Transcript Slide 1
Reforming the
Corporate Legal
Framework- Issues
and Approaches
Second Regional Conference on Prospects and Challenges facing the
Modernization of the Legal Environment to enable Business and
Investment in the MENA Region
Beirut, Lebanon, 22-23 January 2010
Julien Levis- Philippe de Meneval
IFC-World Bank
Business Law in MENA
Examples from World Bank’s lending
operations
– 500 millions USD loan to Egypt (2008) for
specific reforms of the financial sector
(regulation and supervision of banks,
insurance and pensions, regulation of
capital markets);
– 300 millions USD loan to Jordan (2009) for
“recovery under global uncertainty” with
several packages of reforms including a
business environment component
Business Law in MENA
The World Bank’s advisory role
– Ad hoc assessment work
– Investment Climate Assessment, Doing
Business
– Technical Assistance to follow up on
these assessments
The corporate legal framework
What constitutes the corporate legal
framework ?
• Company law, capital markets regulation,
corporate governance, accounting and
auditing, insolvency rules….
• Different types: limited liability, joint stock,
partnerships, State owned companies
• Full corporate cycle: from registration to
liquidation
Different legal and regulatory needs
All these companies have different
needs in terms of:
Protection of shareholders
Management discretion
Board supervision
Minimum capital requirements
Disclosure and transparency
Recent reform trends
New topics have emerged:
Corporate governance: increased
board independence
Groups of companies: specific rules
New approach to insolvency:
reorganization rather criminalization
Fraud and white collar crime.
Different reform trends and issues
Type of
companies
Recent reform trends
Remaining issues
SMEs
(SARL Company
Law)
• Reducing minimum
capital requirements
•Simplified SARL form
(single shareholder)
• Licensing to start
operating
Medium size
(SA Company
Law)
• General updating of the •Weak auditing and
law: suppressing directors accounting standards
warranty shares,
introducing group of
companies, etc.
Listed
Companies
(SA Company
Law + Capital
Market Rules)
• Improving corporate
governance, independent
directors, shareholder
control over related-party
transaction
• Protection of minority
shareholders
•Corporate information
and commercial
registry
Active reforms in MENA
MENA region is relatively active in
corporate legal reforms.
• Several countries amending company
legislation and commercial codes
• Reforms often inspired by international
best practices: OECD principles of
corporate governance, “Doing
Business”, ROSC,…
• …But challenges appear in terms of
reform process
Cross-cutting issues for reformers
Three main challenges:
• Quality and clarity of the “Law on the
book”
• Predictability of Administrative
Implementation
• Fairness and efficiency of Judicial
enforcement
1 - “Law on the Book”
Content of the Law :
Challenges of adapting complex
international standards to local market
needs…
…While updating the main legal framework
(basic codes and institutions)
Organization/hierarchy of legal standards:
Implementation decrees are often lacking
Access to Case law is limited
2 - Administrative implementation
Companies negatively affected by the large number
of instructions and circulars
Fill the vacuum left by the absence of
implementing decrees
Regulation that is not published allows
considerable executive discretion
One option: requiring the publication and
improving the mechanism of formal
publication
3 - Judicial enforcement
Major challenge: fair and efficient judicial
enforcement
• Courts lack resources to handle corporate
matters
• One option: specialized commercial courts
• Is the private sector (business organizations,
lawyers, accountants, notaries, liquidators,
etc.) always seeking judicial enforcement?
Establishing an efficient reform process ?
• What level of consultation?
• Which Ministry: Justice or Economy?
• What focus? Corporate law or the broader
business legislation?
• Which standards? Local or international?
• Should reform focus on a specific
company type?
MENA common legal standards for corporations ?
Commercial laws are currently going
through a piecemeal revision by most
MENA countries
National legislations are slowly diverging
rather than building on their common
patterns.
Could a set of “non-binding” common
legal standards be identified and guide
each country’s commercial law reform
process?