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?