Holding Companies in Lebanese Law
Holding companies (شركة قابضة) occupy a distinct regime in Lebanese commercial law, governed by Legislative Decree No. 45 of 24 June 1983 — a special statute whose 12 articles override the general SAL (Société Anonyme Libanaise) rules whenever they conflict, while leaving the SAL framework as the gap-filler for everything else. A Holding is incorporated in SAL form and remains subject to all SAL provisions of the Code of Commerce except where the Decree itself carves out a different rule. The legislator’s design objective was to attract regional investment to Lebanon by creating a parent-company vehicle for holding equity stakes in other Lebanese and foreign companies, paired with a privileged tax regime that exempts the Holding from ordinary income tax in favour of a fixed annual lump-sum tax.
Legislative Decree No. 45/1983 was issued under the legislative-delegation authority granted by Law No. 36/82 of 17/11/1982 (which authorised the government to issue legislative decrees, extended by Law No. 10/83 of 21/5/1983).
The 12-article text has seen four amendment waves over 39 years (1991–2022), three of which were enacted through annual Budget Laws rather than dedicated reform statutes. Lebanese constitutional scholarship calls this drafting practice “budget riders” (les cavaliers budgétaires, فرسان الموازنة) — substantive provisions inserted into the annual Budget Law that fall outside the constitutional definition of a budget. The Lebanese Constitutional Council has repeatedly held that such riders violate Article 83 of the Constitution and has struck down several on that basis (see, e.g., Constitutional Council Decision No. 23/2019 of 12/9/2019). Provisions that passed without timely constitutional challenge, however, remain in force as a matter of positive law — which is the case for the three Budget-Law amendments to the Holding regime.
Amendment chronology:
- Law No. 89 of 7/9/1991 (the 1991 Budget Law, amending Articles 5 and 6 of Decree 45/1983) — adjusted the SAL carve-outs in Article 5 and revised Article 6 tax provisions.
- Law No. 409 of 7/2/1995 (the 1995 Budget Law, amending Article 6) — further refined the Holding tax regime.
- Law No. 772 of 11/11/2006 (a dedicated amendment statute) — abolished the prior requirement that at least two Lebanese persons sit on the Holding’s board, and modified the Article 4 concentration cap.
- Law No. 10 of 15/11/2022 (the 2022 Budget Law, amending Articles 6 and 7) — raised the fixed annual lump-sum tax from its prior ceiling of LBP 5 million to LBP 50 million, and recalibrated the Article 7 penalties.
I. Name and Designation
The Decree opens with a mandatory naming and disclosure rule for the company itself:
Article 1 — The company contemplated by this Legislative Decree shall bear the designation “Holding Company” (شركة قابضة) or “Holding” (شركة هولدنغ).
>
The designation “Holding Company” or “Holding” shall appear clearly beside the company name on all documents, announcements, publications, and other instruments issued by the company.
The two Arabic designations are legally equivalent — either may be chosen at incorporation. The chosen designation, however, becomes a mandatory element of every document the company issues, on pain of liability. The legislative rationale is plain: a Holding typically deals with target companies, lenders, and counterparties who need to know at first sight that they are dealing with a special-regime entity rather than an ordinary SAL.
II. Exclusive Object of the Holding
Article 2 enumerates the five activities to which the Holding’s object is exclusively restricted:
Article 2 — The object of the company shall be exclusively limited to the following:
>
1) Owning shares or interests in SALs or SARLs, whether Lebanese or foreign, existing or to be formed, or participating in their incorporation.
>
2) Managing the companies in which it owns partnership interests or shareholdings.
>
3) Lending to the companies in which it owns partnership interests or shareholdings, and guaranteeing them vis-à-vis third parties. To that end, the Holding may borrow from banks and issue debt securities under Articles 122 and following of the Code of Commerce, provided that the aggregate value of the debt securities outstanding at any time does not exceed five times the Holding’s capital plus reserves as shown in the last approved balance sheet.
>
The Holding may not lend to companies operating in Lebanon if its participation in their capital is less than twenty percent.
>
4) Owning patents, discoveries, concessions, registered trademarks, and other intangible rights, and leasing them to entities located in Lebanon and abroad.
>
5) Owning movable or immovable assets, provided they are exclusively dedicated to the needs of the company’s business, and subject to the law governing the acquisition of immovable rights in Lebanon by non-Lebanese persons.
The enumeration is exhaustive — any activity outside these five paragraphs is prohibited, and the breach triggers a tax sanction that subjects the company to the ordinary income tax applicable to capital companies. Two points within paragraph 3 warrant particular attention:
- The 5× cap on debt securities issued against capital plus reserves. This cap preserves the Holding’s solvency and limits its over-exposure to subscribers of debt securities.
- The 20% threshold for lending to Lebanese operating companies. A Holding may not lend to a Lebanese operating company in which it holds less than 20% of capital. The threshold ensures that intra-Lebanon lending by the Holding is tied to a genuine equity relationship rather than functioning as a stand-alone financing channel for unrelated parties.
III. Prohibition on Activities Outside the Object
Article 3 — The company is prohibited from directly engaging in any activities outside its object as exclusively defined in Article 2 above.
The sanction for breach is set out in Article 7 of the Decree itself: full income tax on the company’s net annual profits from all its activities (not only the breaching activity), plus a penalty equal to 50% of the tax due. The sanction is severe because the breach strips the company of its “Holding” status for the entire fiscal year and treats it as an ordinary capital company for tax purposes.
IV. Concentration Cap
Article 4 — The company may not directly own a participation exceeding forty percent in more than two companies operating in the same industrial, commercial, or non-commercial activity in Lebanon, where such participations would violate the prohibitions in Article 1 of Legislative Decree No. 32 of 15 August 1967.
>
The provisions of this Article do not apply to investments outside Lebanon.
The provision establishes an anti-concentration rule: a single Holding may not hold more than 40% in more than two same-sector companies operating inside Lebanon. The reference to Legislative Decree No. 32 of 5/8/1967 on combating monopolies and price gouging means a breach also triggers the penalties of that decree (see Article 8 of Decree 45/1983, below). The Article 4 cap does not apply to investments in companies operating outside Lebanon, where Lebanese anti-monopoly rules have no extraterritorial reach.
V. SAL Form with Seven Statutory Carve-outs
Article 5 is the procedural backbone of the Holding regime. A Holding is incorporated as an SAL and remains subject to SAL law for everything not addressed in the Decree, with seven specific carve-outs covering capital denomination, board composition, registered office and meeting venues, the auditor, commercial-registry filings, publication of accounts, and tax compliance. The list of carve-outs has itself been amended twice — by Law No. 89/1991 and Law No. 772/2006 — and the current text reads:
Article 5 (as amended by Law No. 89 of 7/9/1991 and Law No. 772 of 11/11/2006) — Holding companies shall be incorporated in SAL form and shall be subject to the rules applicable to SALs in all matters not in conflict with the provisions of this Legislative Decree, with the following exceptions:
>
1) The company’s capital may be denominated in foreign currency, and the accounts and balance sheets may be kept in the currency in which the capital is denominated.
>
2) Holding companies are exempt from the requirement of having Lebanese natural or juridical persons on their boards of directors, and the chairman of the board need not hold a work permit if he is a non-Lebanese non-resident.
>
3) The principal office of the company must be in Lebanon, where the statutory registers are kept and the company’s documents preserved. Board and general assembly meetings may, however, be held outside Lebanon if the company’s bylaws so provide. The annual ordinary general assembly must be held in Lebanon within a maximum of five months from the end of the fiscal year as defined in the bylaws.
>
4) The company must appoint at least one principal auditor who is resident in Lebanon and a Lebanese national, whose appointment may be for three years. The company is exempt from the requirement of appointing a supplementary auditor.
>
5) The company is registered in the General Commercial Register under the Code of Commerce. A Special Holding Companies Register shall be kept at the Beirut Court of First Instance, in which Holding companies are registered and in which the data and information that the law requires SALs to publish are recorded.
>
6) Notwithstanding Article 101 of the Code of Commerce, the company may limit its publications to the balance sheet of the fiscal year and the names of board members and auditors in the Special Holding Companies Register.
>
7) The Holding is subject to the obligation to keep accounting records, prepare annual financial statements, file returns, and pay the taxes due to the competent income-tax authority, in accordance with the legal provisions applicable to capital companies in all matters not in conflict with the provisions of this Legislative Decree. The company is subject to a fine of fifty thousand Lebanese pounds per month if it is late in filing the statutory return, in addition to the taxes due.
The seven exceptions and their practical implications follow.
1. Foreign-Currency Capital and Accounts
Unlike the general rule that requires an SAL’s capital to be denominated in Lebanese pounds, the Holding may denominate its capital in a foreign currency and keep its accounts and balance sheets in that same currency (Article 5 §1). The provision has practical value in Lebanon, particularly given exchange-rate volatility since 2019. It is especially relevant for Holdings investing abroad in US dollars or euros that wish to preserve the real value of their capital.
2. Exemption from the Lebanese-Director Requirement
No Lebanese — natural or juridical — is required on the Holding’s board, and the chairman of the board needs no work permit if he is a non-Lebanese non-resident (Article 5 §2). The pre-2006 text required at least two Lebanese natural persons on the board of directors; the current text (after Law No. 772 of 11/11/2006) abolished that requirement entirely. The liberalisation is significant for attracting foreign investors who wish to establish Holdings with entirely international boards.
3. Lebanese Head Office with Meeting Flexibility
The principal office must be in Lebanon, where the statutory registers and documents are kept, but the board and the general assembly may meet outside Lebanon if the bylaws expressly so provide. The annual ordinary general assembly, however, must be held in Lebanon within five months of the fiscal year-end (Article 5 §3). The rule preserves Lebanese judicial control over the company while avoiding undue restrictions on its international operations.
4. Single Lebanese Auditor
The Holding must appoint at least one auditor who is resident in Lebanon and a Lebanese national, for a term that may run up to three years (Article 5 §4). Two features distinguish this from the general SAL rule. First, the nationality-and-residence requirement is statutorily imposed on the Holding’s principal auditor — the Code of Commerce imposes no such requirement on ordinary SAL auditors. Second, the three-year term departs from Article 172 of the Code of Commerce (as amended by Law No. 126 of 29/3/2019), which sets the auditor term at one year, renewable for a maximum of five consecutive years.
The single-auditor authorisation, by contrast, is no longer a meaningful departure from the SAL baseline: post-2019, Article 172 itself reads “one or more commissioners,” meaning a single auditor is now the SAL default unless the company chooses otherwise. The Decree’s separate exemption from appointing a supplementary auditor has similarly lost most of its substance after Law 126/2019 amended Article 173: appointment of the supplementary auditor is now optional, triggered only on request of a shareholder or group of shareholders holding 10% of capital, whereas under the pre-2019 text it was mandatory and ordered by the President of the Court of First Instance.
5. Special Holding Companies Register
The Holding is registered in the General Commercial Register under the Code of Commerce, but a Special Holding Companies Register kept at the Beirut Court of First Instance exists in addition (Article 5 §5). Mandatory publications of annual financial statements, board members, and auditors are made in this Special Register rather than in the General Commercial Register, contrary to what Article 101 of the Code of Commerce otherwise requires for SALs (Article 5 §6).
6. Tax Filings and the Fixed Late-Filing Penalty
The Holding is subject to ordinary record-keeping, annual tax-return, and tax-payment obligations under capital-company tax rules. Late filing carries a fine of LBP 50,000 per month (Article 5 §7). The fine is fixed by the original 1983 text of the Decree and has not been adjusted by subsequent Budget Laws; its nominal value is therefore minimal in current terms, but the obligation remains technically applicable.
VI. Tax Regime
Article 6 is the core of the Holding regime’s commercial attractiveness: an exemption from income tax on profits combined with an exemption from the Movable Capital Revenue Tax on distributions, subject to six specific exceptions that remain taxable:
Article 6 (as amended by Law No. 89 of 7/9/1991, Law No. 409 of 7/2/1995, and Law No. 10 of 15/11/2022) — Holding companies are exempt from income tax (Chapter I of the Income Tax Law) on their profits, and the distributions they make are exempt from the Movable Capital Revenue Tax.
>
The company remains subject to the following:
>
(a) Interest received by the Holding on loans to companies operating in Lebanon is subject to the Movable Capital Revenue Tax (Chapter III of the Income Tax Law) if such interest derives from loans of less than three years.
>
(b) The capital gain on disposal by the Holding of its shareholdings or interests in Lebanese companies is subject to the tax under Article 45 of the Income Tax Law if such shareholdings or interests have been held by the company for less than two years.
>
(c) Amounts received by the Holding from its Lebanese subsidiaries as management fees, service charges, and the like are subject to a 5% tax, provided such fees do not exceed limits set by a decree issued upon the proposal of the Minister of Finance.
>
(d) Income received by the Holding from leasing to Lebanon-based entities the patents and other intangible rights it owns is subject to a 10% tax, with no additional surcharges.
>
(e) The Holding is subject to a fixed annual lump-sum tax of fifty million Lebanese pounds. This tax applies to the Holding from its first fiscal year, regardless of that year’s duration.
>
(f) Taxes due are paid in a single payment at the time of return filing within the prescribed period. In case of breach of tax obligations, the penalties under Law No. 44 of 11/11/2008 and its amendments (the Tax Procedures Law) apply.
>
This text takes effect from the 2022 fiscal year onwards.
Analysis of the Six Exceptions
Items (a) through (d) define the situations in which the Holding remains subject to specific taxes despite the general exemption. The legislative pattern is the preservation of tax revenues on activities exercised inside Lebanon or benefiting from the Lebanese environment:
- Interest on short-term loans (less than 3 years) to Lebanese companies is subject to the Movable Capital Revenue Tax (Chapter III of the Income Tax Law). The provision prevents the use of the Holding form as a short-term tax-free intra-Lebanon lending tool.
- Capital gain on disposal of Lebanese shareholdings held less than two years is subject to the tax under Article 45 of the Income Tax Law. Short-term speculation on Lebanese shareholdings does not enjoy the exemption.
- Management fees at 5% apply to amounts received by the Holding from its Lebanese subsidiaries, capped at limits to be set by ministerial decree on the proposal of the Minister of Finance.
- Patent and intangible-right leasing income at 10%, without additional surcharges, applies to rental income from intangible rights leased to Lebanon-based entities.
The Fixed Annual Tax — LBP 50 Million
Item (e) has the longest history of any provision in the Decree. The 1983 text provided a sliding scale: 6% of capital plus reserves up to LBP 50 million, then 4% (between 50 and 80 million), then 2% (above 80 million), with a maximum ceiling of LBP 5 million. The 2022 Budget Law (Law No. 10 of 15/11/2022) replaced the sliding scale with a uniform fixed annual tax of LBP 50 million, applicable to the Holding from its first fiscal year regardless of that year’s duration. The pre-amendment text remains preserved in the Decree for reference, but the legally operative version is the post-2022 single-rate formulation.
Item (f) refers to the Tax Procedures Law (Law No. 44 of 11/11/2008, as amended) for penalties, replacing the original 1983 own-penalty (half per mille per day of payment delay). The shift from a stand-alone penalty to the unified Tax Procedures Law penalty regime aligns the Holding tax regime with the rest of Lebanese tax law.
VII. Penalty for Breach of the Object
Article 7 (as amended by Law No. 10 of 15/11/2022) — In case of breach by the Holding of the provisions of Article 3 of this Legislative Decree, the company becomes subject, for the fiscal year in which the breach occurred, to the income tax applicable to capital companies operating in Lebanon on its entire net annual profits derived from all its activities, plus a penalty equal to 50% of the tax due.
If the Holding engages in a single activity outside its exclusive object — for example, direct commercial activity, or lending to a Lebanese operating company in which it holds less than 20% of capital — it loses “Holding” status for the entire fiscal year for tax purposes. It becomes subject to capital-company income tax (Chapter I) on its full annual profits, plus a 50% penalty on top of the tax due. The pre-2022 text offered an option between (i) income tax plus a 20% penalty, or (ii) a 3-per-mille tax on capital plus reserves, with the higher figure applying. The 2022 amendment unified the equation and made it more severe (full tax plus 50% penalty).
VIII. Application of the Anti-Monopoly Law
Article 8 provides that if the Holding breaches Article 4 of the Decree, the penalties under Legislative Decree No. 32 of 5/8/1967 on combating monopolies and price gouging apply. A breach of the 40% cap in same-sector companies therefore triggers — in addition to the Article 7 tax penalty — the financial and administrative penalties of the anti-monopoly statute. The integration of the two regimes confirms that the Holding was designed as an investment vehicle, not a tool for circumventing competition rules.
IX. Transitional and Final Provisions
- Article 9 granted companies established before 24/6/1983 that were in fact carrying on Holding-company activities a six-month grace period to bring themselves into compliance and register in the Special Register. Companies that did not regularise within this period remained subject to ordinary tax law.
- Article 10 integrates the Decree with other applicable laws: “All provisions of laws in force apply to the Holding company in all matters not in conflict with the provisions of this Legislative Decree.” The Decree thus operates as a special law (lex specialis) for the Holding that prevails over the general SAL rules on every point it addresses, while the general SAL rules — together with the Code of Commerce and the Income Tax Law — fill the gaps on every point it does not address.
- Article 11 authorised the executive to issue implementing decrees on the proposal of the Minister of Finance — an authority that has been exercised, notably to set the management-fee caps for the purposes of Article 6 §(c).
Integration with Other Laws
The Holding company is subject, alongside the provisions of Legislative Decree No. 45/1983, to the following provisions of the Lebanese legislative framework:
- The Code of Commerce — all SAL provisions in Book II, particularly those relating to incorporation, capital, shares, the board of directors, the general assembly, financial statements, dissolution, and liquidation. See further The Joint Stock Company — Part 1: Formation, Documents, and Securities (Articles 77–143) and The Joint Stock Company — Part 2: Operations, Dissolution, and Mergers (Articles 144–225 + Book IX).
- The Income Tax Law and the Tax Procedures Law (Law No. 44 of 11/11/2008).
- Legislative Decree No. 32 of 5/8/1967 on combating monopolies and price gouging.
- The law governing the acquisition of immovable rights in Lebanon by non-Lebanese persons — relevant to any immovable assets owned by the Holding.
- Law No. 75 of 27/10/2016 (as amended by Law No. 144 of 16/10/2019 and Law No. 260 of 5/8/2022) — abolished bearer and order shares for Lebanese SALs, requiring nominative form only. Since a Holding is incorporated as an SAL, all Holding shares must be nominative. Non-compliance carries a fine of 50% of capital, suspension of all shareholder rights for one year, and — after two years of non-conversion — transfer of the shares to the Lebanese State.
Conclusion
The Holding company regime in Lebanese law, enacted by Legislative Decree No. 45 of 24/6/1983, is a complete legal framework for the parent company that owns interests in other Lebanese and foreign companies and exercises specific managerial and financing powers, exhaustively enumerated in five activity categories. The regime is distinguished by a comprehensive tax exemption — from income tax (Chapter I) on profits and from the Movable Capital Revenue Tax on distributions — in return for a uniform fixed annual lump-sum tax (LBP 50 million following the 2022 amendment) and six specific exceptions that target revenues from activities inside Lebanon (short-term interest, short-holding-period capital gains, 5% management fees, 10% intangible-right leasing income).
Other features that make the Holding form attractive include: the right to denominate capital in a foreign currency, exemption from the Lebanese-director requirement, the possibility of holding board and general-assembly meetings outside Lebanon (subject to the mandatory in-Lebanon annual ordinary general assembly), the sufficiency of a single Lebanese auditor, and the simplified publication regime through the Special Holding Companies Register at the Beirut Court of First Instance.
The legislative pattern that has accompanied this regime since 1983 deserves note: of the four substantive amendments to the Decree, three (1991, 1995, 2022) were enacted through annual Budget Laws and one (2006) through a dedicated amendment statute. The pattern reflects the reality that adjustments to tax exemptions are typically made within the fiscal package of the annual Budget Laws, while adjustments to the administrative and governance structure (such as the 2006 abolition of the Lebanese-director requirement) are made through dedicated amendment statutes.