Law No. 163 dated 08/05/2020 organizing Private Investment Companies (PIC)

The Law No. 163 dated 08/05/2020 (hereinafter) organizing Private Investment Companies (PIC) was recently adopted and published in the Official Gazette No.20 dated 14thMay 2020. The main characteristics of this law are summarized in the following developments:

  1. 1-  Object of the Company:  

  2. 2-  Applicable rules:The provisions of the Code of Commerce relating to limited partnerships which are not in contradiction with this Law shall apply. Consequently, general partners are personally and jointly liable for the Company’s debts. However, the limited partners are liable to the extent of their contributions, provided that they do not interfere in the management of the PIC. Nevertheless, the Law No. 162/2020 provides the limited partners with the possibility to be appointed as managers of the PIC or of the portfolio management company of PIC, in which case their liability remains limited.

Invest in financial instruments issued by private companies and funds, non-

negotiable on regulated financial markets on the day of the investment.

Manage the aforementioned private companies and funds.

Grant loans to the aforementioned companies and funds in case they hold

participations in the said companies that are not less than 10%.

Acquire movable and immovable properties allocated to the exercise of its activities.


  1. 3-  Incorporation Procedure
    •   Articles of Association: The articles of association may be notarized by a notary public or by private deed and must be registered near the trade register within 1 month + great flexibility as for the possible adjustments (choice regarding the determination of the fiscal year, voting rights allocated to the partners, majorities required for decision-making, etc.).
    •   Subscription: Any fund, legal person or physical person authorized by virtue of the articles of association may subscribe or acquire the parts of the general partners. However, the subscription to the limited partners’ parts is reserved: (i) the professional investor; (ii) the general partners; (iii) the company responsible for the assets’ management; (iv) investors whose value of shares amount to at least 150 million LBP (refer to article 7).
  2. 4-  Management of the PIC:The Articles of Association define the methods of appointment, dismissal and replacement of the manager. The manager does not require the Financial Markets Authority’s authorization.
  3. 5-  The management of the PIC portfolio:The management of the PIC investment portfolios may be entrusted to one or more companies authorized by the Financial Markets Authority for the assets’ management.
  4. 6-  The depositary:
    •   The depositary must have the authorization from the Financial Markets Authority.
    •   He/it must be independent from the manager and from the company responsible formanaging his investment portfolio.
    •   The financial instruments held by the company are registered in the name of thedepositary and constitute an independent body of its assets and liabilities (off-

      balance sheet) with all the resulting legal consequences.

    •   He/it executes the directives of the manager or of the investment portfoliomanagement company.
  5. 7-  The status of the PIC parts:
    •   The parts do not necessarily grant identical rights for all the partners (for instance the distribution of revenues may be done differently; the parts may be reserved for different investment sectors…).
    •   The Company is compelled to open a bank account in Lebanon. 4
  •   The parts of the limited partners are deemed to be negotiable financial instruments. However, these parts are not subject to the conditions applicable to financial instruments offered for public subscription as provided for by the Law on the financial markets.
  •   The parts of the general partners are non-negotiable instruments. It is even possible to provide in the articles of association for restrictions on their free transferability.

8- Tax Status of the PIC:

  •   Although the PIC has a legal personality, the profits are deemed to be made directly in the assets of each partner just like for the limited partnerships (article 35 of the Income Tax Law).
  •   The realized income of the general partners and limited partners are exempted from tax (chapters 1 and 3 of the Income Tax Law) as a result of the activity of SICAP or the transfer of shares as well as the tax provided for in article 77 of the Income Tax Law (for the proceeds of foreign shares and bonds).
  •   Are not exempt from the distribution tax: (i) the dividends paid by Lebanese capital companies in which PIC invests; (ii) the income earned in Lebanon listed in article 51 of the Law No. 497/2003 as amended by article 31 of the Law No. 144/2019; as well as (iii) on interests generated by loans granted by PIC to Lebanese companies in which it invests, whenever the loans are granted for less than 3 years.
  •   Income generated by the management of the companies in which SICAP invests shall be subject to a 5% tax.
  •   All the activities of the PIC are not liable to VAT. However, VAT shall nonetheless be applied to income generated by the management of the companies in which it invests. However, the VAT borne by the PIC due to services provided by third parties shall not be recoverable.
  •   Are exempted from the fiscal stamp duty: (i) the articles of association; (ii) the subscription to shares and any commitment relating thereto; (iii) the loans granted to PIC by its partners.

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