In a discussion session the new Draft Company Law by Decree,
AMAN calls for initiating a serious dialogue with stakeholders and taking comments into account before the draft act is approved and published in the Official Gazette
Ramallah – The Coalition for Accountability and Integrity (AMAN) held a discussion session the new Draft Company Law by Decree. The session was organised after the official media reported that the President had promulgated a Company Law by Decree early this month. Although it has not been published in the Official Gazette yet, this would allow an opportunity to start a serious dialogue between all stakeholders to review and improve the draft enactment for the common good.
Corporate governance enhances business engagement in the anti-corruption effort
Advocate Bilal al-Barghouthi, Legal Advisor to AMAN, reviewed AMAN’s comments on the draft Company Law by Decree, which should play a significant role in national economic regulation, management, and development. Al-Barghouthi highlighted three key components of the draft Company Law by Decree: (1) observation of governance principles; (2) link to State-owned corporations in possession of public funds; and (3) relationship with non-profit companies. Al-Barghouthi stressed the importance of adhering to governance standards, criminalising personal interest at the expense companies, holding to account directors for mismanagement, making good for the damage caused to corporations, and setting controls to prevent conflict of interests in corporate management, including the duty of disclosure and approval of partners. Other controls should ward off fraud and manipulation by public shareholding companies of the value of their shares by monitoring recoupment. Controls also govern the ability of corporations to repurchase their own shares or purchase treasury shares. The Company Law by Decree should provide for establishing auditing committees at public shareholding companies. These committees will be formed by boards of directors in tandem with a set of financial controls and audits of companies.
The draft law by decree needs to be clear and detailed on State-owned and non-profit corporations
Al-Barghouthi elaborated on the importance clear and explicit provisions on State-owned corporations, which possess public funds. Lacking clarity and a detailed account, the draft law by decree refers the regulation of State-owned corporations to special laws. In addition permitting the concept of partnership with the private sector, the draft act consolidates the government’s control over these corporations, which are considered as part of civil society. Contrary to the Basic Law, the draft law by decree assigns the management of all matters relating to these corporations to a regulation to be issued by the Council of Ministers.
General discontent among stakeholders with the draft law by decree
Participants in the workshop strongly deplored the draft law by decree and the way it was being made. The enactment was developed secretly and without the involvement of stakeholders and relevant actors. Discussants were surprised that the draft law by decree did not reflect the version, which they had made great strides in deliberating and commenting on over many years. This was a waste of efforts and public finances.
Advocate Fadi Abbasi, representative of the Palestinian Bar Association (PBA), called for engaging in a serious dialogue with relevant authorities in order to make collective comments by all partners. The private sector was effectively in limbo. “We were surprised by the version, which was enclosed with AMAN’s invitation to the discussion session. This was never the version we had closely worked on for many years,” Abbasi concluded.
“We made extensive comments, but do not know what comments were approved or rejected,” Advocate Amjad Qabaha, Director of the Legal Affairs Department at the Palestine Capital Market Authority (PCMA), stated. According to Qabaha, the PCMA is waiting for the law by decree to be published so that it can develop a set of secondary legislation relating to shareholder rights to compliance priorities or treasury shares.
The current version is a “hybrid” and inconsistent with the Palestinian business environment
Advocate Haytham al-Zughbi asserted that the draft law by decree had nothing to do with the version submitted to the government in February 2021. The latter was deliberated by a committee of counsels assigned by companies. Al-Zughbi made clear that the current version was literal. The formulation of terminology and provisions was vague, overbroad, and loosely defined. Looking like a translation, it is not consistent with the business environment in Palestine. It may also overstretch the judicial system, particularly given that effective, specialised commercial courts are lacking. Al-Zughbi demanded that the provisions of the law by decree be succinct. He elaborated that some provisions were in conflict with the PCMA Law, did not pay attention to minority shareholders or cumulative voting, exaggerated the role of boards of directors at the expense of other classes of shareholders, and did not give sufficient prominence to the Company Controller.
Overtime to address, review, and discard the current version
Mr. Riyadh al-Iyaseh noted that the Businessmen’s Association was surprised by a 153-page draft law by decree, mostly at odds with the version deliberated since 1998. The first draft of the Company Law by Decree was introduced in June 2021. Al-Iyaseh called for categorically rejecting the draft because it had not been subject to community debate. It must be the object of examination and collective comments.
A set of abrupt laws without involvement of relevant actors
Samir Huleileh, a businessman, said that the problem did not only lie in the new Company Law by Decree, but in a set of new laws, which were abruptly approved without involving or consulting with stakeholders. These included laws on company auditors, value added tax, bank secrecy, etc. Huleileh deplored the adoption of the World Bank adjustments while at the same time turning down those amendments proposed by legal experts and specialists, such as the PBA. According to Huleileh, the chance that the draft law by decree has not been published in the Official Gazette should be grabbed to elicit the opinions of all stakeholders before final publication.
AMAN is ready to contribute to a constructive dialogue between all parties for the common good
In his comment, Dr. Azmi Shuaibi, Consultant to AMAN’s Board of Directors for Anti-Corruption Affairs, stated that the problem lied in influential players or close confidantes at the President’s Office, who interfere with the law-making process and rely on foreign experts. The latter are not informed of the complex reality, specificity of the Palestinian legal system, and order of priorities in the Palestinian context. Meantime, the Palestinian Legislative Council, which is mandated to make and deliberate laws, is inactive. Asserting that the legislative responsibility lied with the government, Shuaibi wondered why the government would insist to discuss some issues in weekly meetings in full confidentiality, without announcing or making these deliberations publicly available. This raises many questions, particularly in the absence of a Law on the Right of Access to Information.
Shuaibi called for initiating a dialogue and allowing time for everybody to examine the current draft Company Law by Decree and review draft regulations to be enacted. Shuaibi stated that AMAN would be ready to contribute to a constructive dialogue between all stakeholders for the common good.