; they shall no longer be capable of individual payment, set-off, legal action, or enforcement, nor shall they be separately extinguished by prescription. Personal or real security attaching to debts entered in the account shall be extinguished unless otherwise agreed.
Neither party shall be deemed a creditor or debtor of the other before the closing of the current account; it is solely the closing of the account that determines the state of the legal relationship between them, giving rise automatically to the global set-off of all account entries, and identifying the creditor and the debtor.
The account shall be closed and settled at the maturity dates agreed by contract or determined by local custom, or at the end of each six-month period. The resulting balance shall constitute a net, due, and payable debt that shall bear interest at the agreed current account rate from the date of settlement, whether transferred to a new account or not.
The contract shall terminate at the time stipulated by agreement; if no time limit has been agreed upon, it shall terminate by the wish of either party; it shall also terminate upon the death, incapacity, or bankruptcy of either party.
The drawer or holder may cross the cheque with the following consequences. Crossing is made by drawing two parallel lines on the face of the cheque; crossing may be general or special. It is general if there is no designation between the lines or merely the word 'banker' or an equivalent. It is special if the name of a banker is written between the lines.
The drawee may not pay a generally crossed cheque (À barrement général) except to a customer or to another banker. The drawee may not pay a specially crossed cheque except to the named banker. If the named banker is the drawee, payment may be made to a customer. A cheque bearing two special crossings may only be paid if the two crossings are for clearing purposes or in one of the other cases provided by law.
The drawer or holder of a cheque may prohibit cash payment by writing transversally on its face the expression 'to be credited to account' (A porter en compte) or an equivalent. In such case, the cheque may only be settled by book entry (credit to account, transfer, or set-off), which shall be equivalent to payment.
Any instrument by which the maker undertakes to deliver a specified sum of money or a quantity of fungible things at a specified place and time may be transferred by endorsement if it expressly bears the words 'to order'. Endorsement shall be subject to the provisions applicable to bills of exchange, unless otherwise provided by law, regulations, or the nature of the instrument.
If a bill of exchange, promissory note, or other endorsable instrument is delivered in payment of a debt, this shall not constitute novation of the contract unless the intention of the parties so requires.
The criminal court of first instance shall hear negligent bankruptcy cases(2) (Banqueroute simple) upon application of the trustees, any creditor, or the public prosecution. The penalty shall be imprisonment for between one month and two years.
Any merchant found in any of the following situations shall be deemed a negligent bankrupt:
Any merchant found in any of the following situations may be deemed a negligent bankrupt:
The costs of an action brought by the public prosecution for negligent bankruptcy may not in any case be charged to the mass of creditors. In the event of a settlement, the Treasury may not claim those costs from the settlement estate.
The costs of an action brought by the trustees on behalf of creditors shall be borne by the mass of creditors if the accused is acquitted, and by the Treasury if convicted, with the Treasury retaining its right of recourse against the convicted party.
The trustees may not bring an action for negligent bankruptcy, nor adopt the status of civil party plaintiff on behalf of the mass of creditors, unless authorised to do so by a resolution of the majority in number of creditors present at a duly convened creditors' meeting.
The costs of a criminal action brought by one of the creditors shall be paid by the Treasury if the accused is convicted, and by the creditor plaintiff if he is acquitted.
Any bankrupt merchant who has concealed his books, concealed part or all of his assets, fraudulently claimed debts that do not exist, whether in entries in his books, in notarial instruments, in private documents, or in letters, or who has removed himself from prosecution and refused to appear, shall be deemed guilty of fraudulent bankruptcy.
The costs of a fraudulent bankruptcy action may in no case be charged to the mass of creditors. If one or more creditors have adopted the status of civil party plaintiff, they shall bear the costs if the accused is acquitted, and the Treasury shall bear them if he is convicted, with the Treasury retaining its right of recourse against the convicted party.
The penalty for fraudulent bankruptcy (Banqueroute frauduleuse) shall be imposed on:
The bankrupt's spouse, ascendants, descendants, and in-laws of the same degree who concealed, attempted to conceal, or disposed of bankruptcy estate property without conspiring with the bankrupt shall be punished by the penalty for theft.
In the cases provided for in the preceding articles, the court of first instance or the court of appeal shall decide the following matters even in the event of an acquittal:
A trustee who commits embezzlement in the management of his duties shall be subject to the penalty prescribed for breach of trust.
Any creditor who reaches an agreement with the bankrupt or any other person for private benefits to be obtained in exchange for his vote at creditors' assemblies, or who enters into a private arrangement giving him a special benefit from the bankrupt's assets, shall be subject to the prescribed penalties.
In addition, the arrangements referred to above shall be declared null and void against all persons, including the bankrupt. The creditor must return to the mass of creditors the cash and amounts received pursuant to those arrangements.
All orders and judgments issued pursuant to the provisions of this chapter shall be posted and published in the manner prescribed for publishing the bankruptcy declaration judgment.
Prosecutions for negligent or fraudulent bankruptcy do not require any modification of the general rules applicable to the administration of the bankruptcy estate.
However, in such cases the trustees are required to deliver to the public prosecution all documents, instruments, papers, and information requested of them.
Documents, instruments, and papers delivered by the trustees during the investigation shall be placed in the court clerk's office; access thereto shall be granted upon the trustees' request, and they may take certified copies thereof.
Transferable Securities
Any company may include in its articles a provision stipulating that its capital is variable, in which case it shall be subject to the provisions of the following articles in addition to the general rules applicable to it according to its specific form. That provision must be published.
When a company has variable capital, its capital may be increased, either by the admission of new partners or by additional contributions from existing partners, and may be reduced by the withdrawal by partners of all or part of their contributions. Capital increases and reductions shall be made freely and without the publication formalities required, unless the company's articles provide otherwise.
Repealed by Article 5 of Legislative Decree No. 54 of 16/6/1977.
The company's articles must specify a minimum amount below which the capital may not fall through the withdrawal of partners' contributions or their departure. That minimum may not be less than one-fifth of the company's capital, and this provision shall be mentioned in the company's articles for publication purposes.
The company's articles may contain a provision allowing the general assembly to decide, by the majority required for amending the articles, to exclude a partner or several partners without depriving them of their accrued rights in the reserve allocated to them.
A partner who leaves the company either voluntarily or pursuant to a general assembly resolution shall remain liable to the partners and to third parties for a period of three years for all obligations that existed at the time of his departure.
If a company has adopted the form of a joint-stock company, its shares must remain registered even after full payment of their price. The company's general assembly or board of directors may be granted the right to object to the transfer of such shares, provided that this right is not abused.
Regardless of the form of the company, it shall not be dissolved by the departure, bankruptcy, incapacity, loss of general legal capacity, or death of any of its partners; it shall remain in existence by operation of law among the remaining partners.
This Code shall apply to agricultural cooperative companies unless the provisions of their special law are contrary to it.
A bank(1) that receives a sum of money on deposit shall become its owner and must return its equivalent in a lump sum or in instalments upon the depositor's first demand, or in accordance with the notice or time-limit conditions specified in the contract. All bank transactions must be supported by written instruments.
If what is deposited at the bank consists of securities (Titre de crédit), the ownership of those securities shall remain with the depositor unless it is proved that the intention was otherwise. Such intention shall be presumed if the depositor has granted the bank in writing and without restriction the right to dispose of those securities, or has granted it the right to return securities of the same type. The provisions applicable to the loan of fungible things shall apply to such deposits.
The rules applicable to the hiring of things shall apply to deposits made in safe-deposit boxes or in compartments thereof. The bank shall be responsible for the safety of the hired boxes.
Under credit facility agreements, the credit provider (Créditeur) undertakes to place certain funds at the disposal of the beneficiary (Crédité), enabling him to draw upon them in a lump sum or in successive instalments according to his needs within a specified period. Amounts repaid or returned by the beneficiary during the term of the contract shall increase the credit available during the remaining period.
The credit provider may terminate the agreement if the beneficiary has become insolvent or was insolvent at the time of contracting without the credit provider's knowledge. If any material reduction in the personal or real security provided by the beneficiary occurs, the credit provider may request additional security or a reduction of the credit amount.
If the security provided is a mortgage, the mortgage registration made at the time of the agreement shall secure, from its date, all drawdowns subsequently made pursuant to the credit facility agreement.
If bank credit is earmarked to be paid to a third party and the bank confirms the credit to the beneficiary, it may no longer be revoked or modified without the beneficiary's consent; the bank becomes directly and irrevocably bound to accept the instruments (Effets) and deposits intended. The bank may recover amounts paid against the principal's account.
Banking operations not mentioned in this chapter are subject to the provisions of the Code of Obligations applicable to the various types of contracts arising from those operations, or to the contracts under which they fall.
Shares, bonds, annuities, and all other negotiable instruments (Des actions, obligations, rentes et tous autres titres négociables) issued in bulk and conferring on their holders equal rights to monetary value may be registered (nominatif), to order (à ordre), or to bearer (au porteur).
If the instrument is to bearer, it shall be transferred by mere delivery. Any holder shall be deemed entitled to exercise the rights attaching thereto; provided the debtor has not received a valid objection, payment made to the holder shall validly discharge the debtor, in good faith.
If the instrument is registered, the holder's right is established by registration in his name in the books of the issuing body. Ownership of such an instrument shall be transferred by this registration.
Transfer of a registered instrument shall be effected by a declaration recording the transfer in the books and signed by the transferor or a person authorised by him. The issuing body may, before registering the transfer, request from the person making the declaration proof of his identity.
Registered instruments may include detachable coupons conferring on their holder the right to collect maturities, distributions, and interest (these are called mixed instruments).
Negotiable securities instruments issued to order shall be transferred by endorsement. Their endorsement shall be governed by the same rules as the endorsement of bills of exchange, unless different provisions arise from the law, regulations, or the nature of the instrument.
After ten years from the declaration of bankruptcy, the bankrupt shall be automatically rehabilitated without any formality if he was not found guilty of negligent or fraudulent bankruptcy. Rehabilitation in this manner cannot be denied to the bankrupt on the grounds of his failing to pay his debts.
Rehabilitation shall occur automatically for a bankrupt who has paid all debts owed by him in principal, interest, and costs; interest shall not be demanded for a period exceeding five years. For the rehabilitation to take effect, the bankrupt must prove payment, which shall be confirmed by the delegated judge or, if the case has ended, by the president of the court.
Rehabilitation may also be granted to a bankrupt of recognised integrity:
Every rehabilitation application shall be filed with the attorney-general at the court that issued the bankruptcy judgment, together with the instruments and supporting documents. The attorney-general shall refer all papers to the court together with his reasoned opinion.
The court clerk shall send a registered letter notifying each creditor whose debt is verified against the bankruptcy estate, or recognised in a subsequent judicial decision, and who has not received full payment, of the rehabilitation application.
Any creditor who has not been fully paid the dividend stipulated in the settlement agreement or who has not fully released the debtor may, within one month of receiving such notice, file an objection to the rehabilitation with the court.
After expiry of the period, the results of the required investigations and the creditors' objections shall be referred to the attorney-general to whom the application was submitted; he shall forward them together with his reasoned opinion to the president of the court that issued the bankruptcy judgment.
The court shall, where appropriate, summon the rehabilitation applicant and the objectors and shall hear them in camera; the applicant may be assisted by counsel. In the case of full payment of debts, the court may limit itself to verifying the evidence of payment and rule accordingly.
If the application is refused, it may not be renewed until after one year. If the application is granted, the judgment issued by the court of first instance or the court of appeal shall be entered in the register of the bankruptcy court or the court having jurisdiction at the bankrupt's domicile.
A commercial rehabilitation application shall not be considered for fraudulent bankrupts, nor for persons convicted of theft, embezzlement, fraud, or breach of trust, unless they have first obtained their criminal rehabilitation.
Rehabilitation of the bankrupt may be granted after his death.
Public Deposit Receipts (Certificats de Dépôt)
A joint venture (société en participation) is distinguished from other commercial companies in that its existence is confined to the contracting parties and it is not intended to be disclosed to third parties.
The agreements concluded between the parties freely determine the mutual rights and obligations of the partners and allocate profits and losses among them, subject to the application of the general principles specific to the number of partners.
The existence of the agreements referred to above may be proved by all means of evidence accepted in commercial matters.
Joint ventures are not subject to the publication formalities imposed on other commercial companies.
A joint venture does not have legal personality.
Third parties shall only have a legal relationship with the partner with whom they contracted. However, a joint venture that discloses itself to third parties as such may be treated by them as a de facto company.
The company may not issue shares or negotiable instruments transferable or tradeable for the benefit of the partners.
In addition to the rules set forth in the preceding chapters, companies shall be subject to the following provisions:
All commercial companies, other than joint ventures(1), may obtain a preventive settlement and may also be declared bankrupt. A company that is in the course of liquidation may also be declared bankrupt.
The application for a preventive settlement or the declaration seeking a bankruptcy judgment must be signed by the partner or partners who have authority to sign on behalf of the company if it is a general partnership, by all general partners if it is a simple limited partnership, and by the legal representative if it is any other type of company.
All partners in general partnerships(3) and all commandités in limited partnerships(4) must also, each as regards himself, make the required declaration within twenty days of the suspension of payments. The bankruptcy of the company shall automatically entail the personal bankruptcy of each general partner.
In all companies, the trustee in bankruptcy may compel partners to complete payment of the company's capital even before the maturity dates set in the company's articles.
If a company becomes fraudulently or negligently bankrupt, a criminal liability action may, where appropriate, be brought against partners of a general partnership and against commandités of a limited partnership, and also against directors, board members, and managers of joint-stock companies and limited liability companies.
All prior legislative texts dealing with the matters covered by this Code shall lose their legal force from the date this Code becomes enforceable. This Code shall enter into force six months after its publication in the Official Gazette.
Companies formed pursuant to the Commercial Code promulgated on 24 March 1942 must comply with the provisions of the Commercial Code as amended by this Law, under penalty of dissolution of the company, within three months of the date of entry into force of this Law.
Preventive Settlement and Bankruptcy
Preventive Settlement
This Code sets forth, on one hand, the rules governing commercial acts performed by any person regardless of their legal capacity, and on the other hand, the provisions applicable to persons who have adopted commerce as their profession.
Where this Code contains no provision, the rules of general law shall apply to commercial matters, provided that such rules are applied only to the extent that they are consistent with the principles specific to commercial law.
Where no statutory provision can be applied, the judge may be guided by jurisprudential precedents and the requirements of good commercial faith and equity.
When determining the effects of a commercial act, the judge shall apply established custom, unless it appears that the contracting parties intended to derogate from the rules of custom, or where custom conflicts with mandatory statutory provisions. Special custom and local custom shall prevail over general custom.
Commercial exchanges(1), fairs, markets, public warehouses, storehouses, and other establishments designated for trade are subject, as required, to special laws and regulations.
The rules set forth in the Code of Obligations and Contracts regarding the contract of partnership shall apply to commercial companies, provided that such rules are not expressly or implicitly contrary to the rules of this Code. Without prejudice to the rights of bona fide third parties, if the number of partners or shareholders in commercial companies of any type falls below the number required by law for each type, dissolution of the company must be declared by a decision of the remaining partners within three months of the occurrence of the cause referred to, unless the deficiency is remedied. The court, upon request by any interested party, shall declare the dissolution of the company after the expiry of the three-month period for remediation.
All commercial companies, other than joint ventures, must be evidenced by a written instrument; however, third parties may, as the case may be, prove the existence of the company or of any provision relating thereto by all means. All companies incorporated in Lebanon must have their principal office therein, and are deemed to be of Lebanese nationality notwithstanding any contrary provision.
The constitutive instruments of all commercial companies — other than joint ventures — must be published by completing the procedures described below, failing which they shall be null and void.
A change in the form of a company does not create a new legal personality; the legal personality remains, and the new company continues with the same legal personality as before the transformation. Such change shall not be enforceable against third parties except from the date of registration in the commercial register and upon expiry of one month from the announcement of the change in the Official Gazette and in a local daily newspaper designated by the judge supervising the commercial register. Persons who acted in the name of a company in the course of its formation, before it acquired legal personality, shall be personally and jointly liable for the acts performed, unless the company, after its incorporation, assumes responsibility for those acts, in which case those acts shall be deemed to have been approved by the company from the date they occurred.
Every merchant, before suspending payments or within the ten days following such suspension, may apply to the court of first instance in the district where his principal establishment is located and request it to convene his creditors in order to discuss and deliberate on a proposed preventive settlement.
The merchant must submit in support of his application: his commercial books(3), properly kept for at least three years or since the commencement of his commercial activity if it has been less than three years; a balance sheet; a list of creditors with their addresses and the amount of each debt; a list of debtors; and a brief explanatory statement of the situation.
The court, after hearing the public prosecutor, shall rule in chambers to reject the application: - If the applicant has not filed the books and documents referred to in the preceding article. - If he was previously adjudicated bankrupt and has not been rehabilitated. - If he has already been granted a preventive settlement. - If he has been convicted of negligent or fraudulent bankruptcy.
If the court finds the application to comply with the law and to merit consideration, it shall issue, by an unappealable order, a summons for creditors to appear before a delegated judge to discuss and deliberate on the proposed preventive settlement. This judge shall be one of the court members specially designated by the court for that purpose.
The court's order shall be published by the clerk by means of notices posted at the court's door, and an extract of the same order shall subsequently be published in the Official Gazette and in a daily newspaper. If the list of creditors is incomplete, or if broader publication is warranted, the court shall order publication in additional newspapers.
From the date of filing the application until the order ratifying the settlement acquires the force of res judicata, no creditor whose debt predates the order may commence or continue enforcement proceedings or acquire any lien(1) or privilege, unless the court expressly authorises it.
During the preventive settlement procedure, the debtor shall remain in possession of his assets and shall be permitted to carry out all normal acts relating to his commerce, subject to the supervision of the appointed official and under the direction of the delegated judge. Both may object to any act they deem improper.
Gifts(3) and other gratuitous acts or acts of guarantee performed by the debtor during the preventive settlement procedure may not be enforced against creditors. The same principle applies if the debtor makes payments on debts not yet due.
If the debtor violates the provisions of the two preceding articles, or if it is established that he concealed part of his assets, omitted to declare some of his creditors, or committed any fraud, the delegated judge shall refer the matter to the chamber of deliberation, which may declare him bankrupt.
The supervisor, after examining the debtor's books and documents and based on the information he was able to gather, shall verify the accuracy of the creditors' and debtors' list, make all necessary corrections thereto, and indicate the amounts of debts, their nature, and their seniority.
The delegated judge shall preside over the creditors' meeting. Each creditor may appoint a special proxy bearing a written power of attorney; this power may be written without formality on the letter of summons or on a telegram. The debtor or his representative must attend the meeting.
Every creditor may state the reasons why he believes a particular debt is disputed, or why the debtor is not entitled to the indulgence sought, or why the proposals are not worthy of acceptance. Creditors may also raise individual objections.
The preventive settlement must be approved by a majority of creditors who participated in the vote, and that majority must represent at least three-quarters of the unsecured and unencumbered debts (those not secured by movable or immovable pledge)(1).
The debts of the debtor's spouse and those of his relatives and in-laws up to the fourth degree shall not be counted in calculating the majority described in the preceding article. Persons who acquired such debts by assignment within six months preceding the filing of the application for preventive settlement shall also be excluded from voting.
The delegated judge shall record in the minutes those who accepted the settlement; they must all sign the minutes. Persons who expressed their acceptance by letter or telegram addressed to the delegated judge or the clerk before the meeting shall be counted toward the majority.
Before the signatures are collected, the delegated judge shall issue an order recorded in the minutes summoning the interested parties to attend a hearing before the court within a period not exceeding twenty days for the ratification of the settlement.
The supervisor must file with the court clerk, three days before the designated hearing, his reasoned submissions on the feasibility of accepting the settlement. At the hearing, the delegated judge shall present a report, and the debtor and creditors shall be entitled to intervene.
In the ratification order, the court may provisionally assess, based on indications, the declared debts and their amounts, in order to verify the existence of the required majority, subject to any subsequent definitive judgments on those debts.
If the court finds that the debtor deserves to benefit from the settlement, and that the objections set forth in the preceding articles do not eliminate the required majority, and that the settlement terms are not less than the legal minimum and do not contain illegal conditions, it shall issue a decision ratifying the settlement. Otherwise, it shall refuse ratification.
Unless there is a contrary agreement in the settlement agreement or in another decision taken under the conditions described above and confirmed by the court, the debtor may not, before fully performing all his obligations under the settlement agreement, sell or mortgage his immovable property or surrender his assets.
Orders granting or refusing ratification of the settlement must be published in accordance with the rules that will be specified below for the announcement of bankruptcy.
Dissenting creditors may object to ratification of the settlement within five days of the date of closing the final minutes; the objection must state its grounds and must be notified to the debtor and to the supervisor. No further objection may be lodged after the five-day period has expired.
Ratification of the preventive settlement renders it binding on all creditors. Creditors, even those who voluntarily consented to the settlement, shall retain all their rights in full against co-debtors, guarantors, and others jointly liable for the debtor's debts.
A settlement granted to a company shall benefit partners who are personally liable for the company's debts, unless there is a contrary provision.
In any commercial company that has issued bonds representing more than twenty per cent of its total debts, a settlement may only be granted if the bondholders' assembly approves the proposals by a resolution adopted under the conditions of the general assembly of bondholders.
If it is worthwhile to convene the bondholders' assembly, the period previously set for convening creditors may be extended to sixty days.
Holders of bonds with a redemption premium (Les porteurs d'obligations avec prime de remboursement) may not only claim the issuance price; they must add to it the portion of the premium that has accrued at the date the settlement proposal was filed.
Upon application by any creditor within three years from the date of publication of the ratification order, the court may annul the settlement and declare the debtor bankrupt if it is established that he exaggerated or fraudulently manipulated the debts attributed to him in the settlement proposal.
If the debtor fails to fulfil all obligations set out in the settlement agreement, every creditor, after pursuing the guarantors and exercising the rights provided as security, may request the rescission (Faire résoudre) of the settlement and the declaration of bankruptcy.
The settlement agreement may stipulate that the merchant shall not be finally discharged from the portion of his debt written off under the settlement unless he remains insolvent. However, the duration of this condition must be fixed at five years, and it must also be stipulated that the debtor may be finally discharged before the expiry of that period if he proves his solvency.
Bankruptcy
Merchants(3) are, first, persons whose profession it is to perform commercial acts, and second, companies whose objects are commercial(4). Companies whose objects are civil(5) but which have adopted the form of joint-stock companies or limited partnerships with shares are subject to all the obligations of merchants specified in Chapters Two and Three hereinafter, and to the provisions on preventive settlement and bankruptcy set forth in Book Five of this Code.
Individuals who engage in small trade or simple trades of modest turnover, such as itinerant vendors or daily resellers (Revendeur à la journée), or who carry on small-scale transport by land or water, are not subject to the provisions on commercial books nor to the publication rules imposed by this Code.
A married woman has full legal capacity to carry on commercial activities.
A married woman, in the exercise of commerce, may perform any act required by the interests of her commercial enterprise.
1. Regarding the chartering of vessels and contracts of carriage, see Article 167 et seq. of the Maritime Commercial Code of 18/2/1947.
2. Regarding bottomry contracts, see Article 282 et seq. of the Maritime Commercial Code of 18/2/1947.
3. See Law No. 8 of 4/2/1981 on the control of the register of traders who have speculated as a result of events, and Decree No. 4408 of 10/12/1981 on the detailed rules for applying certain provisions of that law.
4. Regarding commercial companies, see Article 42 et seq. of this Code.
5. Regarding civil companies, see Article 823 et seq. of the Code of Obligations and Contracts of 9/3/1932.
A married woman is entitled to join a general partnership(1) or to be a commanditaire in a limited partnership(2).
The rights of a married woman shall be determined, as the case may be, by the provisions of her personal law and her marriage contract.
Any separation of property between spouses (Séparation de biens) ordered in a foreign country shall not be enforceable against third parties in Lebanon unless it is registered in the commercial register of the locality where both spouses, or one of them, is commercially domiciled.
The number of founders may not be less than three. No person may participate in the formation of a joint-stock company if he has been declared bankrupt and has not been rehabilitated for at least ten years, or if he has been convicted in Lebanon or abroad within the last ten years for bankruptcy or for attempting to commit a felony or misdemeanour carrying the penalty for fraud, misappropriation of funds or securities, issuance of bad faith dishonoured cheques, or impairing the financial standing of the State within the meaning of Articles 319 and 320 of the Penal Code, or for receiving property obtained through such offences. The same conditions apply to the representative of legal persons participating in the formation of the company. Founders shall be jointly and severally liable for the obligations undertaken in the formation of the company, and may not recover such obligations from subscribers if the company is not formed.
Subject to the provisions of laws and regulations requiring prior authorisation for the exercise of certain activities, the formation of joint-stock companies does not require authorisation. The articles of a joint-stock company and every subsequent amendment thereto must be drawn up and executed before any notary public in Lebanese territory.
If a public invitation to subscribe to the company's capital is made, the founders must publish in the Official Gazette and in two newspapers, one of which is a local daily and the other an economic publication, a prospectus containing the name and address of each founder together with his signature, and in particular the company's name, its principal office, its registered office, its branches, its object, the amount of its capital, the structure of shares and the value allocated thereto, the value of contributions in kind, any stipulated fixed interest, any profit-sharing conditions, the number of board members and their remuneration as provided in the company's articles, and their powers. The information contained in the prospectus must also be included in the personal subscription form, the share certificate, posted notices, broadcasts, and circulars, with reference to the issues of the newspapers in which the prospectus was published.
Any violation of the provisions of the preceding article entails a fine of two million to ten million Lebanese pounds, and the court may, where appropriate, annul the subscriptions that were solicited.
The capital of a joint-stock company may not be less than thirty million Lebanese pounds, and must be fully subscribed.
The minimum nominal value of a single share is one thousand Lebanese pounds. Every subscriber must pay at least one quarter of the nominal value of each share he subscribes.
The founders must deposit, prior to the final incorporation of the company, the amounts paid by subscribers in one of the public banks in Lebanon in an account opened in the name of the company in formation, together with a list of subscribers and the amount paid by each of them. These amounts shall be released after the company's incorporation upon instruction of the person or persons designated pursuant to the company's articles, upon presentation of a certified copy of the articles and of the minutes of the constituent general assembly. In the event of non-deposit or withdrawal of all or part of the deposited amounts or their disposal prior to completion of the company's formation, the offenders shall be fined an amount equal to ten per cent of the value of the amounts in question.
The accuracy of the valuation of contributions in kind shall be subject to the assessment of an expert or experts appointed by the president of the court of the district in which the company's registered office is situated, by a decision issued upon the application of the founders. The granting of special benefits to any person in the company's articles is prohibited.
The experts' report shall be made available to subscribers before the constituent general assembly, and they may withdraw from their subscriptions if the founders' valuation exceeds by twenty per cent the actual value assigned by the experts to the contributions in kind and special benefits. In such case, the founders may themselves subscribe or procure third parties to subscribe on behalf of the withdrawing subscribers.
Shares representing contributions in kind (Actions d'apport) must be fully paid up upon the formation of the company.
Such shares must be registered shares, connected to their register of origin, and must bear a mark indicating their type and the date of the company's formation; they shall not become negotiable until the general assembly has approved the accounts for the company's second year. However, the restriction on negotiability referred to above shall not apply to contribution shares allotted to shareholders of a company that was merged and whose shares were already negotiable.
Within the month following the experts' report, the founders must convene a constituent general assembly of shareholders, announcing it twenty days in advance, and presenting to it the experts' report on the valuation of contributions in kind. Decisions shall be taken in accordance with the quorum and majority rules applicable to this type of assembly; shareholders who are providers of contributions in kind may not vote thereon, even if they are at the same time subscribers in cash or by proxy. The approval procedure referred to above is not required in all cases where there are no cash subscribers other than the shareholders providing contributions in kind.
The completion of the procedures referred to above does not preclude a subsequent action for liability, which may be brought jointly and severally within five years of the company's formation against the founders, contributing shareholders, initial board members, and experts, where it becomes apparent that there was a material overvaluation of the contributions in kind.
In all cases, the constituent assembly shall conduct a verification based on supporting documents to determine whether the conditions required for the formation of the company have been duly met.
The said assembly appoints the initial board members if they were not designated in the company's articles, and also appoints the initial auditors; the company is considered formed from the moment of their acceptance. Those members and auditors must verify that the company was formed in a lawful manner and are jointly and severally liable therefor.
If a joint-stock company has been formed in an unlawful manner, any person with standing and interest, within a period of five years running from the date the defect occurred, may give notice requiring the completion of the omitted formality. If the company fails within one month to carry out the rectification, any person with standing and interest may apply for a judgment declaring the company null and void. Shareholders may not invoke the nullity of the company against third parties. A company declared null and void shall be treated as a de facto company.
Where the formation of the company is unlawful, shareholders — in addition to the action for nullity — may bring an action for joint and several liability against the founders, initial board members, and initial auditors, as well as against contributing shareholders and experts if the verification procedures were not carried out in good faith and honestly. Liability requires proof of a causal link between the act and the damage caused.
Persons who have delivered, even in good faith, to subscribers share certificates for a joint-stock company formed in an unlawful manner shall be liable to a fine of two million to twenty million Lebanese pounds, as shall persons who have purchased or sold such certificates.
Any fraudulent act intended to induce persons to invest money or rely on a company shall be punishable by the penalties prescribed for fraud.
Board members, after the company's formation, must complete the initial formalities relating to publication by way of filing and registration with the competent commercial register secretariat within the month following incorporation, under penalty of a fine determined by the judge supervising the commercial register, imposed on the company in an amount ranging from five thousand to one million Lebanese pounds. Completion of the said formalities may be carried out electronically by means designated by the Minister of Justice, provided the process is carried out through the prescribed means.
Failure to publish entails the same consequences, namely nullity of the company or of the omitted clause, and imposition of joint and several liability on the initial board members and initial auditors, who are required to ensure that all formalities are completed.
The company is also subject to a form of ongoing publication: The company's articles must be displayed at its offices. Any person may request a certified copy against the applicable fee. The company's name must appear on all its printed, handwritten, and electronic documents, together with an indication that it is a joint-stock company, the amount of its capital, and the portion thereof that has been paid up.
The judge supervising the commercial register shall fine the company one hundred thousand Lebanese pounds per year for each document that is not properly filed. For the purpose of filing and registering the documents specified in Article 101 within the prescribed time limits, the company shall be exempt from a certificate of clearance issued by the National Social Security Fund.
The new Chapter Nine on 'Mergers and Demergers of Companies' was added to Book Two of the Commercial Code by Article 118 of Law No. 126 of 29/03/2019. A merger or demerger shall be deemed to occur when one or more companies (the disappearing companies) are dissolved without liquidation and their patrimonies are transferred to one or more existing or newly created companies (the beneficiary companies), in exchange for the allocation of shares or quotas in the beneficiary companies to the shareholders or partners of the disappearing companies, possibly with a cash adjustment not exceeding ten per cent of the nominal value of the shares or quotas allocated.
These operations may be carried out between different types of companies under the conditions prescribed for amending each company's articles. If this requires the formation of one or more new companies, their formation shall be subject to the rules applicable to the incorporation of each such company as determined by law.
A merger or demerger shall result in the dissolution of the disappearing companies without liquidation and in the transfer of their entire patrimony to the beneficiary companies in the state in which it stands when the operation is finally completed, including lease rights. The partners of the disappearing companies shall acquire the status of partners in the beneficiary companies under the conditions specified in the merger or demerger agreement, and the old shares and quotas shall be replaced by shares or quotas in the beneficiary companies.
A merger or demerger shall take effect:
Agency is commercial when it relates to commercial transactions. More specifically, this contract is called a commission contract (عقد وساطة) and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name for the account of the principal. When the agent must act in the principal's name, his rights and obligations are governed by the rules of civil agency.
In commercial matters, the agent is entitled to remuneration in all cases unless there is a contrary provision. If the remuneration has not been determined by agreement, it shall be fixed in accordance with professional tariffs, or custom, or the circumstances.
A commercial agency, even if comprising a general power of attorney, does not authorise non-commercial acts except by express provision.
An agent who has received instructions only for part of the work shall be deemed to have full discretion as to the remaining part.
The agent must pay interest on funds belonging to the principal from the date on which their delivery or deposit was required pursuant to the principal's instructions.
Where a contract simultaneously combines agency characteristics with the essential elements of an employment contract, as commonly occurs in contracts between a merchant and various agents such as local representatives, travelling representatives, contractors, and branch or agency managers, the rules of the employment contract shall apply insofar as they pertain to the employment relationship.
Commercial representatives are sometimes treated as employees and sometimes as ordinary agents, depending on what the contract indicates as to their degree of commitment and their use in the work. However, in all cases, upon termination of the contract, even if that termination is for non-exceptional reasons, they are entitled to benefit from the advance notice period prescribed for employees.
A bill of exchange shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a bill of exchange, except in the following cases: An instrument that does not specify the maturity date shall be deemed payable at sight. If no specific place of payment is stated, the place indicated next to the drawee's name shall be deemed the place of payment and also the drawee's domicile. An instrument that does not specify the place of drawing shall be deemed to have been drawn at the place shown next to the drawer's name.
A bill of exchange may be drawn to the order of the drawer himself. It may be drawn on the drawer himself. It may also be drawn for the account of a third party. It must be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere.
The drawer of bills payable at sight or at a certain period after sight may stipulate that interest shall accrue on the amount; however, this stipulation shall be deemed void in any other type of bill of exchange. The interest rate must be stated in the bill; failing this, the stipulation shall be deemed void. Interest shall run from the date of the bill unless a different date is specified.
A bill of exchange in which the amount is written both in words and in figures shall be valid for the amount written in full words in the event of a discrepancy. A bill in which the amount is written several times, whether in full words or in figures, shall only be valid for the lesser amount in the event of a discrepancy.
If the instrument contains the signatures of persons who lack capacity to bind themselves by a bill of exchange, forged signatures, signatures of fictitious persons, or signatures which for any other reason cannot bind the persons who signed the bill or in whose name it was signed, the obligations of the other signatories shall remain valid.
Any person who signs a bill of exchange purporting to be an agent of a person for whom he has no authority to act shall be personally bound by the bill; if he pays the bill, he shall have the same rights as the purported principal would have had. An agent who exceeds his authority shall be subject to the same rule.
The drawer guarantees acceptance and payment of the bill. He may release himself from the guarantee of acceptance; however, any provision purporting to release him from the guarantee of payment shall be deemed void.
A cheque shall contain:
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a cheque except in the following cases: If no special place of payment is designated, the place shown next to the drawee's name shall be deemed the place of payment. If several places are shown next to the drawee's name, the cheque shall be payable at the first place indicated. If none of the foregoing particulars is present, the cheque shall be payable at the drawee's principal place of business. A cheque drawn and payable in the same country in which the drawee's principal place of business is situated shall be payable at that place if no other place is specified.
A cheque may only be drawn on a bank that holds, at the time of drawing, funds at the drawer's disposal pursuant to an express or implied agreement entitling the drawer to dispose of those funds by issuing a cheque.
A cheque may not be accepted (Le chèque ne peut être accepté); any words of acceptance written on it shall be deemed void. However, the drawee may certify the cheque; the effect of such certification is to confirm the existence of cover on the date of certification. Certification does not bind the drawee to pay the cheque after the presentation period expires.
A cheque may be drawn payable: - To a named person (A une personne dénommée) with or without the express words 'to order'. - To a named person with the words 'not to order' or an equivalent expression. - To bearer. A cheque drawn to a named person with the express words 'to order' shall be transferable by endorsement. A cheque drawn to bearer shall be transferable by mere delivery.
A cheque may be drawn to the drawer's own order. It may also be drawn for the benefit of a third party. A cheque may not be drawn on the drawer himself except when drawn between different establishments of the same drawer, provided it is not a bearer cheque.
Any interest stipulation written on the cheque shall be deemed void.
A cheque may be payable at the domicile of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
The drawer guarantees payment; any condition purporting to release the drawer from this guarantee shall be deemed void.
Subject to the application of the provisions of the preceding chapter, any merchant who has ceased paying his commercial debts, or any merchant who sustains his financial creditworthiness only by means that clearly constitute a misuse of credit (Ou qui ne soutient son crédit), shall be deemed to be in a state of bankruptcy.
Bankruptcy is declared by a judgment of the court of first instance in whose district the principal commercial establishment is located. This judgment shall be immediately enforceable. If several courts have simultaneously declared the bankruptcy of the same merchant, the court whose judgment is first registered in the commercial register shall have exclusive jurisdiction over the bankruptcy proceedings.
The case may be referred to the court by the merchant's own declaration; he must make this declaration within twenty days of the date of suspension of payments, failing which he shall be exposed to prosecution for the offence of negligent bankruptcy. He must also file his commercial books and a balance sheet.
The case may also be referred to the court by an expedited summons for a period of three days filed by one or more creditors. In urgent cases, such as when a merchant has closed his stores and fled, or has concealed a significant part of his assets, the court may issue a restraining order against the merchant without prior summons and may immediately declare bankruptcy.
The court may also order precautionary measures necessary to protect creditors' rights upon application of the public prosecutor, or of its own motion. The court may also, where appropriate, declare bankruptcy of its own motion where it finds in the course of civil, commercial, or criminal proceedings that the merchant is in a manifest state of bankruptcy (L'état manifeste de faillite).
A merchant who has ceased trading or died may be declared bankrupt by the court within one year from the date of cessation of trading or death if his suspension of payments preceded that cessation or death. However, the death of the merchant shall not preclude his heirs from filing the declaration with the court.
The bankruptcy judgment must specify the date of suspension of payments. The court may set an earlier date of suspension of payments by one or more subsequent judgments.
The bankruptcy judgment and judgments altering the date of suspension of payments must be posted within five days by the trustees in the corridor of the issuing court and at the nearest stock exchange, and must also be published in the Official Gazette and in two local daily newspapers.
These judgments are subject to opposition and appeal; the same applies to all judgments issued in bankruptcy matters unless a contrary provision exists in this Code. Opposition periods shall run for one month, as shall appeal periods.
If it appears incidentally in the course of civil, commercial, or criminal proceedings that a merchant is in a manifest state of bankruptcy (L'état manifeste de faillite), the court may, even if bankruptcy has not been declared, apply the provisions on bankruptcy.
The names of merchants declared bankrupt who have not been rehabilitated shall be entered in a list posted at the door of every court and in the main hall of all stock exchanges. A merchant's name shall not be entered in the list if he has died at the time of the bankruptcy declaration.
In addition, the bankrupt shall lose his political rights. He may not be an elector or elected to political or professional councils, and may not hold a public office or position.
Every person, whether natural or legal, having the status of a merchant, shall keep, either manually or by means of an enhanced digital application organised in accordance with standards determined by a decree issued on the proposal of the Ministers of Justice and Finance, the following documents: - A day-book in which financial operations are recorded at minimum on a daily basis, or in which the results of those operations are recorded monthly if the nature of the business prevents daily recording, provided that in such case all documents enabling a daily audit thereof are retained. - A ledger for opening and tracking accounts. The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare a balance sheet and a 'profit and loss account'. The documents relating thereto must be authenticated and retained for the period specified in Article 19 of the Commercial Code. - The keeping of commercial books by means of the digital application provided for in this article shall become mandatory two years after the date of promulgation of this Law.
Mandatory commercial books(5) must be organised chronologically, without blanks, spaces, marginal transfers, interlineations, or erasures.
The merchant shall also carry out an annual inventory of all the elements of his enterprise, close all accounts, and prepare the balance sheet and the profit and loss account, and record the opening assets (Bilan) and profit and loss account in the inventory book. If that book does not contain the details of the inventory, the relevant documents must be authenticated and retained for the period specified in Article 19 of the Commercial Code.
1. Regarding general partnerships, see Article 46 et seq. of this Code.
2. Regarding limited partnerships, see Article 226 et seq. of this Code.
3. Text of Article 16 as amended by Decree No. 9800 of 05/04/1968, prior to its amendment by Law No. 126 of 29/03/2019: Every person, natural or legal, having the status of a merchant, shall keep a day-book in which all acts forming part of his commercial enterprise are recorded daily, or at least, when the nature of business prevents this, monthly, provided that in such case all documents enabling daily verification of the accuracy of those acts are retained for the period specified in Article 19 of the Commercial Code.
4. This Law enters into force three months from the date of its publication in the Official Gazette (Issue No. 18 of 04/01/2019) pursuant to the second paragraph of the sole article of the said Law (ratifying the legislative proposal).
5. Regarding the evidentiary force of commercial books, see Article 166 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
Books kept manually must be numbered and endorsed and signed by the president of the court of first instance in towns where such a court exists.
A merchant must retain books for seventeen years after they are completed.
Commercial books may be admitted in court as evidence in favour of the merchant, provided that they are regularly kept, that their contents are invoked against another merchant, and that the dispute relates to a commercial act. In all cases, they constitute evidence against the merchant who kept them; and if that merchant refuses to produce them, the judge may direct the other party to take an oath.(3)
Books shall only be submitted in their entirety to the court in cases of inheritance, partition of a community (Partage de communautés), partnership, preventive settlement, and bankruptcy. Outside these cases, production or submission of books, or compelling their production by court order, may always be requested or ordered for the purpose of extracting the entries relating to the dispute.
Joint-stock companies issue shares and may also issue bonds (Obligations) and convertible bonds. They may not issue founders' shares, i.e., securities (Titres) granting founders the right to a share of the company's profits without any capital contribution.
Part One: Shares.
Shares are equal and indivisible parts of the company's capital, represented by negotiable instruments that are registered.
A share confers upon its holder certain binding rights, namely: the right to a share of the profits (dividend), the pre-emptive right to subscribe upon a capital increase, the right to recover the share's nominal value, the right to participate in the distribution of the company's assets, the right to vote at the general assembly, and the right to transfer the share.
Dividends (Dividends) may only be drawn from the net profits resulting from a true balance sheet, after deducting the amounts required to constitute the legal reserve (Réserve) and the statutory reserve provided for in the company's articles.
Any distribution of fictitious dividends renders board members civilly liable towards any person thereby harmed, and renders auditors likewise liable in the same manner as board members, unless the auditors prove that they committed no error in supervision. Board members and auditors shall also be criminally liable if dividends are distributed without a balance sheet, or pursuant to a false inventory, balance sheet, or financial statements, and shall be punished by the penalty for fraud or any other more severe penalty provided by law.
The action for recovery of fictitious dividends is extinguished by prescription five years from the date of distribution.
Amounts distributed under a provision for fixed interest (Intérêts fixes) paid to shareholders in any circumstance and included among the company's expenses shall not be deemed fictitious profits. However, such a provision is lawful only if the following conditions are met: the rate of interest must not exceed four per cent, and the period of application of the provision must not exceed five years. This provision must be published by depositing it in the company's file at the commercial register secretariat; otherwise it shall be null and void.
As a general rule, all shareholders of the same company must have the same rights and share in the same benefits. However, in all cases where the company's articles do not contain an express prohibition, preference shares may be created by a resolution of an extraordinary general assembly discussed in the manner described hereinafter. Such shares confer upon their holders the right of priority in receiving certain dividends from the profits, in recovering capital upon dissolution, or both, or any other material benefit.
If the general assembly adopts a resolution that in any way reduces the rights attributed to a class of shares, that resolution shall not become effective until it has been approved by a special assembly composed of holders of the shares of that class.
When capital is increased by issuing new shares to be subscribed, shareholders of all existing classes shall have a pre-emptive right to subscribe to the totality of the new shares in proportion to the old shares they hold, and this right may not be waived. The extraordinary general assembly that approved the capital increase shall adopt all measures concerning any surplus shares after distribution.
The extraordinary general assembly may decide that the shareholders' pre-emptive subscription right be preserved only partially, or that it not be proportional to the previously held shares. In such case, any allocation of new shares to non-shareholders, or to a specific category of shareholders, shall be subject to the verification procedure applicable to contributions in kind, and this verification shall cover all shares allocated to non-shareholders. As regards shareholders, it shall cover only the excess over the proportion set for old shares. If such verification is not carried out, the capital increase shall be null and void.
Every shareholder, provided sufficient assets remain upon dissolution of the company, has the right to recover the nominal amount of his share, subject to the liquidation priority right of preference shares. Any surplus shall be distributed among all shareholders in proportion to the number of shares held.
The company may redeem its capital by allocating an amount from its profits to a special reserve or to an amortisation fund entirely dedicated to that purpose. Redemption shall be carried out in accordance with the procedures provided in the company's articles or those approved by the general assembly. Upon redemption, previous shares shall be replaced by shares called jouissance shares. These shares confer upon their holder the same advantages as negotiable shares, except for the fixed interest provided in the company's articles and the nominal share amount upon dissolution of the company.
Every shareholder is entitled to attend the various assemblies convened for the formation and management of the company, and shall in principle have, upon voting, a number of votes equal to the number of shares held. If the company is notified of the existence of a usufruct over specific shares, it is obligated to notify the usufructuary of all convocations and matters, without exception, including decisions to distribute any economic benefit. Only the usufructuary of shares has the right to attend ordinary general assemblies and vote thereat; the bare owner has the right to attend extraordinary general assemblies and vote thereat. The bare owner is deemed to be the holder of the voting right unless otherwise agreed between the bare owner and the usufructuary.
Fully paid-up shares that have been registered in the name of a single owner for at least two years before the convening of each general assembly shall each carry two votes. Shares shall be treated as having been held by the same owner during the said period if they were acquired by inheritance, gift, or bequest. Extraordinary general assemblies, by a resolution of shareholders, may decide to abolish the double voting right provided for above. The provisions of the first and second paragraphs of this article do not apply to companies formed after the promulgation of this Law.
A shareholder who has not paid the full price of his share is obligated to pay the balance upon a call by the board of directors, in accordance with the terms and conditions specified in the resolution containing the call for payment. All former holders of the share shall remain jointly and severally liable for a period of two years only from the date of the call, for the unpaid amount. Any provision in the company's articles or any resolution contrary to the provisions of this article shall be absolutely null and void.
A former shareholder who was compelled to pay the balance or part of the price of the share he transferred shall be subrogated to the company's rights and recourses against all subsequent holders of the share. In all cases, the former shareholder shall have the right to recourse against the shareholder who acquired the share after him.
A company may issue negotiable and indivisible bonds (Obligations) of uniform nominal value, given to subscribers in exchange for the amounts they have lent. However, bonds may not be issued unless the subscribed capital has been fully paid up by the shareholders. Board members and managers who issue or permit the issuance of bonds in violation of the preceding paragraph shall be liable to a fine of one thousand to ten thousand Lebanese pounds, and such bonds shall be null and void.
Holders of such bonds are entitled to receive a fixed interest paid at agreed intervals and to recover their capital from the company's social patrimony (Patrimoine social).
Subject to the rules applicable to mortgage credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital as shown in financial statements audited by the auditors and approved by the general assembly, provided they are not more than six months old at the date of issuance.
Even if the company's articles provide for the issuance of bonds, such issuance may only take place after the approval of the general assembly.
Before publishing any pre-issuance advertisement, the board members must publish in the Official Gazette, in an economic newspaper, and in a local daily newspaper a statement signed by them and containing in particular the date of the general assembly resolution authorising the issuance, the number of bonds to be issued, their value, interest rate, final maturity date and conditions and guarantees, the number of bonds previously redeemed together with their guarantees, the amount of the company's capital, and the value of the paid-up portion thereof.
The subscription form, the bond certificate, advertisements, endorsements, and supplementary materials must include the information contained in that statement, with reference to the issues of the newspapers in which it was published.
Persons who have subscribed to purchase bonds may cancel their subscriptions if the foregoing formalities have not been complied with.
Every bond issuance must, once completed, be recorded in the commercial register by the board members. If they fail to do so, they shall be liable to a fine of five thousand to two thousand and five hundred Lebanese pounds.
If bonds have not been fully paid up at their nominal value and calls have failed to produce payment of the balance, the company may resort to sale on the stock exchange floor.
Mortgage bonds (Hypothécaires) may be issued, but their issuance shall be governed by the provisions of Decision No. 77 L.R. of the High Commissioner dated 26 May 1933.
Lottery bonds must be authorised by a government permit issued upon the proposal of the Minister of Economy and Trade.
Bonds may be issued with an additional premium (Avec primes de remboursement) payable upon redemption of the bond.
The redemption of bonds shall take place in accordance with the conditions set at the time of issuance, and the company may neither advance nor postpone the redemption date.
Notwithstanding any contrary provision, a single body shall be formed from bondholders, constituted automatically upon each issuance; its resolutions adopted by majority vote shall be binding on all.
After completion of subscription, the issuing company shall convene a general assembly of bondholders to approve the rules of the body and to appoint its representative.
Whenever a meeting of bondholders (Obligataires) is deemed necessary, it shall be convened either upon request of their representative, or upon request of a group of bondholders representing one-twentieth of the value of the bonds, or upon request of the joint-stock company.
The assembly shall be convened by two consecutive advertisements in the Official Gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, specifying the matters on the agenda; no matters other than those on the agenda may be discussed.
The quorum and voting rules are those specified in Articles 193 and 195 for shareholders' general assemblies.
Representatives of the bondholders' body are entitled to take all precautionary measures to protect their rights.
However, measures intended to extend redemption periods, reduce the interest rate or the principal of the debt, or the guarantees securing it, and in general any measures that sacrifice the rights of bondholders, may not be taken other than by their assembly, meeting with the quorum conditions specified in the first paragraph of Article 193, by a majority of two-thirds of the votes of bondholders present or represented.
Representatives of bondholders are entitled to attend shareholders' general assemblies after receiving the same communications sent to shareholders. However, they have no right to vote in the proceedings.
If a company continues to pay premiums or credits to holders of bonds or other financial instruments repaid by lottery, the company may not reclaim such amounts upon presentation of the bond for redemption. Any contrary provision shall not be recognised.
Part Three: Convertible Bonds. This Part was added to Chapter Two of Title Three of Book Two of the Commercial Code by Article 9 of Legislative Decree No. 54.
Convertible bonds issued by joint-stock companies are subject to the provisions of Part Two of this Chapter and to the additional provisions below, and their value may not exceed twice the company's capital.
The issuance of convertible bonds must be approved by an extraordinary general assembly convened specifically for that purpose. The board of directors must submit to the extraordinary general assembly a report accompanied by a special report from the auditors specifying the terms of the issuance and conversion. The board's report must include: the reasons for issuing such bonds, their conversion terms, the period or periods during which the conversion right may be exercised, and, if shareholders are requested to waive their pre-emptive right, the reasons therefor.
The pre-emptive right to subscribe to convertible bonds belongs to shareholders in accordance with the provisions of Articles 105 and 112, unless the extraordinary general assembly convened pursuant to Article 2 of this Part decides otherwise. Approval of the issuance of convertible bonds without restricting the subscription right to shareholders shall automatically entail the shareholders' waiver of the pre-emptive subscription right specified in the first paragraph of this article in respect of shares that will be subscribed upon conversion.
The issuance price of convertible bonds may not be less than the nominal value of the shares that bondholders will receive if they choose to convert.
Conversion of bonds into shares shall only take place at the will of the bondholder and on the terms specified in the issuance rules.
The issuance rules must specify the time at which conversion may be exercised: either during a specific period or periods, or at any time. If bonds are convertible at any time, the bondholder may not request conversion more than one month after the maturity date of the bond or the first instalment in the case of redemption by instalments. Likewise, if conversion is possible at any time, the board of directors may suspend the conversion right for a maximum of three months, provided that it so notifies the bondholders in advance.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company is prohibited from redeeming or reducing its capital, or modifying the manner of profit distribution. In the event of a capital reduction due to losses, whether by reducing the number of shares or their nominal value, the rights of bondholders who choose conversion shall be reduced proportionally as if they were shareholders at the date of issuance of the convertible bonds.
From the date of the extraordinary general assembly's approval of the issuance of convertible bonds until such bonds remain outstanding, the company may not issue shares to be subscribed in cash, issue new convertible bonds, incorporate reserves, profits, or share premium into capital, or make any distribution of reserves, except on the condition that the rights of bondholders who may choose to convert their bonds are preserved. For this purpose, the company must, within the prescribed conditions, take the necessary measures to compensate bondholders for the effects of such operations.
If the company issues shares to be subscribed in cash or new convertible bonds, it must take the following measures:
If the company incorporates reserves, profits, or share premiums into capital, or distributes reserves, it must transfer to a special reserve account the portion that would accrue to bondholders from such reserves, profits, or premiums, so that those who choose conversion may, depending on the case, receive the same number of bonus shares, or shares of the same par value, or the same bonds as if they had been shareholders at the time of the transaction.
If the company carries out more than one of the transactions described in Articles 8, 9, and 10 above, it must in respect of each of them comply with the provisions of those articles, taking into account the rights that may arise for bondholders from shares received upon conversion, from shares subscribed in cash, from bonus shares, or from convertible bonds that may accrue to them as a result of capital increases or convertible bond issuances, in the event of their choosing conversion.
If the company has issued bonds convertible at any time and decides to carry out a transaction other than those referred to in Articles 8, 9, and 10 above, involving a subscription reserved exclusively to shareholders, it must notify bondholders by means of an announcement published in the Official Gazette, an economic newspaper, and a local daily newspaper, at least one month before carrying out the contemplated transaction. The announcement must include:
Shares received by bondholders as a result of converting their bonds shall benefit from dividends distributed for the financial year during which the conversion request was made.
A capital increase resulting from the conversion of bonds into shares shall not require the completion of formalities prescribed by law for capital increases in joint-stock companies. The increase shall be definitively secured upon submission of the conversion request accompanied by the subscription form. Within one month from the close of accounts for each financial year, the board of directors must verify the number of shares issued as a result of conversion of bonds during the preceding year and the nominal value of those shares, and make the necessary adjustments.
From the date of issuance of convertible bonds and for as long as such bonds remain outstanding, the merger of the issuing company with another company, as well as the consolidation of the issuing company with one or more other companies within a new company, shall be subject to the prior approval of the general assembly of bondholders concerned. If that assembly does not approve the merger or consolidation, or if no quorum is reached, the matter may be overridden and such approval dispensed with. The board's decision to override and dispense with the bondholders' assembly's approval must be immediately published in the Official Gazette, an economic newspaper, and a local daily newspaper. However, the bondholders' general assembly may, by a relative majority of those present regardless of their number, unconditionally delegate its right to object to the contemplated transaction. The objection shall be submitted to the court hearing commercial cases in the district where the company's registered office is situated, within one month of the last publication referred to in the first paragraph above; in such case the court may either reject the objection, or order the issuing company to repay the bond value, or require the absorbing company to provide guarantees if it has offered to do so and the court considers such guarantees sufficient. In the event of non-compliance with the court order to repay the bonds or to provide guarantees, the merger or consolidation shall remain unenforceable against the objecting bondholder. The submission of the objection referred to in the third paragraph above does not suspend the course of the proposed merger or consolidation.
Holders of convertible bonds are entitled to convert them into shares of the absorbing company or the new company, as the case may be, either during the option period or periods specified in the issuance rules, or at any time, subject to the provisions of Articles 6 and 7 above. The conversion bases shall be determined by adjusting the exchange ratio specified in the issuance rules by the ratio adopted for exchanging shares of the issuing company for shares of the absorbing company or new company, so that bondholders who choose conversion may receive a number of shares of the absorbing company or new company proportional to the number of shares of the issuing company they would have received had they converted before the merger or consolidation. The capital increases of both companies shall also be taken into account at the relevant time.
The general assembly of the absorbing or new company must approve the merger or consolidation and waive the pre-emptive subscription right specified in the second paragraph of Article 3 above, based on the report of the expert appointed to value the contributions and the board of directors' report and the special auditors' report referred to in Article 2 above.
The absorbing company or new company shall assume the place of the issuing company in all obligations of the latter, whether relating to conversion terms, prohibited operations, or measures necessary to preserve the rights of bondholders, in accordance with the provisions set forth in the specific Part.
All resolutions adopted contrary to the provisions of this Part shall be deemed ipso jure null and void. (Legislative Decree No. 54/1977 ends with this article.)
A commission agent is one who undertakes to carry out, in his own name but for the account of his principal (Commettant), sales, purchases, and other commercial transactions in exchange for a commission or financial remuneration. The rules of agency shall apply to commission contracts subject to the provisions set out in this chapter.
A commission agent who contracts in his own name shall acquire the rights arising from the contract and be directly bound to the persons with whom he contracts, as if the transaction were his own personal affair; those persons may raise against him all grounds of defence arising from their personal relationship with him, and may not raise them against the principal who is unknown to them.
A commission agent must personally execute the instructions given to him, unless he is authorised by agreement or by custom to substitute a third party, or circumstances compel him to do so. In the latter cases, the principal may directly sue the person substituted by the commission agent.
A commission agent may not place himself as a counter-party against his own principal without the principal's consent.
If the commission agent advances for or lends to a third party without the principal's consent, he bears the risks of his action.
Except in the case of an unauthorised advance, the commission agent shall not be liable for non-payment or non-performance of other obligations by those with whom he contracted, unless he has guaranteed them (del credere) or unless commercial custom at the place where he operates so requires. A commission agent who guarantees the party with whom he deals shall be entitled to an additional commission.
Notwithstanding the provisions of the preceding article, the commission becomes due upon conclusion of the transaction, even if the third party fails to perform the obligations he assumed, unless such failure is due to an error committed by the commission agent. The commission also becomes due if performance of the transaction is prevented by a cause attributable to the principal.
The commission is calculated on the gross value of the transaction, including additional expenses, unless there is a contrary agreement.
The agent is entitled to recover all expenses, advances, and disbursements incurred for the principal's account, together with interest. He may also include in the account compensation for storage and transport expenses, but may not charge for the wages of his employees.
Every commission agent has a lien on the value of goods sent to him, stored, or deposited, arising from the mere act of sending, storing, or depositing them, to secure all debts, advances, and disbursements incurred before or during their possession. However, this lien shall not stand against rights previously acquired by third parties over the goods.
A principal who cancels a commission, or a commission agent who withdraws from it without lawful cause, shall be liable to pay damages.
A forwarding commission agent (Le commissionnaire expéditeur) who undertakes to dispatch or return goods for the account of his principal for remuneration and at his own expense shall be treated as a commission agent, but shall be governed, as regards the carriage of the goods, by the provisions applicable to carriers (Voiturier).
A cheque drawn to a named person (Personne dénommée), with or without the express words 'to order', is transferable by endorsement. A cheque drawn to a named person with the words 'not to order' or an equivalent is only transferable by ordinary assignment and with its effects. A bearer cheque is transferable by mere delivery.
Endorsement may be made to the drawer himself or to any other obligor; all such persons may re-endorse the cheque.
Endorsement must be unconditional; any condition attached to it shall be deemed void. A partial endorsement is null and void. Endorsement by the drawee is also null and void. An endorsement to bearer shall be treated as a blank endorsement. An endorsement to the drawee is only valid as a receipt, unless the drawee has several establishments and the endorsement is made to an establishment other than the one on which the cheque was drawn.
The holder of a cheque transferable by endorsement shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another, the signatory of the latter shall be deemed to have acquired the cheque by virtue of the blank endorsement. If a cheque is taken from its holder by any event, the holder who establishes his right in the manner described above shall not be required to surrender the cheque unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement written on a bearer cheque renders the endorser liable in accordance with the provisions on recourse, but does not convert the instrument into an 'order' cheque.
If an 'order' cheque is taken from a person by any incident, the entitled holder who establishes his right as described in Article 421 shall not be required to surrender it unless he acquired it in bad faith or committed a gross error at the time of acquisition.
An endorsement after protest or after expiry of the presentation period shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the period referred to, unless the contrary is proved.
The bankruptcy judgment shall take effect ipso jure from the date of its issuance, depriving the bankrupt of the administration of all his assets, including assets that may accrue to him during the bankruptcy period. In particular, the bankrupt may not sell or mortgage his immovable property, nor exercise rights over his movables without the trustees' authorisation.
However, this surrender shall not cover rights that are personal to the bankrupt, or rights relating to him as head of a household, or rights of purely personal interest. The bankruptcy estate may however intervene in a lawsuit if it finds a financial interest therein.
The bankruptcy judgment shall entail the suspension of individual actions by ordinary creditors or holders of a general privilege; such actions shall from that point be concentrated in the bankruptcy estate without distinction between commercial and civil debts.
The bankruptcy judgment shall, with respect to the mass of creditors only, suspend the accrual of interest on debts not secured by a privilege, mortgage, or other real security. Interest on secured debts may only be claimed from the proceeds of the assets subject to the security.
The bankruptcy judgment shall accelerate maturity of debts with respect to the bankrupt only, without affecting co-debtors or guarantors; this shall nonetheless benefit creditors holding security. Holders of bonds redeemable with a premium(1) shall not be affected by the acceleration of debts.
If the bankrupt owns immovable property or real rights over immovables, the bankruptcy judgment shall be subject to the publication rules applicable to mortgages(2) and shall be registered by the trustees; from the date of registration a compulsory mortgage shall arise in favour of the creditors over all the bankrupt's immovables.
The following acts shall be void ipso jure against the mass of creditors if performed by the debtor after the date of suspension of payments as determined by the court, or within the twenty days preceding that date:
Any other payment of due debts made by the debtor, and any act carried out for consideration after the suspension of payments and before the bankruptcy judgment, may be set aside if the persons who received payment from the debtor or who contracted with him had knowledge of the suspension of payments.
The avoidance of the acts described above shall, where appropriate, give rise to an action for restitution (Action en rapport). If what was paid was a bill of exchange or a cheque, this action may only be brought against the person who received payment from the debtor directly, and provided it is established that the latter had knowledge of the suspension of payments.
Any mortgage registration made after registration of the bankruptcy judgment shall be null and void against the mass of creditors. A registration made after the suspension of payments or within the twenty days preceding it shall be voidable if the debt for which it was registered predates those twenty days.
Avoidance actions under Articles 507, 508, and 510 shall be extinguished by prescription eighteen months from the date of the bankruptcy declaration.
The commercial register enables the public to obtain comprehensive information on all commercial establishments operating in the country. It is also an instrument of publication intended to make its entries enforceable against third parties where there is an express statutory provision to that effect.
A register shall be maintained at every court of first instance by the clerk, under the supervision of the president of the court or a judge specifically designated by the president each year.
Part One: Registration of the names of merchants whose principal establishments are in Lebanon, regardless of their nationality.
Every merchant must request the clerk of the court in whose district his principal establishment is situated to enter his name in the commercial register within one month of opening the establishment or of his participation therein. The applicant shall submit to the clerk a declaration in duplicate, bearing his signature, stating the following:
3. Regarding oaths, see Article 235 et seq. of the Code of Civil Procedure issued by Administrative Decree No. 90/1983.
The following must also be recorded in the commercial register:
Companies having their principal office in Lebanon must be registered in the commercial register of the district of their principal office. The legal representative of the company must request registration within the month following its incorporation. The registration applicant shall submit to the court a copy of the constitutive instrument and an extract therefrom, written in duplicate on stamped paper, signed and certified by him, containing in particular the following particulars:
1. Regarding the manner in which a foreign woman married to a Lebanese national acquires Lebanese nationality, see Article 5 of Decision No. 15 of 19/1/1925.
2. See Legislative Decree No. 11 of 7/11/1967 on commercial establishments.
3. Regarding patent particulars, see Decision No. 2385 of 17/1/1924 on the system of industrial and commercial property rights.
4. Regarding the ratification of the settlement agreement, see Article 567 et seq. of this Code.
5. Regarding closure of bankruptcy proceedings for insufficiency of assets, see Article 601 et seq. of this Code.
6. Regarding rehabilitation, see Article 651 et seq. of this Code.
The following must also be entered in the commercial register:
Every merchant having his principal office in a foreign country and a branch or agency in Lebanon must, regardless of his nationality, register his name within the month following the opening of the agency or branch at the clerk's office of the court in whose district the agency was established. The declaration must contain all the previously mentioned particulars, together with the address of the principal office. Likewise, all amendments described above must be entered in the commercial register, together with the previously mentioned judgments and decisions if issued in Lebanon or Syria or having acquired an enforcement formula from their courts.
Part Four: Foreign commercial companies having a branch or agency in Lebanon.
Every foreign commercial company having a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and limited partnerships with shares subject to the provisions of Decision No. 96 of the High Commissioner dated 30 January 1926. Before opening the branch or agency, the person in charge of its management must file with the court clerk a written declaration in two copies, containing his name and all the previously mentioned particulars, and adding his name, surname, date of birth, place of birth, and nationality. All changes relating to the matters required to be registered must be registered. Upon replacement of the branch manager, the new manager's name, surname, date of birth, place of birth, and nationality, together with all required particulars, must be registered in the commercial register.
Part Five: General Provisions.
If a merchant dies or ceases to carry on his trade and no one has acquired his commercial establishment, or if a company is dissolved, the registration assigned to it in the commercial register must be cancelled. This cancellation shall be carried out directly pursuant to a decision issued by the judge charged with supervising the register.
Any entry in the commercial register for which no specific time limit is prescribed by the preceding articles must be requested within one month beginning from the date of the instrument or act to be entered. For judgments and decisions, the time limit runs from the date of their issuance.
All registrations and entries in the commercial register shall be made following a declaration submitted in the prescribed form.
The clerk may only refuse to make the requested entries if the declarations submitted do not contain all the required particulars; in such case, the clerk must bring to the attention of the president or the judge charged with supervising the commercial register the deficiencies observed in those declarations.
Any person may request a copy of the entries recorded in the register against payment of a fee fixed by decree; the clerk may, where appropriate, issue a certificate attesting to the absence of entries. Certification of copies shall be authenticated by the president of the court or the judge charged with supervising the commercial register.
The following may not be mentioned in copies delivered by the clerk:
Every merchant and every company required to register must indicate the place where they are registered and the registration number in their correspondence, bills, order memoranda (Notes de commande), tariffs, circulars, and all other printed matter issued by them.
Every merchant, company agent, or manager who fails within the prescribed time limits to request mandatory entries, or who fails to mention what must be stated on correspondence, invoices, and other printed matter issued by his establishment, shall be liable to a fine of fifty to one thousand Lebanese pounds. This fine shall be imposed by the court of first instance upon request of the president or judge charged with supervising the commercial register, after hearing the party concerned or summoning him in the proper manner. The court shall order the entries to be made within fifteen days; if not made within that period, the fine originally imposed shall be doubled. Clerks who fail to act in accordance with these regulations shall be referred to the disciplinary council.
Any incorrect statement submitted in bad faith for registration or entry in the commercial register shall be punishable by a fine of two hundred and fifty to five thousand Lebanese pounds and imprisonment of one to six months, or either penalty alone. This shall not prevent the court from imposing a more severe penalty pursuant to special laws and the Penal Code in respect of offences resulting from the incorrect statement. The criminal court that issues the judgment may order the correction of the statement referred to in the manner it specifies.
The aforementioned penalties shall apply without prejudice to the rule that facts and entries whose registration in the commercial register was refused may not be invoked against third parties under penalty of nullity.
Articles 40 – 41.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
Repealed by Legislative Decree No. 11 of 16/7/1967 on commercial establishments and replaced by new provisions.
A joint-stock company is managed by a board of directors composed of a minimum of three and a maximum of twelve members. Subject to any provisions in special laws applicable to certain companies, at least one-third of the members of the board of directors must be Lebanese. The board of directors shall designate one of its members as chairman. The chairman of the board does not require a work permit if he is a non-Lebanese national not residing in Lebanon.
The ordinary general assembly shall elect the board members; however, initial members may be appointed in the company's articles. Where a single share is subject to both a usufruct and a bare ownership right, only the bare owner is entitled to be a board member, unless there is a contrary agreement between the bare owner and the usufructuary, as provided in Article 116 of this Code. In the case of co-ownership of a single share, the provisions of Article 116 of this Code shall also apply, and only one person representing the co-owners may be a board member. During the period between two annual general assemblies, if the number of working members falls, due to death, resignation, or any other reason, below half the minimum number specified in the articles or below three, the remaining members must convene the general assembly within two months at the latest to fill the vacancies.
The ordinary general assembly shall elect board members from among shareholders or non-shareholders.
Board members appointed pursuant to the company's articles shall have a term of office of five years at most. Those appointed by resolution of the shareholders' assembly shall have a term of three years at most. Their election may be renewed. The company's articles may include specific provisions for the partial renewal of the board of directors.
Board members may be removed at any time without cause. Any contrary provision shall have no effect.
If the shareholders' general assembly adopts a removal decision without the matter having been included on its agenda, the decision shall only take effect after it has been confirmed by a new general assembly whose agenda expressly includes that matter. That second assembly shall be convened by the auditors within two months of the date of the first assembly, and shall proceed to elect its own chairman.
Every change in the composition of the board of directors must be published by depositing the relevant minutes with the competent commercial register secretariat by the board members. The notice by which the company is informed of the resignation of a board member shall likewise be registered with the commercial register. In both cases, publication or registration shall be completed without the need to produce any other document of any kind, whether notarised or otherwise.
The same conditions apply to the representative of legal persons on the board of directors.
No person may chair the board of directors in more than six companies in Lebanon. Likewise, no person may be general manager or deputy general manager in more than three companies having their registered office in Lebanon. No natural person may be a member of more than eight boards of directors of companies having their registered office in Lebanon.
The chairman of the board of directors and the general manager shall not be deemed merchants except in relation to the following matters: The competent court may declare them, or any of them, subject to the disabilities that the law attaches to bankruptcy if the company becomes bankrupt and its bankruptcy results from fraud or serious errors in the management of its affairs. If the duties of the chairman have been partly or wholly delegated to one of the persons referred to in Article 153, the person to whom the chairman's duties have been delegated shall bear liability proportional to what was delegated to him.
For board decisions to be valid, at least half the members must be present or represented at the meeting; no member may represent more than one other member. The company's articles may, for the purpose of calculating majorities and quorum in board meetings, provide for the possibility of treating as present members who participate remotely by video conferencing or other technical means whose conditions are determined by a ministerial decision issued by the Minister of Labour, provided the integrity of the vote and the security of the connection are ensured.
The board of directors has broad powers to implement the general assembly's resolutions, to carry out all acts required for the normal operation of the enterprise that are not routine, and these powers are limited only by what is expressly provided by law or by the company's articles. The board may delegate some of its powers to the chairman of the board or, in the absence of a general manager, to the general manager, for a short and specific period, provided that such delegation is subject to oversight and accountability and does not concern the fundamental decisions of the company.
Authorisation must be renewed each year where it relates to contracts with long-term continuing obligations (successives prolongées). Board members who are not among the persons referred to are prohibited from obtaining from the company, by any means, a loan, an overdraft account for their own account, or a guarantee or suretyship in their commercial dealings with third parties. However, this prohibition does not apply to banks where the operations in question constitute ordinary operations of such banks.
The chairman and members of the board of directors, the general manager, and the deputy general manager may not participate in the management of a company similar in object or activity to their own company unless they have obtained prior authorisation from the ordinary general assembly; such authorisation shall be renewed annually.
The chairman, board members, general manager, and deputy general manager may not hold any interest whatsoever in any company, association, union, or other group conducting operations intended to influence the price of securities issued by the company, of whatever type.
Board members must, at the end of the months of the financial year, prepare interim financial statements for that period. They must also, at year-end, organise the financial statements referred to in Article 101 of this Code.
Financial statements must be clear; any change made from one year to another in the manner of their preparation or presentation must be disclosed in the notes accompanying the precise financial statements.
The board of directors shall convene shareholders for general assemblies.
The board of directors must constitute a legal reserve by deducting ten per cent from the net profits after deducting prior losses, until the reserve reaches an amount equal to the company's capital.
Board members and the general manager shall be liable even to third parties for all acts of fraud and for every violation of the law and the company's articles. The individual action available to an injured party may not be stayed, even upon resolution of the general assembly, by a proposal to discharge the board members and general manager from liability. The company's participation in other enterprises, whether in the form of shares or otherwise, and the amount of advances granted to a subsidiary company, must be recorded.
The persons referred to in Article 166 shall also be liable to shareholders for their administrative errors. As a general rule, board members and the general manager shall not be liable for their administrative errors towards third parties. However, in the event of the company's bankruptcy and the disclosure of a deficit in assets, the court, upon application of the trustee or the public prosecution, or of its own motion, may order that the company's debts be paid by board members, the general manager, or any other person de facto in charge of the management of the company's affairs, whether by direct action or through an intermediary.
The right to bring an action against the chairman, board members, and general manager pursuant to the first paragraph of the preceding article vests in the company. If the company fails to exercise it, every shareholder may bring such action on behalf of the company to the extent of his interest therein.
In order for a discharge to be validly granted, the accounts of the company and the auditors' report must always have been approved. The discharge covers only the administrative acts that the general assembly was able to ascertain.
The liability action, whether brought by a shareholder or by a third party, shall be extinguished by prescription five years from the date of the general assembly at which the members rendered their accounts of management.
Part Two: Auditors (Commissaires de surveillance).
The constituent assembly, and thereafter the ordinary general assemblies, shall appoint one or more auditors; they may not continue in their duties for more than one year. However, their appointment may be renewed for a maximum of five consecutive years.
A shareholder or group of shareholders representing at least ten per cent (10%) of the company's capital may apply to the president of the chamber of the court of first instance in whose jurisdiction the company's registered office falls for the appointment of an additional auditor to be selected from among the court's accountancy experts, having full authority and receiving remuneration not exceeding that of the auditors appointed pursuant to Article 172.
Auditors shall audit the financial statements referred to in Article 101 of this Code as prepared by the board of directors, in order to express their opinion on their accuracy; their report must include a reference to any instances of non-compliance by the company with its articles and with applicable laws and regulations. The board of directors and the general manager must provide the auditors with all the information and documents they need to carry out their mission.
Auditors shall submit their report on the financial statements to the general assembly for approval. If they fail to submit this report, the general assembly's decision to approve the financial statements shall be null and void.
Auditors must convene the general assembly whenever board members fail to do so in the cases provided by law or by the company's articles. Likewise, they must do so whenever they deem it necessary. They must also convene the general assembly if a group of shareholders representing one-fifth of the company's capital so requests.
Auditors may not hold any direct or indirect interest in a group whose purpose is to influence the price of any class of the company's financial securities. Auditors may also not hold any interest outside the scope of their mandate, in particular through consulting contracts of any kind, whether with the company, an identified shareholder, or a shareholder or group of shareholders holding ten per cent or more of the company's capital.
Auditors shall be liable, individually or jointly, even towards third parties, for any error committed in the exercise of their supervisory duties, subject to the five-year prescription period.
Part Three: Shareholders' General Assemblies.
Shareholders' general assemblies are: the constituent assembly, ordinary general assemblies, and extraordinary general assemblies.
The right to convene ordinary and extraordinary general assemblies rests in principle with the board of directors. The constituent assembly is convened by the founders. Auditors may also convene assemblies in lieu of board members in the cases described above.
Shareholders who cannot attend an assembly may appoint a representative from among themselves, provided that such representatives are themselves shareholders, unless the articles permit non-shareholders to act as representatives. Excluded from this requirement are the legal representatives of persons lacking capacity. The company's articles may, in the context of respecting majorities and quorum in shareholders' general assembly meetings, provide for the possibility of treating as present shareholders who participate remotely by video conferencing or other technical means, provided the integrity of the vote and the security of the connection are ensured.
An attendance sheet shall be drawn up recording the names of shareholders present, represented, and participating remotely if any, and the number of shares held by each and the number of votes attached to those shares. This sheet shall be kept at the company's registered office and may be inspected by any person who establishes that they are a shareholder.
A bureau consisting of at least a chairman and a secretary shall be established. The members of the bureau must be personally present.
The assembly may not deliberate on matters other than those included on the agenda, except for unexpected and urgent matters raised during the meeting.
Every shareholder, regardless of the type of shares held, is entitled to participate in voting even if he holds only one share certificate.
Subject to the special provisions concerning registered shares contemplated in Article 117, each shareholder has a number of votes equal to the number of shares held or represented, without limit unless the company's articles expressly impose a limit; in such case the limit must be uniform for all shares regardless of class.
A shareholder may not vote, whether personally or by proxy, when the matter relates to a benefit to be granted to him, or to a dispute between him and the company where the assembly has adopted a decision on that dispute.
Representatives of bondholders who attend the assembly have no right to vote in the proceedings.
If a single shareholder requests a secret ballot, such ballot shall become mandatory in all matters of a personal nature, such as the removal of board members or the imposition of liability on them.
If the shareholders present find that their information on the matters submitted for deliberation is insufficient, the meeting may be adjourned for a minimum of eight and a maximum of fifteen days, provided that one quarter of the assembly's members request such adjournment.
The bureau members must draw up and sign the minutes of the meeting.
Resolutions adopted in accordance with the proper procedure, meeting the quorum and majority requirements applicable to each type of general assembly, and not tainted by fraud or abuse of power, shall be binding on all shareholders, including absentees and dissenters.
The deliberations of the constituent assembly shall only be valid if the shareholders present represent at least two-thirds of the company's capital. If this quorum is not met, a new assembly may be convened by a notice published in the Official Gazette, an economic newspaper, and a local daily newspaper twice with one week between each publication, specifying the agenda of the previous assembly and its outcome; in such case the quorum requirement shall be one-third of the capital.
With respect to verification of contributions in kind, the quorum shall be calculated based on the number of shares subscribed or held by shareholders, excluding the shareholders providing contributions in kind.
At the assemblies referred to in Articles 193 and 194, resolutions shall be adopted by a majority of two-thirds of the votes of shareholders present or represented. Shareholders providing contributions in kind may not participate in the vote on the verification of their contributions.
The ordinary general assembly shall be held each year after the close of the financial year to approve the accounts of the board of directors, distribute dividends, appoint new auditors, and appoint board members upon the expiry of their mandate. It may also be convened during the financial year when unexpected circumstances arise, provided its purpose is not to amend the company's articles.
All shareholders and bondholders are entitled to inspect at the company's registered office or through a special electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this Code for the last three financial years; - The list of board members; - The list of auditors; - The board's report on the company's management; - The auditors' report.
The ordinary general assembly must be composed of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly shall be convened and its deliberations shall be valid regardless of the portion of the company's capital represented.
In all cases not governed by a specific provision, resolutions at ordinary general assemblies shall be adopted by the absolute majority of votes attached to shares of shareholders present, represented, or participating remotely, who validly constitute the assembly.
Extraordinary general assemblies shall deliberate on any amendments to be made to the company's articles.
Extraordinary general assemblies, subject to the provisions of Article 80 and the following rules, may amend the articles in all their provisions, provided that they do not change the company's nationality, increase shareholders' obligations, or prejudice the rights of third parties.
For resolutions to change the company's object or form, the quorum must always represent at least three-quarters of the company's capital.
For all other permitted amendments, the quorum at each of the three successive assemblies convened in the manner of the constituent assembly must represent one-half of the capital at the first assembly, one-quarter at the second, and one-third at the third.
Resolutions at extraordinary general assemblies shall be adopted by a two-thirds majority of votes attached to shares of shareholders present, represented, or participating remotely.
Capital may only be increased after the value of the previous capital has been fully called up pursuant to Article 119 of this Code, under penalty of nullity of the capital increase.
The legal rules applicable to the formation of joint-stock companies shall apply to newly issued shares; the rules applicable to the nullity of a capital increase and to penalties, and the liability of the chairman, board members, general manager, or legally empowered general managers in relation to shares on which subscriptions were not properly approved, as well as the liability of auditors and experts, shall also apply.
If new shares are subscribed by persons other than existing shareholders, notwithstanding the pre-emptive right given to those shareholders, and the company holds a reserve, the shares in question shall be issued at a price higher than their nominal value, and the excess price shall represent the new subscribers' contribution to the reserve.
Capital may not be reduced except subject to the preservation of third parties' rights. Accordingly, a general assembly resolution ordering the reduction may not be implemented unless it has been published in the Official Gazette and creditors have not objected within three months. If an objection is made, the capital reduction shall be deferred until the court rules whether the reduction is or is not prejudicial to third parties' rights.
Board members shall be liable for any unlawful reduction of capital carried out through the company's repurchase of its own shares with funds drawn from capital or legal reserves. Articles 210, 211, 212, and 213 have been repealed and replaced by the new Chapter Nine entitled 'Mergers and Demergers of Companies' added to Book Two of this Code by Article 118 of Law No. 126 of 29/3/2019.
The dissolution of several companies must be approved by the extraordinary general assembly of each of those companies.
When a new company is created through the merger of existing companies, the legal rules applicable to the formation of companies must be observed. The publication formalities for the dissolution of the old companies must be completed before the formation of the new company.
If one company absorbs another, the absorbed company (Annexée) must publish notice of its dissolution before the scheduled date, and the absorbing company must comply with the substantive and formal rules applicable to capital increases.
The provisions applicable to the rights of third parties upon capital reduction shall apply to resolutions ordering a merger (Fusion) or absorption (Absorption).
Brokerage(1) is a contract whereby one party, called the broker, undertakes to introduce another party to an agent for concluding a deal, or to act as intermediary for him in contract negotiations, in exchange for remuneration. The rules of agency shall apply generally to brokerage.
If the broker's remuneration has not been determined by agreement or by an official tariff, it shall be fixed in accordance with custom, or assessed by the judge according to the circumstances. If a reduction appears justified, the judge may fix a fair remuneration for the service rendered.
The broker is entitled to remuneration when the information he provided or the negotiations he conducted lead to the conclusion of the agreement. If the agreement is made subject to a condition precedent, remuneration shall only become due upon fulfilment of the condition. If the reimbursement of expenses incurred by the broker was stipulated, such expenses shall be due even if the agreement is not concluded.
The broker forfeits all right to remuneration and to recovery of expenses incurred if he acts in the interest of the contracting third party in a manner contrary to his obligations, or if he induces that party to promise him remuneration under circumstances that violate the rules of good faith.
The broker may not act as intermediary for persons of known insolvency or whose incapacity is known to him.
The broker must register all transactions concluded through his intermediary, together with their specific terms and conditions, retain all related documents, and provide each contracting party with a copy thereof upon request. In sales concluded by reference to a sample, the broker must retain the sample until the transaction is completed.
Agency and brokerage transactions at securities exchanges (Les bourses de valeurs) and commodity exchanges are subject, as required, to special legislation.
Persons sued on a bill of exchange may not raise against the holder defences based on their personal relationship with the drawer or with previous holders, unless the holder, when acquiring the bill, knowingly acted to the detriment of the debtor.
If an endorsement contains the words 'value for collection', 'for receipt', 'by proxy' (Valeur en recouvrement, pour encaissement, par procuration), the holder may exercise all rights arising from the bill but may only re-endorse it for collection purposes. The persons sued may only raise against such a holder the defences available against the endorser.
If an endorsement contains the words 'value as security' or 'value as pledge' (Valeur en garantie, valeur en gage) or any other expression indicating a security, the holder may exercise all rights arising from the bill; however, if he endorses it, such endorsement shall only be treated as a collection endorsement. The persons sued may not raise against such a holder the defences based on their personal relationship with the endorser, unless the holder acted in bad faith when acquiring the bill.
An endorsement made after maturity produces the same effects as one made before maturity; however, an endorsement made after a protest for non-payment, or made after the expiry of the time limit prescribed for protest, shall only produce the effects of an ordinary assignment. An undated endorsement shall be presumed to have been made before the protest or before the expiry of the time limit, unless the contrary is proved.
Bills of exchange may not be ante-dated; otherwise, such act shall constitute forgery.
The cheque is payable at sight; any contrary indication shall be deemed void. A cheque presented for payment before the date shown as the date of issue shall be payable on the day of presentation.
A cheque issued in Lebanon and payable therein must be presented for payment within eight days. A cheque issued outside Lebanon and payable therein must be presented within twenty days if the place of issue is in the same continent, or within seventy days if it is in a different continent. Those periods shall run from the date shown on the cheque as the date of issue.
If a cheque payable in Lebanon was issued in a country using a calendar other than the Gregorian calendar, the date of issue shall be converted to the corresponding date in the Gregorian calendar.
The drawee must pay even after expiry of the presentation period; an objection by the drawer to payment of the cheque shall only be accepted in case of the cheque's loss or in case of the drawer's bankruptcy.
The death of the drawer or his loss of capacity occurring after the issue of a cheque shall not affect the validity of the cheque.
The drawee may, upon paying the cheque, require the holder to deliver it to him with a receipt notation. The holder may not refuse a partial payment. If the cover is less than the value of the cheque, the holder may require payment up to the amount of the cover. In case of partial payment, the drawee may require notation of such payment on the cheque and delivery of a receipt.
A person who pays an uncontested cheque shall be validly discharged. The drawee paying an endorsable cheque is required to verify the regularity of the chain of endorsements but is not required to verify the endorsers' signatures.
If the cheque is drawn payable in a currency not in circulation in Lebanon, its value may be paid within the presentation period in Lebanese currency at the prevailing exchange rate on the date of payment. If payment is not made upon presentation, the holder may at his option claim payment of the cheque's value in the prevailing local currency or in the currency stipulated.
The administration of the bankrupt's assets shall be entrusted to a paid agent called the trustee in bankruptcy. The bankruptcy judgment shall appoint one or more trustees. The number of trustees may be increased to three at any time. Their expenses and remuneration shall be fixed as provided by law.
One or two supervisors may be appointed at any time by order of the delegated judge (Juge Commissaire) from among the creditors who nominate themselves for this mission.
No relative or in-law of the bankrupt up to the fourth degree may be appointed as trustee.
If the court decides to add or replace one or more trustees, the delegated judge shall refer the matter to the court, which shall proceed with the appointment.
Where several trustees are appointed, they may only act jointly; however, the delegated judge may grant one or more of them a special authorisation to perform certain administrative acts, in which case each shall be individually responsible for his own acts.
If an objection is raised against certain acts of the trustees, the delegated judge shall rule on it within three days. The delegated judge's ruling shall be immediately enforceable.
The delegated judge, upon complaints submitted by the bankrupt or creditors, or of his own motion, may propose the removal of one or more trustees. If the delegated judge does not act on such complaints within a reasonable time, the complainant may refer the matter directly to the court.
Orders concerning the appointment or removal of trustees are not subject to any method of review.
The court shall designate in its bankruptcy judgment one of its members to act as delegated judge.
The delegated judge shall be specifically charged with monitoring and supervising the bankruptcy proceedings and their administration. He shall submit to the court a report on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
The delegated judge's rulings shall be deposited immediately with the court clerk. They are in all cases subject to objection by any interested party before the court, and the court may also review them of its own motion. Objections shall be submitted in the form of a declaration to the clerk within three working days.
The court may at any time replace the delegated judge with another member of the court; neither this order nor the order appointing the delegated judge is subject to methods of review.
Part Two: Administration of the Bankrupt's Assets.
The court shall in its bankruptcy judgment order that seals be affixed and may at any time order the bankrupt to appear and enforce his attendance; in all cases the bankrupt may not leave the district of the court without the delegated judge's authorisation.
The court clerk shall immediately notify the justice of the peace of the order directing the affixing of seals. The justice of the peace may affix seals even before that judgment is issued, either on his own initiative or upon application by any interested party.
Seals shall be affixed on the stores, offices, safes, packages, books, papers, movables, and personal effects (Effets) of the bankrupt; in the case of bankruptcy of a general partnership, seals shall not be confined to the company's principal office but shall also be affixed at branches and at the home of each partner.
If seals have not been affixed before the appointment of the trustees, the trustees shall request their affixing from the justice of the peace.
The delegated judge shall order, upon application of the trustees, that seals not be affixed to the following items, or shall authorise their withdrawal: the clothing, garments, furniture, and personal effects of the bankrupt and his family; essential documents. The justice of the peace shall in any case ensure that the bankrupt and his family are left with the necessities of life.
The sale of perishable items, or items likely to deteriorate rapidly in value, or items requiring expensive maintenance, shall be carried out by the trustees with the delegated judge's permission. The continued operation of the commercial enterprise by the bankruptcy trustees shall be authorised by the delegated judge following an opinion from the public prosecutor and, if any exist, from creditor supervisors.
The justice of the peace shall extract the commercial books from the sealed items and deliver them to the trustees after authenticating the last entries; he shall then briefly record in his minutes the state in which those books were found. Where circumstances require it and after urgent consultation with the delegated judge, the justice of the peace shall, after opening the seals, proceed to a provisional inventory of the cash, bills of exchange, and other documents found.
The bankrupt and his family may receive from the bankruptcy estate a food allowance fixed by the delegated judge upon the trustees' proposal.
The trustees shall summon the bankrupt to close the books and balance the accounts in his presence; if he fails to attend, a notice shall be sent requiring his appearance within forty-eight hours at most. He may appoint a proxy, provided that such proxy produces credentials and is capable of providing all necessary information.
If the bankrupt does not submit a balance sheet (Bilan), the trustees shall draw one up without delay based on the bankrupt's books, papers, and information they can gather; they shall then file the balance sheet with the court clerk.
The delegated judge may hear the statements of the bankrupt, his clerks, and employees, and of any other person, whether regarding the preparation of the balance sheet or regarding the causes and circumstances of the bankruptcy.
If bankruptcy is declared after a merchant's death, or if the merchant dies after the declaration of his bankruptcy, his widow and heirs may attend personally or be represented by proxy for the preparation of the bankrupt's balance sheet and other bankruptcy proceedings.
Within three days of the affixing of seals, or of the date of the bankruptcy judgment if this measure preceded its issuance, the trustees shall apply for removal of the seals to proceed to an inventory of the bankrupt's assets in his presence or after duly summoning him.
The trustees shall draw up the inventory in duplicate originals in the presence of the justice of the peace, in proportion to the seals being removed; the justice of the peace shall sign the inventory after each session (A chaque vacation), and one copy shall be filed with the court clerk.
If bankruptcy is declared after the bankrupt's death and no inventory had been drawn up before the declaration, one shall be prepared immediately in accordance with the procedures described in the preceding article, in the presence of the trustees or after duly summoning them; the proceedings shall be carried out in the presence of the widow or heirs, or after duly summoning them.
In every bankruptcy, the trustees must, within fifteen days of assuming their duties, submit to the delegated judge a report or a general account of the apparent state of the bankruptcy, its circumstances, and causes, together with their view on the nature of the bankruptcy.
Public prosecution officers may visit the bankrupt's place of residence to supervise the preparation of the inventory and may at any time request that all documents, books, and papers relating to the bankruptcy be filed with them.
After completion of the inventory, the goods, bills of exchange, and other documents belonging to the bankrupt, together with his books, papers, furniture, and personal effects, shall be delivered to the bankruptcy trustees, who shall acknowledge receipt at the end of the inventory.
From the moment the trustees assume their duties, they must perform all acts necessary to protect the bankrupt's rights against his debtors. They must also register a mortgage against the immovables of the bankrupt's debtors if this has not already been done and the registration has not expired.
The trustees shall continue under the delegated judge's supervision to collect the debts owed to the bankrupt.
The delegated judge may, after hearing the bankrupt's statements or duly summoning him, authorise the trustees to sell movable items and goods. He shall decide whether this sale shall be carried out by private agreement or by public auction.
The funds derived from sales and collections shall be immediately deposited with the bank authorised to receive state deposits, after deducting the amounts authorised by the delegated judge for expenses; proof of such deposit must be provided to the delegated judge. These funds shall only be withdrawn from the bank by order of the delegated judge.
The trustees may, after obtaining the delegated judge's authorisation and after duly summoning the bankrupt, settle all disputes relating to the mass of creditors, including those relating to rights or real property actions. If the subject matter of the settlement involves an amount exceeding a threshold set by decree, the creditors must first be consulted.
From the date of the bankruptcy judgment, creditors may file their instruments with the trustees, together with a statement indicating the documents filed and the amounts claimed. The creditor or his proxy shall sign this statement and attach a power of attorney if applicable. The filing shall be noted in the instrument and the statement; the trustees shall deliver a receipt to the creditor.
Creditors whose names are listed in the balance sheet but who have not produced their debt instruments within the eight days following the bankruptcy judgment shall, at the end of that period, be notified by newspaper publication or by a registered letter from the trustees, allowing them a further fifteen days to file their instruments.
Verification of debts shall be carried out by the trustees, assisted where present by supervisors, subject to the delegated judge's approval and in the presence of the bankrupt or after duly summoning him. If the trustees dispute the validity of a debt, they must notify the creditor and the bankrupt simultaneously.
After completion of debt verification and within three months at most from the date of the bankruptcy judgment, the trustees shall file with the court clerk a statement of the debts (État des créances) they have verified, indicating the amount of each debt, its nature, and whether it is preferential or ordinary.
Every creditor who has established his debt or whose name appears in the balance sheet may, within eight days of the publications referred to in the preceding article, submit claims or objections to the court clerk to be noted on the statement drawn up by the trustees.
Disputed debts shall be referred by the clerk to the commercial court to be heard at a session to be held within thirty days of the publication referred to in Article 550, and the court shall deliberate on them at that session based on the delegated judge's report and the submissions of the parties.
The court may provisionally admit a creditor to deliberations for an amount specified in the same order; such order shall not be subject to any method of review.
A creditor whose dispute concerns only his right to a privilege or mortgage shall be admitted to the bankruptcy deliberations as an ordinary creditor.
Creditors who failed to appear or to file their debt instruments within the prescribed time limits, whether known or unknown, shall not participate in the distribution to be made. However, the right to object remains open to them; they may participate in distributions not yet made, without any right to claim a share of distributions already made.
Bonds legally issued by a commercial company are not subject to the debt verification procedure.
The delegated judge must, within the three days following completion of the debt list, or within the three days following the court's order under Article 553 if there is a dispute, convene the creditors to deliberate on a proposed settlement agreement.
The assembly shall meet under the chairmanship of the delegated judge at the place, day, and hour specified. Creditors whose debts have been finally verified or provisionally admitted shall participate, either personally or through proxies. The bankrupt shall be summoned to appear or be represented. The trustees shall submit a report on the state of the bankruptcy and the operations carried out; the report shall be signed by the trustees and delivered to the delegated judge, who shall record the proceedings in the minutes.
The trustees shall present a report on the state of the bankruptcy and the operations and transactions carried out; the bankrupt's statements must be heard; the trustees' report bearing their signatures shall be delivered to the delegated judge, who shall draw up the minutes of the deliberation session.
Pursuant to the legal rules concerning formal requirements to be observed in general assembly deliberations, any resolution contrary to those requirements shall be null and void, provided it is established that the violation actually affected the decisive outcome. Any interested party may invoke this nullity before the competent authority. The nullity shall lapse upon rectification of the deliberations or after one year from the date on which the assembly was held without proper compliance.
Persons who fraudulently fabricate or attempt to fabricate a false majority at a shareholders' or bondholders' general assembly — in particular those who represent themselves as holding securities belonging to others who cannot vote, or who induce others by means of private benefits to vote in a specified manner or to abstain from voting, or who use any other illicit means — shall be liable to the prescribed penalties.
Joint-stock companies shall be dissolved upon expiry of the period for which they were formed, upon completion of the enterprise for which they were incorporated, or upon the impossibility of completing it. They shall also be dissolved by the shareholders' decision expressed at a general assembly in accordance with the conditions of Articles 202 and 204, and in all particular cases provided for in the articles.
In any event, if the board of directors fails to convene the assembly, or if the assembly cannot be validly constituted for lack of quorum, or if the assembly refuses to dissolve the company, every shareholder retains the right to apply to the competent court to take appropriate action or to dissolve the company.
The resolution adopted, whatever its nature, must be published.
Liquidation shall be conducted in principle in accordance with the rules provided for general partnerships.
If liquidators are not designated in the company's articles, they shall be appointed by the ordinary general assembly, unless the company is to be dissolved before its scheduled term, in which case the extraordinary general assembly shall appoint them at the same time. If the general assembly does not appoint the liquidators, their appointment shall rest exclusively with the competent court upon application by any interested party.
Auditors, joined by an expert appointed by the court, shall remain in office and shall supervise the liquidation.
Liquidators shall receive the accounts of administrative acts performed by board members and the general manager since the general assembly's approval of the last balance sheet until the opening of liquidation; they shall either approve them or refer any apparent problems to the competent court.
If the liquidation period exceeds one year, liquidators must draw up and publish the annual balance sheet.
Upon completion of liquidation, the liquidators shall draw up the final balance sheet, specifying each shareholder's share in the distribution of the company's assets.
Auditors shall prepare a report on the accounts submitted by the liquidators; the ordinary general assembly shall then approve them and resolve to grant a discharge to the liquidators or to object to the accounts, in which case the dispute shall be referred to the competent court.
A bill of exchange may be presented for acceptance to the drawee at his domicile at any time before maturity, either by the holder or by any holder for collection.
The drawer may stipulate in any bill of exchange that it be presented for acceptance, with or without a time limit. He may prohibit presentation for acceptance in the bill, unless the bill is payable at a third party's address, or in a place other than the drawee's domicile, or unless it is a bill payable at a certain time after sight.
Bills drawn at a period after sight must be presented for acceptance within one year of their date. The drawer may shorten or extend this period; endorsers may also shorten the periods referred to.
The drawee may request that the bill be presented to him a second time on the day following the first presentation; interested parties may not invoke this request as insufficient unless it is mentioned in the protest. The holder is not obliged to surrender a bill presented for acceptance to the drawee.
Acceptance is written on the bill of exchange and is expressed by the word 'accepted' or an equivalent; it is signed by the drawee, and the drawee's mere signature on the face of the bill is deemed acceptance. If the bill is payable at a period after sight, or if it must be presented for acceptance within a specified time by special stipulation, the acceptance must be dated on the day of presentation; failing this, the holder may, in order to preserve his rights against endorsers and the drawer, establish the omission by a protest on a specific date.
Acceptance shall be unconditional; however, the drawee may limit it to part of the amount. Any other modification of the bill's terms in the acceptance shall constitute a refusal; however, the acceptor shall be bound in accordance with the terms of his declaration.
If the drawer designates in the bill a place of payment other than the drawee's domicile without specifying a third party at whose address payment must be made, the drawee may designate that third party upon acceptance; failing such designation, the drawee shall be deemed to have undertaken to pay at the designated place himself.
The drawee's acceptance of the bill binds him to pay at maturity; in the event of non-payment, the holder — even if he is the drawer himself — has a direct action against the acceptor arising from the bill for everything that may be claimed pursuant to the applicable provisions.
If the drawee wrote an acceptance on the bill and then struck it out before returning the bill, refusal of acceptance shall be deemed to have occurred; the striking out shall be presumed to have been made before the return of the bill unless the contrary is proved. However, if the drawee notified his acceptance in writing to the holder or to any signatory of the bill, he shall be bound to those persons in accordance with the terms of his acceptance.
The deliberating creditors may not approve a post-bankruptcy settlement agreement unless the following conditions are met, failing which the agreement shall be null and void. The agreement shall only be concluded by a vote of creditors forming the majority in number and representing three-quarters of the total debt; the foregoing conditions being cumulative.
Creditors holding a mortgage(1) or movable pledge privilege may not vote unless they waive their securities in accordance with the conditions provided for in the chapter on preventive settlement.
The settlement agreement must be signed at the same session, failing which it shall be null and void. If only a majority in number, but not in amount, is obtained, or only a majority in amount is obtained, the session shall be adjourned for eight days and no further adjournment may be granted; in this second session the creditors who were present or represented at the first session may alone deliberate.
No settlement agreement may be concluded for a person convicted of fraudulent bankruptcy(1). If an investigation is ongoing regarding fraudulent bankruptcy, creditors shall be convened to decide whether they intend to deliberate on a settlement at the conclusion of the investigation.
If the bankrupt is convicted of negligent bankruptcy, a settlement agreement is possible. However, creditors may, in the case of ongoing criminal proceedings, defer deliberations until after the conclusion of those proceedings in accordance with the provisions of the preceding article.
In the case of a commercial company that has issued bonds, a settlement agreement may only be concluded if it is approved by the bondholders' assembly under the conditions and in the circumstances specified in the chapter on preventive settlement.
Any creditor entitled to participate in the settlement agreement and whose rights have been recognised, and the bondholders' assembly if one exists, may object to the settlement. The objection must be stated and the objectors must affix their signatures at the same session.
The ratification procedure shall be initiated before the court upon application of the most diligent party (A la requête de la partie la plus diligente); the court may not act before the expiry of the eight-day period referred to in Article 562, and must rule at the earliest at the session convened for that purpose.
In all cases, the delegated judge shall, before the court rules on ratification, prepare a report on the characteristics of the bankruptcy and the feasibility of accepting the settlement.
If the rules set forth above have not been observed, or if grounds relating to the public interest or the interests of creditors appear to preclude the settlement, the court must refuse ratification. It may also refuse to ratify a settlement agreement if the bankrupt is deemed undeserving of the benefit.
Ratification of the settlement agreement renders it binding on all creditors, whether listed in the balance sheet or not, and whether their debts have been verified or not. It is also enforceable against creditors residing outside Lebanese territory.
After the ratification judgment acquires the force of res judicata, the effects of the bankruptcy shall cease, subject to the continuation of the loss of political rights provided for in Article 500. The trustees whose duties have ended shall render their accounts to the bankrupt.
The settlement agreement involves above all payment of debts in instalments over successive periods, and in general the discharge of the debtor from a greater or lesser portion of his debt. However, this discharge leaves him with a natural obligation. The settlement agreement may also not include the bankrupt's final discharge for the written-off portion.
The mortgage created in favour of the mass of creditors (L'hypothèque de la masse) shall be retained as security for payment of the sum specified in the settlement agreement.
Creditors may also request one or more guarantees to secure performance of the settlement agreement.
Until the full amount provided for in the settlement agreement is paid, the debtor may not make any extraordinary disposition not required by the conduct of the trade itself, unless there is a contrary agreement. The provisions of Articles 466 and 467 shall apply to this effect.
No action to annul the settlement agreement after ratification shall be admissible unless it is based on fraud discovered after ratification and arising from the concealment of the bankrupt's assets or the exaggeration of debts owed by him. Every creditor may bring such an action within five years of the ratification.
If after ratification of the settlement agreement the bankrupt is prosecuted for fraudulent bankruptcy and a temporary or permanent arrest warrant is issued against him, the court may order any precautionary measures it is authorised to take. These measures shall be lifted if the bankrupt is ultimately acquitted.
If the bankrupt fails to perform the terms of the settlement agreement, an action may be brought before the court for the rescission (Résolution) of the agreement; any guarantors shall be summoned or invited to attend in the proper manner.
When the court becomes aware of the judgment ordering fraudulent bankruptcy(2), it shall proceed to appoint a delegated judge and one or more trustees. It shall also make this appointment in the order declaring the settlement annulled or rescinded, or in the judgment declaring the bankruptcy of a company whose partners are personally liable.
Verification of debt instruments filed pursuant to the preceding article shall be commenced without delay. There is no need to conduct a new verification of previously verified debts, subject to the right to reject or reduce debts and to provisionally admit or reject new ones.
After completion of the acts described above, creditors shall be convened to give their opinion on retaining the trustees or replacing them if no new settlement has been concluded.
Acts performed by the bankrupt after ratification of the settlement agreement and before its annulment or rescission shall only be voided in the event of fraud affecting creditors' rights.
Pre-settlement creditors shall retain all their rights against the bankrupt alone. With respect to the mass of creditors, they may only participate within the following limits: if they received nothing or were not fully satisfied under the previous settlement, they may participate for the portion of their debt for which they were not satisfied, together with all creditors under the new settlement.
If no settlement agreement is concluded, the creditors shall ipso jure enter into a state of union. The delegated judge shall immediately consult them regarding management acts and the retention or replacement of the bankruptcy trustees, and those creditors whose debts have been verified or provisionally admitted shall participate in deliberations.
Creditors shall be consulted as to whether it is possible to grant the bankrupt an allowance from the bankruptcy estate (Actif). If the majority of creditors present agree, an allowance may be granted; the delegated judge shall propose the amount, and the court shall fix it.
If a partnership is declared bankrupt, creditors may only conclude a settlement agreement with one or more partners. In such case, the totality of the company's assets shall remain subject to the creditors' union. The personal assets allocated to each individual partner under a settlement with that partner shall be withdrawn from the union.
The trustees shall represent the mass of creditors and carry out the liquidation acts. However, the creditors may authorise the trustees to continue operating the existing assets. The authorisation shall specify the duration and the scope of that operation.
If the trustees' acts give rise to obligations exceeding the value of the union's assets, only the creditors who authorised those acts shall be personally liable for the excess beyond their share in those assets; however, their liability shall not exceed their share in the union's assets.
The trustees shall proceed to collect outstanding debts. They may accept settlements on the same terms as were previously in use, notwithstanding any objection by the bankrupt. However, for disputes involving a lump sum, the delegated judge's authorisation is required.
The trustees must proceed to sell all movable assets, including the commercial enterprise(1), under the delegated judge's supervision and without the need to convene the creditors' assembly, in accordance with the forms prescribed for execution.
If no forced sale procedure has been completed before the union, the trustees alone shall be authorised to proceed with the sale and must commence it within eight days with the delegated judge's authorisation and through the enforcement department.
The trustees shall draw up the conditions of sale pursuant to which bidding shall take place, and shall include therein the particulars required by Article 744 of the Code of Civil Procedure(2). Articles 746 and 747 of the same Code shall also apply.
The delegated judge shall convene the creditors in union at least once during the first year, and also in subsequent years when circumstances require. The trustees must submit accounts of the administration at the meetings.
The bankruptcy estate assets shall be distributed among all creditors in proportion to each creditor's verified debt, after deducting the costs of administration, the allowances granted to the bankrupt or his family, and the amounts paid to preferential creditors.
For this purpose, the trustees shall submit monthly statements to the delegated judge on the state of the bankruptcy and the amounts deposited with the designated bank for receiving and paying enforcement funds; the delegated judge shall then order, as appropriate, the distribution of funds among creditors.
The trustees may not carry out any closing of a debt except against presentation of the instrument evidencing the debt; they shall note on the instrument the amount paid or ordered to be paid. If production of the instrument is not possible, the procedure prescribed by law for the circumstances shall apply.
After completion of the bankruptcy liquidation, the delegated judge shall convene the creditors for a final meeting; at this final meeting the trustees shall render their accounts, and the bankrupt shall be present or duly summoned. The creditors shall decide whether to discharge the trustees or to raise objections; in the latter case the dispute shall be referred to the competent court.
The delegated judge shall submit to the court the creditors' resolution concerning the excusing of the bankrupt, together with a report on the characteristics and circumstances of the bankruptcy. The court shall then issue its decision declaring the bankrupt excused or not excused.
Persons convicted of fraudulent bankruptcy(1), and persons convicted of forgery, theft, fraud, breach of trust, or embezzlement of public funds(2), may not be declared excused.
A settlement may be concluded involving the total or partial transfer of the bankrupt's assets. The conditions of this type of settlement are the same as those provided for the simple settlement agreement; however, the discharge of the bankrupt in respect of any shortfall resulting from the realisation of the assets shall not operate automatically but only if expressly agreed upon.
If at any time before ratification of the settlement or formation of the union it appears that the course of the bankruptcy proceedings has been suspended due to insufficiency of assets, the court may, based on the delegated judge's report or of its own motion, close the bankruptcy proceedings. In such case, each creditor shall recover his freedom to act individually.
The bankrupt or any interested person may at any time apply to the court to reverse the closure order if they prove the existence of sufficient assets to cover the bankruptcy costs, or if they deliver to the trustees the sufficient amount to cover such costs.
Payment of the whole or part of the amount of a bill of exchange may be guaranteed by an aval. Such guarantee may be given by a third party or by one of the signatories of the bill.
The aval is written on the bill or on an allonge, or in a separate instrument indicating the place where it was given. It is expressed by the words 'good for aval' or an equivalent expression and is signed by the aval provider. The aval shall be constituted by the mere signature of the aval provider on the face of the bill, except for the drawer's signature.
The aval provider is bound in the same manner as the person for whom he gave the aval. His obligation shall be valid even if the obligation which he guaranteed is void for any reason other than a defect in form. The aval provider who pays the bill acquires all rights arising from it against the person guaranteed and against those who are bound to that person under the bill.
The holder of a cheque may sue endorsers, the drawer, and other obligors if the cheque presented in due time is not paid and the refusal to pay is evidenced: - Either by an official document (protest). - Or by a declaration by the drawee dated and written on the cheque stating the date of presentation. - Or by a dated declaration from a clearing house stating that the cheque was delivered in time but not paid.
The protest or similar evidence must be raised before the expiry of the presentation period. If presentation is made on the last day of the period, the protest or similar evidence may be raised on the first following working day.
The holder of the cheque may claim from the person sued:
A person who paid the cheque may claim from those who guaranteed him:
If an insurmountable obstacle (a legal provision or other force majeure circumstances) prevents presentation of the cheque, protest, or similar evidence within the prescribed periods, those periods shall be extended. The holder must without delay notify his immediate endorser of the force majeure and note such notice on the cheque with a date and his signature; Article 367 shall apply. When the force majeure ceases, the holder must without delay present the cheque for payment and, if necessary, raise a protest or obtain similar evidence. If the force majeure persists for more than fifteen days from the date on which the holder notified his endorser, recourse may be exercised without presentment or protest.
A creditor who holds a debt instrument (Engagement) that is jointly and severally guaranteed or endorsed or signed for joint and several liability by the bankrupt and by co-obligors who are also bankrupt may participate in the distribution with every mass of creditors in proportion to their verified claims, without any deduction.
The claims of co-debtors under the same obligation against one another before the courts shall not be admissible unless the total of those claims from all co-debtors exceeds the principal debt.
If a creditor holds instruments jointly and severally binding the bankrupt and other persons, and has collected part of his debt before the bankruptcy, he may only participate in the mass of creditors for the balance remaining after deducting the collected portion.
Notwithstanding the settlement agreement, creditors retain the right to sue the bankrupt's co-obligors to claim the full debt owed by them; those co-obligors are entitled to intervene in the settlement ratification proceedings to protect their own interests.
Persons claiming ownership of assets in the bankrupt's possession may apply for their recovery; the trustees may accept such applications with the delegated judge's approval. If a dispute arises, the matter shall be referred to the competent court.
Recovery may also be specifically claimed for commercial instruments and other unaccepted documents found in the bankrupt's possession at the time of opening the bankruptcy proceedings if the owner delivered them to the bankrupt solely for a specific purpose.
Recovery of goods, in whole or in part, may also be claimed as long as they are identifiable in kind, if they were delivered to the bankrupt on deposit or for sale on account of the owner. Recovery of the price may also be claimed if the goods were sold and the price not remitted to the owner, provided payment was not made by set-off or by payment into the current account.
A seller may withhold delivery of goods and other movables sold if they have not been delivered to the bankrupt or dispatched to him, or to another person on his behalf.
The seller may recover goods dispatched to the bankrupt in order to exercise his right of retention, provided they have not been delivered to the bankrupt's warehouses or to a place where he has apparent control (Apparente disposition).
If the buyer received the goods before his bankruptcy, the seller may not invoke a claim for rescission, recovery, or any privilege whatsoever.
In cases where the seller may exercise his right of retention, the trustees may, after obtaining the delegated judge's authorisation, take delivery of the goods upon paying the price.
If the trustees do not take this step, the seller may rescind the sale, provided he reimburses the mass of creditors for any instalment already paid on account. He may also claim damages from the mass of creditors for any resulting loss.
The recovery rights of the non-bankrupt spouse shall be determined in accordance with the rules applicable to both spouses pursuant to their personal law and their marriage contract.
Creditors of the bankrupt who lawfully hold a pledge or a special privilege over a movable shall have their names entered in the register of the creditors' union only as a reminder.
The trustees may at any time, after obtaining the delegated judge's authorisation, recover pledged property for the benefit of the bankruptcy estate, upon payment of the debt.
If the trustees do not recover the pledged property and the creditor sells it, the trustees shall receive any surplus over the debt; if the price is less than the debt, the pledgee creditor shall participate in the remaining balance together with the ordinary creditors' union.
The trustees shall submit to the delegated judge a statement of the names of creditors claiming a privilege over movable property; the judge shall, where appropriate, authorise payment of their debts from the first available funds. If a dispute arises over the privilege itself, the delegated judge shall refer the matter to the competent court.
If distribution of the proceeds of immovables takes place before distribution of the proceeds of movables, or if both distributions occur simultaneously, creditors holding a privilege or mortgage over immovables who have not recovered all their debts from the immovables' proceeds shall participate in the distribution of the movables' proceeds in competition with unsecured creditors for what remains of their debts.
If one or more distributions of cash funds from the proceeds of movables are made before distribution of the proceeds of immovables, creditors holding a privilege or mortgage whose debts have been verified shall participate in the distribution proportionally to the portion of their debt not covered by the pledge or immovable security, after deducting the privileged portion up to the assessed value of their pledge or immovable security.
After the sale of immovables and final settlement of the accounts of privileged and mortgage creditors in order of their rank, any creditor who, based on his rank, is entitled to claim more than the value assigned to the asset subject to his security, may not recover the full debt from the proceeds of immovables beyond that value.
Mortgage creditors whose share in the distribution of immovable proceeds covers only part of their debts shall be subject to the following rule: their rights in the fund allocated to the ordinary creditors' union shall be proportional to the remainder of their debts not covered by the immovable proceeds, and the amount thus determined shall be added to their shares of the ordinary distribution fund.
Creditors who have no share in the distribution of immovable proceeds shall participate as ordinary creditors in the settlement and all acts relating to the ordinary creditors' union.
Part Five: Spouse's Rights.
Assets belonging to the non-bankrupt spouse that are proven to be acquired from sources independent of the bankrupt spouse's activities shall not form part of the bankruptcy estate, unless otherwise established pursuant to Articles 626 and 628.
Assets of the non-bankrupt spouse whose acquisition cannot be proved to have originated from sources independent of the bankrupt spouse shall be deemed part of the bankruptcy estate, unless the non-bankrupt spouse proves otherwise by any means of evidence.
If the non-bankrupt spouse has paid debts on account of the bankrupt spouse, he or she shall have a right of recourse against the bankruptcy estate for amounts paid, to the extent that such payments benefited the estate.
If the spouse was a merchant at the time of marriage, or was without a profession at that time, the immovable assets acquired by the non-bankrupt spouse after the marriage shall be subject to a compulsory mortgage created by operation of law for the benefit of the mass of creditors, from the date of the bankruptcy judgment.
The non-bankrupt spouse is also entitled to recover assets purchased during the marriage period if she proves that the purchase price came from her personal funds, independent of the bankrupt's assets.
The following acts are deemed commercial by their very nature (Nature propre), as are all acts that may be considered analogous to them by reason of their similar characteristics and purposes (Caractères identiques):
1. See Legislative Decree No. 120 of 16/9/1983 on the organisation of the Beirut Stock Exchange; Decree No. 4808 of 29/1/1982 on the internal regulations of the Beirut Stock Exchange; and Legislative Decree No. 29 of 8/5/1967 defining the powers of the Government Commissioner to the Beirut Stock Exchange.
2. See Law No. 78 of 21/11/1987 on the regulation of the money-changing profession in Lebanon.
3. See the Regulation on Creditors and Auctions issued on 26/9/1934.
4. Regarding insurance contracts, see Article 9 et seq. of Decree No. 9812 of 5/4/1968 on the organisation of insurance entities, and Decision No. 109/L.B. of 21/7/1937 on the regulation of insurance companies and the collection of fees and savings.
5. See the Mining Regulations issued pursuant to Decision No. 113/L.B. of 9/8/1933.
The following are also deemed maritime commercial acts:
All acts performed by a merchant for the needs of his trade are also deemed commercial in the eyes of the law. In the presence of a partner, a merchant's acts shall be presumed to have been performed for that purpose, unless the contrary is proved.
A general partnership is one that operates under a specific firm name and is formed between two or more persons who are personally and jointly liable for the debts of the company.
The constitutive instrument may be notarised or privately signed. However, in the latter case, as many copies of the instrument must be drawn up as there are partners.
Within the month of incorporation of the company, a copy or an extract of the constitutive instrument must be filed with the clerk of the court of first instance of the district of the company's registered office.
Within the same period, the company must also be registered in the commercial register of its registered office district. Such publication shall be in summary form and shall contain all information useful for third parties to know, in particular:
If an amendment is subsequently made to the constitutive instrument, a new copy thereof must be filed with the court clerk, and registration in the commercial register is also required if the change affects matters that concern third parties.
Failure to file the constitutive instrument with the court clerk, or failure to register it in the commercial register, shall render the company null and void and shall make all partners jointly and severally liable towards third parties where damage has been caused to them.
The nullity arising from failure to publish is not extinguished by the mere passage of time, and any interested party may invoke it. Partners may not invoke it against third parties; however, if publication is made belatedly, only those who dealt with the company before the rectification may invoke the nullity to which the company was exposed.
Every partner in a general partnership is deemed to be carrying on trade personally under the company's firm name; accordingly, each partner acquires the legal status of a merchant. The bankruptcy of the company entails the personal bankruptcy of each partner.
The firm name (Raison Sociale) of the company is composed of the names of all partners or the names of some of them together with the word 'and Partners'. The firm name must at all times correspond to the company's current membership (Personnel Actuel). Any person extraneous to the company who knowingly consents to the inclusion of his name in the company's firm name shall become liable for its debts towards any person misled thereby.
Except for transfers expressly provided for in the constitutive instrument, no partner may assign his share in the company's capital to a third party without the consent of all partners and compliance with the publication formalities. However, a partner may assign to a third party the rights and benefits related to his shareholding, since such an arrangement is binding only between the contracting parties.
The right to manage the affairs of the company belongs to all partners, unless the company's articles or a subsequent instrument provide that management be entrusted to one or more partners or to another person, even an outsider to the company.
Managers (Gérants) may be removed in the same manner in which they were appointed; however, if the removal is wrongful, it may give rise to a claim for compensation under the conditions set out in Article 822 of the Code of Obligations. Where a new manager is appointed to replace a regular manager, this replacement must be published.
Managers may carry out all acts necessary for the normal operation of the company's enterprise, unless their authority is limited by the company's articles.
Managers may not enter into any agreement for their own account with the company, or any agreement in which they or any of them have a direct or indirect interest, without specific authorisation from the partners renewed as the case may be each year. Ordinary contracts relating to operations normally carried out by the company with its clients are exempt from this prohibition.
Likewise, managers may not manage an enterprise similar to that of the company unless they obtain authorisation renewed annually.
Where several managers exist, each of them has the right to object to transactions that the others intend to carry out. In such case, the decision shall be taken by majority vote of the said managers, unless the objection is based on the ground that the contemplated act is contrary to the company's articles, in which case it is for the court to assess the nature of the act.
The company shall be bound by acts performed by the managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use that signature in furtherance of their personal interests, unless the third party is in bad faith.
Creditors of the company may sue it; however, before doing so, they must send it a formal notice demanding payment. They may also sue any partner who was a member at the time of the contract. Such partners shall be jointly and severally obligated to make payment from their personal assets.
The general causes of dissolution applicable to all companies are:
A general partnership is also subject, in addition to the foregoing, to the following specific causes of dissolution:
Unless the company's articles provide otherwise, a general partnership, upon the death of one of its partners, shall continue among the surviving partners, unless the deceased leaves a spouse or descendants to whom his rights pass. If so, the company shall continue with the spouse or descendants of the partner, and they shall have the status of silent partners (commanditaires).
In all cases, the value of the rights of the deceased or excluded partner shall be determined by a special inventory, unless the company's articles provide for another method of valuation.
The dissolution of a company — except where dissolution occurs automatically pursuant to the constitutive instrument — must be published in the same manner and within the same period as the company itself. The same procedure applies upon the exclusion of a partner and upon the continuation of the company after the death of one of its members.
After dissolution, commercial companies retain their legal personality for the period required for liquidation, and only for the purposes of that liquidation.
If the company's articles do not provide for the appointment of the liquidator or liquidators, and the partners do not agree on their choice, they shall be appointed by the court in whose district the company's registered office is situated, from among its members.
The result of the selection or the court order appointing the liquidators must be published by those liquidators.
On assuming their duties, the liquidators must draw up an inventory of assets together with the managers of the company's affairs.
The liquidators shall collect the debts owed to the company by third parties or by the partners, pay the company's debts, sell its assets, and carry out all acts required by the liquidation. However, they may not continue to operate the company's enterprise, nor dispose of the company's establishment as a whole, except pursuant to a specific authorisation from the partners.
The liquidators must provide the partners, upon request, with all information on the state of the liquidation. However, no obstacles to the liquidation may be raised on account of unlawful claims.
The partition shall be carried out in accordance with the conditions of the partnership agreement and shall also be governed by the provisions of Articles 941 and 949 of the Code of Obligations.
In all commercial companies, and without prejudice to actions that may be brought against liquidators in their capacity as such, the actions of the company's creditors against a partner, his heirs, or his successors in title shall be extinguished by prescription after five years from the dissolution of the company, or from the departure of a partner with respect to actions directed against that partner. The prescription period shall run from the date of completion of publication in all cases where publication is required, and from the date of finalisation of liquidation for actions arising from the liquidation itself. Prescription may be suspended or interrupted in accordance with the rules of general law.
The proof of commercial contracts is not in principle subject to the exclusive rules established for civil contracts; accordingly, subject to the exceptions arising from special legal provisions, the contracts referred to may be proved by all means of evidence that the judge deems appropriate to accept in accordance with commercial custom and usage.
In commercial matters, the date of private instruments may be proved against third parties by all means of evidence. The date of negotiable instruments and the date of their endorsement shall be deemed valid until the contrary is proved.
Co-debtors under a commercial obligation are presumed to be jointly and severally bound by that obligation; this presumption also applies to guarantees of commercial debts.
The legal rate of interest in commercial matters is fixed at nine per cent.
For the purpose of establishing the fair price and market price, reference shall be made to stock exchange prices and mercuriales, unless there is a contrary agreement.
No commercial obligation to perform an act or a service shall be presumed to be gratuitous; if the parties do not specify a fee, commission, or brokerage, the remuneration customary in the profession shall be due.
In commercial matters, a court may not grant a time limit for rescission except in exceptional circumstances. A party who has applied to the court for rescission of the contract may not thereafter claim performance; however, a party who sought performance may subsequently opt for a claim for rescission. Performance of obligations after a rescission action has been brought shall not preclude the action.
The non-performance of one of the obligations under contracts with successive obligations entitles the party who fulfilled its obligations to request termination of the contract in respect of all obligations not yet performed, without prejudice to its right to claim damages.
In commercial matters, the right to bring a claim is extinguished by prescription after ten years if no shorter period is specified. If a judgment has been issued containing a decision, the claim arising from the res judicata shall be extinguished in all cases after ten years.
Sale(1), credit, transport undertakings(2), insurance undertakings(3), and all contracts whose rules are not determined by this Code are subject to the Code of Obligations and to custom. The special rules relating to public transport enterprises shall also apply to contracts of carriage. Stock exchange transactions, whether on securities or commodities, shall also be subject to special legislation.
The commercial pledge provided for in the following articles is one that secures a commercial debt.
Subject to the following provisions on delivery, the pledge may be proved by all means of evidence that the court deems necessary to accept. A pledge over a registered instrument shall be established by a transfer transaction recorded in the registers of the establishment that issued the instrument and on the instrument itself. For a promissory note(3), the pledge shall be established by an endorsement entered in the register.
A pledge agreement shall not produce its effect as a pledge if the pledged property remains in the possession of the debtor such that it appears to third parties as still part of his free assets from which he may obtain new credit; it is therefore necessary that the pledged property be delivered to the creditor, and even if it remains in the possession of the creditor or of a third party holding it for the creditor's account.
The pledgee must deliver to the debtor upon request a receipt specifying the nature, type, quantity, weight, and all distinguishing marks of the things delivered as pledge.
If the pledge is over fungible things or instruments, the pledge shall remain valid even if those things or instruments are replaced by things or instruments of the same type; if those things or instruments are non-fungible, the debtor may also recover them and replace them with the creditor's consent, provided that the pledge agreement is a notarial deed or a private instrument with certified date.
The creditor must, for the debtor's account, exercise all rights attaching to the things or instruments delivered to him as pledge. If what he received is an option credit instrument (Titres de crédit donnant droit à option), the debtor who wishes to exercise his option right must notify the creditor sufficiently in advance.
If the thing pledged is an instrument whose price has not been fully paid, the debtor, upon being called to pay, must remit the money to the creditor a few days at least before maturity, failing which the pledgee may proceed to sell the instrument.
In the event of non-payment at maturity, the creditor — after a period of two months running from the date of a simple notice sent to the debtor and to the third-party provider of the pledged property if any — may apply to the president of the enforcement department to order the sale of the pledged things by public auction. The creditor shall recover his debt from the proceeds of sale; any surplus shall be remitted to the debtor.
Cover is provided by the drawer or the person on whose account the bill is drawn; this shall not prevent the drawer acting for the account of a third party from remaining personally liable to endorsers and holders of the bill only. Cover exists if, at the maturity date of the bill, the drawee is indebted to the drawer or to the person on whose account the bill was drawn in an amount at least equal to the bill's value.
Acceptance of a bill implies the existence of cover. Such acceptance establishes cover in relation to endorsers. In the absence of acceptance, the drawer must, upon denial of the existence of cover, prove that the drawee had cover at the maturity date, failing which he shall be liable to guarantee the cover, even if the protest was raised after maturity.
A promissory note shall contain: - The words 'to order' or a statement in the text of the instrument itself in the language used for writing it. - An unconditional promise (La promesse pure et simple) to pay a specified sum. - A specification of the maturity date. - A specification of the place of payment. - The name of the person to whom or to whose order payment is to be made. - The date and place where the note is drawn. - The signature of the maker.
An instrument lacking any of the particulars specified in the preceding article shall not be deemed a promissory note, except in the following cases: - A promissory note not specifying the maturity date shall be deemed payable at sight. - If no special place of payment is indicated, the place shown next to the maker's name shall be deemed the place of payment. - If no place of drawing is indicated, the instrument shall be deemed to have been drawn at the place indicated as the place of payment.
The provisions applicable to bills of exchange and relating to the following matters shall apply to promissory notes to the extent compatible with their nature: Endorsement (Articles 325 to 335) Maturity (Articles 348 to 352) Payment (Articles 353 to 363) Recourse for non-payment (Articles 365 to 376) Protest (Articles 377 to 382) Intervention (Articles 383 to 391) Copies (Articles 395 and 396) Alterations (Article 397) Prescription (Articles 398 and 399) Legal holidays, counting of periods, and prohibition on days of grace (Articles 400 to 402)
The provisions applicable to bills of exchange payable at the domicile of a third party or in a place other than the maker's domicile (Articles 317 and 342), and the provisions on interest stipulations (Article 318), discrepancies in amounts (Article 319), the effects of signatures in the case of unauthorised agents (Article 321), and other related provisions shall also apply to promissory notes.
The provisions on aval shall also apply to promissory notes (Articles 345 to 347). In the case specified in the last paragraph of Article 346, if the aval does not indicate for whose account it was given, it shall be deemed given for the maker's account.
The maker of a promissory note is bound in the same manner as the acceptor of a bill of exchange. A promissory note payable at a certain period after sight (Payable à un certain délai de vue) must be presented to its maker for authentication within the time limits specified in Article 338.
Summary Procedure
A joint-stock company is a company whose capital is divided into shares, i.e., negotiable instruments, which operates under a trade name, and which is formed among a minimum of three persons who hold shares in their own names and are not liable for the company's debts beyond the extent of their contributions.
Every joint-stock company, regardless of its object, is subject to the commercial law and its customs. One third of the capital of joint-stock companies whose object is the exploitation of a public utility or public service must be held as registered shares by Lebanese natural persons or by companies whose entire capital consists of registered shares or quotas owned entirely by Lebanese persons and whose articles require the transfer of shares or quotas therein only to Lebanese persons. Any transfer of such shares in a manner different from the preceding paragraph shall be absolutely null and void.
Every bill of exchange not expressly drawn 'not to order' is transferable by endorsement. If the drawer has inscribed on the bill the words 'not to order' or a similar expression, the bill is only transferable by way of an ordinary assignment in accordance with the rules applicable to that. Endorsement may be to the drawee's own order, whether he has accepted the bill or not, to the drawer himself, or to any other party bound by the bill; all such persons may re-endorse the bill.
Endorsement must be unconditional. Any condition attached to an endorsement shall be deemed void. A partial endorsement is null and void. An endorsement 'to bearer' shall be treated as a blank endorsement.
Endorsement must be written on the bill of exchange or on an allonge attached to it, and must bear the endorser's signature. The endorsement need not name the endorsee, or may consist solely of the endorser's signature (blank endorsement); in the latter case, the endorsement shall only be valid if written on the back of the bill or on the allonge.
Endorsement transfers all rights arising from the bill of exchange. If the endorsement is in blank, the holder may:
An endorser guarantees acceptance and payment unless there is a contrary agreement. He may prohibit further endorsement; in such case, he shall not be bound to guarantee against persons to whom the bill is subsequently endorsed.
The holder of a bill of exchange shall be deemed its lawful holder if he establishes his right by an unbroken chain of endorsements, even if the last endorsement is in blank; stricken endorsements shall be deemed void for this purpose. If a blank endorsement is followed by another endorsement, the signatory of that second endorsement shall be deemed to have acquired the bill by virtue of the blank endorsement. If a bill of exchange is taken from its holder by any event whatsoever, the holder who establishes his title in the manner described in the preceding paragraph shall not be required to surrender the bill unless he acquired it in bad faith or committed a gross error at the time of acquisition.
If it appears from the balance sheet submitted by the bankrupt, or from subsequent information, that the bankruptcy estate's assets do not exceed two thousand five hundred Lebanese pounds, or if the dividend to be distributed to creditors appears too small to justify the ordinary procedure, the court may, based on the delegated judge's report or of its own motion, substitute the summary procedure for the ordinary one.
The summary procedure described above differs from the ordinary procedure in the following characteristics:
Negligent or Fraudulent Bankruptcy
A limited partnership operating under a trade name comprises two categories of partners: firstly, general partners (Commandités) who alone have the right to conduct its business and who are personally and jointly liable for the company's debts; and secondly, silent partners (Commanditaires) who provide the capital and each of whom is liable only to the extent of his contribution.
There are two types of limited partnerships: the simple limited partnership and the limited partnership with shares (La Commandite simple et la Commandite par actions).
A limited partnership operates under a trade name that includes only the names of the general partners. If there is only one general partner, the word 'and Partners' may be added to his name. If a silent partner consents to the inclusion of his name in the company's trade name, he shall become liable as a general partner towards any bona fide third party.
General partners, whether all of them manage the company's affairs or whether one or some of them do so on behalf of all, are subject to the same legal rules applicable to members of a general partnership.
A silent partner may not intervene in the management of the company's affairs with respect to third parties, even if such intervention is based on a power of attorney. If he violates this prohibition, he shall become jointly and severally liable until the end together with the general partners for obligations arising from his managerial act; the liability imposed on him may be limited either to the results of the acts in which he intervened, or may extend to all the company's debts, in proportion to the number of those acts.
Simple limited partnerships are subject to the rules applicable to the formation and dissolution of general partnerships, even as regards silent partners.
In limited partnerships with shares, the capital is divided into shares, and the silent partner therein is subject to the same legal rules applicable to a shareholder in a joint-stock company.
Limited partnerships with shares, regardless of their object, are subject to commercial law and its customs.
The legal rules applicable to joint-stock companies shall apply to the formation and operation of limited partnerships with shares.
All obligations imposed by law on board members of a joint-stock company shall apply to managers of a limited partnership with shares.
The number of auditors must be at least three, including a court-appointed accountancy expert designated by the president of the court by a decision. General partners may not be selected as auditors. They shall meet as a supervisory council as often as required by the supervision and investigations they are required to conduct. The term of the supervisory council shall be determined in the company's articles, but the initial council may only be appointed for one year.
All general assembly resolutions, other than those relating to the ratification of managerial acts, shall implicitly require the personal consent of the general partners in accordance with the rules set out in the company's articles.
A current account exists whenever two persons, whose mutual business requires them to make reciprocal deliveries of funds, agree to convert their mutual debts into simple debit and credit entries forming a single account, so that only the final balance at the closing of that account constitutes a due and payable debt (Du compte courant).
The scope of the current account depends on the parties' wishes; they may make it cover all their transactions or only a specific type thereof. The current account may be maintained for both parties or for one party only; in the latter case, one party is not obliged to lend money to the other unless so agreed.
The existence of a current account does not negate the right to commissions and recovery of expenses on transactions relating to the current account; these shall be entered in the account unless there is a contrary agreement.
Payment by commercial instrument is only deemed final upon collection of its value unless there is a contrary agreement; if its value is not collected at maturity, the recipient may, while retaining it as security and exercising the rights attached to it, debit its value against the payor's account. In the event of the payor's bankruptcy, the recipient may reclaim the instrument, and its value may not be included in the current account.
Payments shall automatically generate interest in favour of the lender against the borrower, calculated at the legal rate unless otherwise specified by contract or custom.
Debts credited to either party in the current account shall lose their specific nature and individual identity upon entry; they shall no longer be capable of individual payment, set-off, legal action, or enforcement, nor shall they be separately extinguished by prescription. Personal or real security attaching to debts entered in the account shall be extinguished unless otherwise agreed.
Neither party shall be deemed a creditor or debtor of the other before the closing of the current account; it is solely the closing of the account that determines the state of the legal relationship between them, giving rise automatically to the global set-off of all account entries, and identifying the creditor and the debtor.
The account shall be closed and settled at the maturity dates agreed by contract or determined by local custom, or at the end of each six-month period. The resulting balance shall constitute a net, due, and payable debt that shall bear interest at the agreed current account rate from the date of settlement, whether transferred to a new account or not.
The contract shall terminate at the time stipulated by agreement; if no time limit has been agreed upon, it shall terminate by the wish of either party; it shall also terminate upon the death, incapacity, or bankruptcy of either party.
The drawer or holder may cross the cheque with the following consequences. Crossing is made by drawing two parallel lines on the face of the cheque; crossing may be general or special. It is general if there is no designation between the lines or merely the word 'banker' or an equivalent. It is special if the name of a banker is written between the lines.
The drawee may not pay a generally crossed cheque (À barrement général) except to a customer or to another banker. The drawee may not pay a specially crossed cheque except to the named banker. If the named banker is the drawee, payment may be made to a customer. A cheque bearing two special crossings may only be paid if the two crossings are for clearing purposes or in one of the other cases provided by law.
The drawer or holder of a cheque may prohibit cash payment by writing transversally on its face the expression 'to be credited to account' (A porter en compte) or an equivalent. In such case, the cheque may only be settled by book entry (credit to account, transfer, or set-off), which shall be equivalent to payment.
Any instrument by which the maker undertakes to deliver a specified sum of money or a quantity of fungible things at a specified place and time may be transferred by endorsement if it expressly bears the words 'to order'. Endorsement shall be subject to the provisions applicable to bills of exchange, unless otherwise provided by law, regulations, or the nature of the instrument.
If a bill of exchange, promissory note, or other endorsable instrument is delivered in payment of a debt, this shall not constitute novation of the contract unless the intention of the parties so requires.
The criminal court of first instance shall hear negligent bankruptcy cases(2) (Banqueroute simple) upon application of the trustees, any creditor, or the public prosecution. The penalty shall be imprisonment for between one month and two years.
Any merchant found in any of the following situations shall be deemed a negligent bankrupt:
Any merchant found in any of the following situations may be deemed a negligent bankrupt:
The costs of an action brought by the public prosecution for negligent bankruptcy may not in any case be charged to the mass of creditors. In the event of a settlement, the Treasury may not claim those costs from the settlement estate.
The costs of an action brought by the trustees on behalf of creditors shall be borne by the mass of creditors if the accused is acquitted, and by the Treasury if convicted, with the Treasury retaining its right of recourse against the convicted party.
The trustees may not bring an action for negligent bankruptcy, nor adopt the status of civil party plaintiff on behalf of the mass of creditors, unless authorised to do so by a resolution of the majority in number of creditors present at a duly convened creditors' meeting.
The costs of a criminal action brought by one of the creditors shall be paid by the Treasury if the accused is convicted, and by the creditor plaintiff if he is acquitted.
Any bankrupt merchant who has concealed his books, concealed part or all of his assets, fraudulently claimed debts that do not exist, whether in entries in his books, in notarial instruments, in private documents, or in letters, or who has removed himself from prosecution and refused to appear, shall be deemed guilty of fraudulent bankruptcy.
The costs of a fraudulent bankruptcy action may in no case be charged to the mass of creditors. If one or more creditors have adopted the status of civil party plaintiff, they shall bear the costs if the accused is acquitted, and the Treasury shall bear them if he is convicted, with the Treasury retaining its right of recourse against the convicted party.
The penalty for fraudulent bankruptcy (Banqueroute frauduleuse) shall be imposed on:
The bankrupt's spouse, ascendants, descendants, and in-laws of the same degree who concealed, attempted to conceal, or disposed of bankruptcy estate property without conspiring with the bankrupt shall be punished by the penalty for theft.
In the cases provided for in the preceding articles, the court of first instance or the court of appeal shall decide the following matters even in the event of an acquittal:
A trustee who commits embezzlement in the management of his duties shall be subject to the penalty prescribed for breach of trust.
Any creditor who reaches an agreement with the bankrupt or any other person for private benefits to be obtained in exchange for his vote at creditors' assemblies, or who enters into a private arrangement giving him a special benefit from the bankrupt's assets, shall be subject to the prescribed penalties.
In addition, the arrangements referred to above shall be declared null and void against all persons, including the bankrupt. The creditor must return to the mass of creditors the cash and amounts received pursuant to those arrangements.
All orders and judgments issued pursuant to the provisions of this chapter shall be posted and published in the manner prescribed for publishing the bankruptcy declaration judgment.
Prosecutions for negligent or fraudulent bankruptcy do not require any modification of the general rules applicable to the administration of the bankruptcy estate.
However, in such cases the trustees are required to deliver to the public prosecution all documents, instruments, papers, and information requested of them.
Documents, instruments, and papers delivered by the trustees during the investigation shall be placed in the court clerk's office; access thereto shall be granted upon the trustees' request, and they may take certified copies thereof.
Rehabilitation
Any company may include in its articles a provision stipulating that its capital is variable, in which case it shall be subject to the provisions of the following articles in addition to the general rules applicable to it according to its specific form. That provision must be published.
When a company has variable capital, its capital may be increased, either by the admission of new partners or by additional contributions from existing partners, and may be reduced by the withdrawal by partners of all or part of their contributions. Capital increases and reductions shall be made freely and without the publication formalities required, unless the company's articles provide otherwise.
Repealed by Article 5 of Legislative Decree No. 54 of 16/6/1977.
The company's articles must specify a minimum amount below which the capital may not fall through the withdrawal of partners' contributions or their departure. That minimum may not be less than one-fifth of the company's capital, and this provision shall be mentioned in the company's articles for publication purposes.
The company's articles may contain a provision allowing the general assembly to decide, by the majority required for amending the articles, to exclude a partner or several partners without depriving them of their accrued rights in the reserve allocated to them.
A partner who leaves the company either voluntarily or pursuant to a general assembly resolution shall remain liable to the partners and to third parties for a period of three years for all obligations that existed at the time of his departure.
If a company has adopted the form of a joint-stock company, its shares must remain registered even after full payment of their price. The company's general assembly or board of directors may be granted the right to object to the transfer of such shares, provided that this right is not abused.
Regardless of the form of the company, it shall not be dissolved by the departure, bankruptcy, incapacity, loss of general legal capacity, or death of any of its partners; it shall remain in existence by operation of law among the remaining partners.
This Code shall apply to agricultural cooperative companies unless the provisions of their special law are contrary to it.
A bank(1) that receives a sum of money on deposit shall become its owner and must return its equivalent in a lump sum or in instalments upon the depositor's first demand, or in accordance with the notice or time-limit conditions specified in the contract. All bank transactions must be supported by written instruments.
If what is deposited at the bank consists of securities (Titre de crédit), the ownership of those securities shall remain with the depositor unless it is proved that the intention was otherwise. Such intention shall be presumed if the depositor has granted the bank in writing and without restriction the right to dispose of those securities, or has granted it the right to return securities of the same type. The provisions applicable to the loan of fungible things shall apply to such deposits.
The rules applicable to the hiring of things shall apply to deposits made in safe-deposit boxes or in compartments thereof. The bank shall be responsible for the safety of the hired boxes.
Under credit facility agreements, the credit provider (Créditeur) undertakes to place certain funds at the disposal of the beneficiary (Crédité), enabling him to draw upon them in a lump sum or in successive instalments according to his needs within a specified period. Amounts repaid or returned by the beneficiary during the term of the contract shall increase the credit available during the remaining period.
The credit provider may terminate the agreement if the beneficiary has become insolvent or was insolvent at the time of contracting without the credit provider's knowledge. If any material reduction in the personal or real security provided by the beneficiary occurs, the credit provider may request additional security or a reduction of the credit amount.
If the security provided is a mortgage, the mortgage registration made at the time of the agreement shall secure, from its date, all drawdowns subsequently made pursuant to the credit facility agreement.
If bank credit is earmarked to be paid to a third party and the bank confirms the credit to the beneficiary, it may no longer be revoked or modified without the beneficiary's consent; the bank becomes directly and irrevocably bound to accept the instruments (Effets) and deposits intended. The bank may recover amounts paid against the principal's account.
Banking operations not mentioned in this chapter are subject to the provisions of the Code of Obligations applicable to the various types of contracts arising from those operations, or to the contracts under which they fall.
Shares, bonds, annuities, and all other negotiable instruments (Des actions, obligations, rentes et tous autres titres négociables) issued in bulk and conferring on their holders equal rights to monetary value may be registered (nominatif), to order (à ordre), or to bearer (au porteur).
If the instrument is to bearer, it shall be transferred by mere delivery. Any holder shall be deemed entitled to exercise the rights attaching thereto; provided the debtor has not received a valid objection, payment made to the holder shall validly discharge the debtor, in good faith.
If the instrument is registered, the holder's right is established by registration in his name in the books of the issuing body. Ownership of such an instrument shall be transferred by this registration.
Transfer of a registered instrument shall be effected by a declaration recording the transfer in the books and signed by the transferor or a person authorised by him. The issuing body may, before registering the transfer, request from the person making the declaration proof of his identity.
Registered instruments may include detachable coupons conferring on their holder the right to collect maturities, distributions, and interest (these are called mixed instruments).
Negotiable securities instruments issued to order shall be transferred by endorsement. Their endorsement shall be governed by the same rules as the endorsement of bills of exchange, unless different provisions arise from the law, regulations, or the nature of the instrument.
After ten years from the declaration of bankruptcy, the bankrupt shall be automatically rehabilitated without any formality if he was not found guilty of negligent or fraudulent bankruptcy. Rehabilitation in this manner cannot be denied to the bankrupt on the grounds of his failing to pay his debts.
Rehabilitation shall occur automatically for a bankrupt who has paid all debts owed by him in principal, interest, and costs; interest shall not be demanded for a period exceeding five years. For the rehabilitation to take effect, the bankrupt must prove payment, which shall be confirmed by the delegated judge or, if the case has ended, by the president of the court.
Rehabilitation may also be granted to a bankrupt of recognised integrity:
Every rehabilitation application shall be filed with the attorney-general at the court that issued the bankruptcy judgment, together with the instruments and supporting documents. The attorney-general shall refer all papers to the court together with his reasoned opinion.
The court clerk shall send a registered letter notifying each creditor whose debt is verified against the bankruptcy estate, or recognised in a subsequent judicial decision, and who has not received full payment, of the rehabilitation application.
Any creditor who has not been fully paid the dividend stipulated in the settlement agreement or who has not fully released the debtor may, within one month of receiving such notice, file an objection to the rehabilitation with the court.
After expiry of the period, the results of the required investigations and the creditors' objections shall be referred to the attorney-general to whom the application was submitted; he shall forward them together with his reasoned opinion to the president of the court that issued the bankruptcy judgment.
The court shall, where appropriate, summon the rehabilitation applicant and the objectors and shall hear them in camera; the applicant may be assisted by counsel. In the case of full payment of debts, the court may limit itself to verifying the evidence of payment and rule accordingly.
If the application is refused, it may not be renewed until after one year. If the application is granted, the judgment issued by the court of first instance or the court of appeal shall be entered in the register of the bankruptcy court or the court having jurisdiction at the bankrupt's domicile.
A commercial rehabilitation application shall not be considered for fraudulent bankrupts, nor for persons convicted of theft, embezzlement, fraud, or breach of trust, unless they have first obtained their criminal rehabilitation.
Rehabilitation of the bankrupt may be granted after his death.
Special Provisions for Bankruptcy of Companies
A joint venture (société en participation) is distinguished from other commercial companies in that its existence is confined to the contracting parties and it is not intended to be disclosed to third parties.
The agreements concluded between the parties freely determine the mutual rights and obligations of the partners and allocate profits and losses among them, subject to the application of the general principles specific to the number of partners.
The existence of the agreements referred to above may be proved by all means of evidence accepted in commercial matters.
Joint ventures are not subject to the publication formalities imposed on other commercial companies.
A joint venture does not have legal personality.
Third parties shall only have a legal relationship with the partner with whom they contracted. However, a joint venture that discloses itself to third parties as such may be treated by them as a de facto company.
The company may not issue shares or negotiable instruments transferable or tradeable for the benefit of the partners.
In addition to the rules set forth in the preceding chapters, companies shall be subject to the following provisions:
All commercial companies, other than joint ventures(1), may obtain a preventive settlement and may also be declared bankrupt. A company that is in the course of liquidation may also be declared bankrupt.
The application for a preventive settlement or the declaration seeking a bankruptcy judgment must be signed by the partner or partners who have authority to sign on behalf of the company if it is a general partnership, by all general partners if it is a simple limited partnership, and by the legal representative if it is any other type of company.
All partners in general partnerships(3) and all commandités in limited partnerships(4) must also, each as regards himself, make the required declaration within twenty days of the suspension of payments. The bankruptcy of the company shall automatically entail the personal bankruptcy of each general partner.
In all companies, the trustee in bankruptcy may compel partners to complete payment of the company's capital even before the maturity dates set in the company's articles.
If a company becomes fraudulently or negligently bankrupt, a criminal liability action may, where appropriate, be brought against partners of a general partnership and against commandités of a limited partnership, and also against directors, board members, and managers of joint-stock companies and limited liability companies.
All prior legislative texts dealing with the matters covered by this Code shall lose their legal force from the date this Code becomes enforceable. This Code shall enter into force six months after its publication in the Official Gazette.
Companies formed pursuant to the Commercial Code promulgated on 24 March 1942 must comply with the provisions of the Commercial Code as amended by this Law, under penalty of dissolution of the company, within three months of the date of entry into force of this Law.