SOMALILAND COMPANIES LAW
08/10/2018: A new Somaliland Companies Law (Law No. 80/2018), apparently based US Corporation Acts (reportedly, on the advice of World Bank experts) has been promulgated with effect from its publication in the Somaliland Gazette on 1 September 2018. It has been said that this is a more simpler and modern law, but the change might, in our view, lead to to the loss of the caselaw and regulatory developments that were readily available from the many nearby African, Middle East and Asian countries, with which Somaliland has long commercial links, that have British based companies laws. Access to the US regulatory and caselaw interpretation of the similar Laws (be it the Model Law or whichever state corporation Law this Law was upon) will therefore important for its successful implementation. We have kept a copy (pdf) of the old law below for reference.
The Law as gazetted (in Somali) is available here: Xeerka Shirkadaha Lr. 80/2018
A copy of the Law (in Somali) is also available here with Arrangements of the Articles of the Law which we have added and are in Somali & English (i.e the Arrangemnts only). In time we plan to post here a full English language copy of the Law when we study fully the reported earlier draft English version of the Law and the Somali translation .
- Xeerka Shirkadaha Lr 80/2018 (SLLaw - in Somali)
- Tusmada Xeerka Shirkada Lr 80/2018 (SSLaw - Arrangements of the Articles Som/Eng)
The Arrangements of the Articles above should give a flavour of the contents of the Law which run to a total of 122 Articles arranged in 16 Chapters (or 4 main Parts). It is considerably shorter than the previous Somaliland Companies Laws and whilst that is helpful, many regulations have to be issued soon to amplify the regulatory regime.
Background - (updated July 2015)
The previous Somaliland Companies law
The Indian Companies Act 1913 was extended to the Somaliland Protectorate in 1947 under the Somaliland Indian Companies Act 1913 (Application) Ordinance (No. 18 of 1947). This Act was itself based on the English Companies (Consolidation) Act 1908 and included additional changes to meet the Indian conditions. Similarly, minor changes were made, in the 1947 Somaliland Ordinance, to the 1913 Indian Act to adopt it to the circumstances in Somaliland. For example, references to the ‘Advocate General’ or the ‘Public Prosecutor’ were amended to read the Somaliland ‘Legal Secretary’; ‘Treasury’ was substituted for the ‘Reserve Bank of India’; ‘High Court’ was changed to read initially the Protectorate Court and then later the Somaliland High Court and the Governor of the Protectorate exercised the powers of the ‘Indian Government’. Sections of the Act (such as 2A, 42A, 159 (2), 160 (3), Part VII, sections 278 (2), 282 B (6), 284, 287, 289 and 289) also did not apply to Somaliland.
This is a copy of the Indian Companies Act 1913 (circa 1940s) As Modified by the Somaliland 1947 Ordinance.
The various changes to the Act were often extended to Somaliland under various ‘Applied Indian Acts Ordinances’ and the relevant case law under the Act was also equally applicable in appropriate cases.
Under the Somaliland 1951 Indian Companies Act 1913 – Appointment of Registrar Ordinance (No. 19 of 27 March 1951), and with the establishment as from 1 April 1950 of a separate Legal Department coming under an Attorney General (and a Crown Counsel), the Attorney General’s Legal Department became responsible for the registration of companies in Somaliland. In 1955, for example, six companies were registered (Colonial office, Somaliland Protectorate 1954 and 1955 (HMSO 1957) 22).
On independence, the 1960 Somaliland Constitution confirmed the continued application of all then current Somaliland and the 1961 Act of Union re-confirmed that and Somaliland and Somalia laws shall apply in their respective territories until the adoption of new laws. Therefore, with the emphasis on integration of criminal and public administration the laws, many of the civil laws, remained unchanged, after the union with Somalia, until the 1970s.
Period of union with Somalia
During the 30 year union with Somalia, no dedicated Companies Law was promulgated. A new Somali Civil Code (and a later Civil Procedure Code) was introduced in 1973. The Civil Code (which is still applied in Somaliland) and was based on the Egyptian Civil Code, touches on very aspects aspects of Company law by, for example, confirming, for example, that ‘commercial and economic corporations’ or companies have legal personality (Article 52(3)) and were therefore entitled to the rights of ‘juristic persons’ listed in Article 53 of the Code, such as the rights to own property, have legal capacity and to sue and be sued, and have own domicile. The Code dealt with many other issues including contracts and other obligations as well as issues of insolvency, but in ways that apply to all legal and individual persons. The Code covers very briefly issues of conflict of laws.
On companies law, however, the Italian Civil Code applicable to Somalia before the union continued to hold sway even after the adoption of the Somali Civil Code. The Italian Civil Code which was reintroduced to Somalia at the start of the Italian Trusteeship Administration (AFIS) (with 1942 approved text of the Code coming into force in the territory, with effect from 1 May 1951, as set out in Art. I of Ordinance No. 146 of 28 December 1950) included many provisions covering companies. The relevant parts of the Italian Civil Code which dealt with various forms of companies and corporation were fairly extensive. Briefly, the various forms of companies were Simple Company (Article 2251); Public Corporation (Article 2291); Simple Limited Partnership (Article 2313); Limited Partnership With Shares (Article 2462), all with various degrees of unlimited liability; and finally Corporations (Article 2325) with limited liability. For corporations with limited liability, the founding agreement (constitution) (Article 2328) was formalised before a Notary and was to contain specified information, such as the original subscribers, the name, headquarters, amount of the capital subscribed and paid up, number and kind of shares, number of members of the board of directors etc. The statutes (or articles of association) should contain certain requirements. The registration procedure in Somalia involved the transmission by the Notary of the company constitution to the office of the Regional Court. The Regional Court initialled the founding documents and then passed them to the Office of the Attorney General for consideration and for making sure that the documents conform to the Somali law. The judge of the Regional Court thereupon then ordered the entry of the Company in the Registry of Companies, when the company was then accorded the status of corporate body.
I have, as yet, not been able to trace any translation of these provisions to either Somali or English, and neither have I been able to ascertain when these provisions were extended to the Somaliland regions. I shall be happy to hear any comments or further information on these points - Editor.
The Somaliland Companies Law 2004 - Law No. 25/2004 (REPEALED by the new Law - see above)
A Companies Law which was said by the then Minister of Commerce in July 2002 was drafted after examination of the companies of various countries, such as Kenya, Tanzania, Uganda, India and England was finally submitted to the House of Representatives which passed it on 4 January 2004. A month later, on 7 February 2004, the House of Elders also passed the Law and the then President (Rayaale) signed it shortly afterwards. It is no surprise, therefore, that the Law is an updated version of the previous Somaliland (Indian) Companies Law. Some of the schedules referred to the Law were not originally finalised and we understand that the Ministry is currently working on updating the whole Law and issuing all its necessary Schedules and detailed Regulations.
The Law consists of 310 sections (or Articles) grouped into 17 parts and five schedules of which one schedule (the third) was included in the Law, as passed. Briefly, the Law covers:
- The formation and registration of companies and their types (Part II)
- Issue of Share Capital (Part III)
- Allotment of shares & Debentures (Part IV)
- Share capital increases and reduction (Part V)
- Accounts and Audit (Part VI)
- Company Management and Administration (Parts VIII to X))
- Regulation and investigation (Parts XII to XIV)
- Winding-up and its effects (Part XV)
- Foreign companies in Somaliland (Part XVI)
Types of companies recognised in this Law are: 1. Companies limited by shares; 2. Companies limited by guarantee; and 3. Unlimited companies; which can be either public (formed by 7 or more persons) or private (formed by two or more persons) companies; the difference between the latter two types being that a private company is one which restricts the right of transfer its shares; limits the number of its members to 30 (excluding employee members), and prohibits any invitation to the public to subscribe for any shares of the company (s. 26).
The other type of companies regulated by this Law are Foreign Companies incorporated outside Somaliland which have established a place of business in Somaliland, and must therefore apply to be registered as a foreign company in line with Articles and 292 and 293 of the Law.
The Office of the Attorney General acts as the Registrar of Companies under this Law and exercises also other the regulatory functions set out in the Law. More information about the processes of company incorporation in Somaliland is available in this 2012 Report – Doing Business in Hargeisa (IBRDevelopment / The World Bank) - see pages 80-84 for a practical list of the procedures for setting up a business, which includes the detailed steps of incorporating a company.