Is the Bar Association Barring Lebanon from Doing Business?

April 29, 2011 in Entrepreneurship, General, Starting up by Tania Saba Mazraani

I recently attended a workshop organized by the World Bank Group at the Grand Serail, focusing on the ease – or not – of starting a business in Lebanon for limited liability companies, best known as SARL (Société anonyme à responsabilité limitée).

Inevitably, the workshop leaders had to draw comparisons and benchmark against existing practices worldwide. They looked at four indicators, being first, the number of days required to pre-register, register and post-register a company, secondly, the cost against % of income (exclusive of any hidden charges!!), thirdly, the paid-in minimum capital, which presently stands at LBP 5M, and finally, the number of procedures involved.

Unsurprisingly, Lebanon ranked 103, way behind Egypt (18) and slightly ahead of Jordan (127). Countries that vied for top position included, by chronological order, New Zealand, Australia, Canada and Singapore. What did they have, that we didn’t? For one, no capital requirements, no registration fees, and short procedures and days to be completed.

Of course, an action plan, requiring the simplification of procedures was put forth, aggregating all steps required to register a company at a Libanpost window (the national post company). However, one painful and sticky point has temporarily shut down the whole process. Surprisingly, the impediment, this time, did not come from the government or from lack of legislation. The reason why we have been unable to simplify our “Starting a Business” procedure comes from an unexpected party: the Bar Association. Indeed, the legal requirement to appoint a lawyer comes with a hefty annual fee of LBP 7M, which for a startup, and at least in the first few years, is neither required, nor justified. But the Bar Association has successfully lobbied to prevent the removal of such a requirement, reduce the fee or even allow Libanpost to become the one-stop-shop for registering a company, which was somehow perceived by lawyer as unfair competition which can lead to loss of business. Hence, the first major step on the roadmap to business simplification was stillborn.

Yet, examples drawn from other markets have largely demonstrated that liberalizing the process from any impediments, monopolies and undue charges, will lead to invigorating the startup process, benefiting all the stakeholders across the board, including the bar association and law practice at large.

Entrepreneurship plays a vital role in revitalizing local and global economies and is the only way to drive markets towards prosperity, especially during economic downturns. Fostering entrepreneurship is not only about education and inspiration. It is high time we unleash the potential of our entrepreneurs, by setting them free from hurdles, impediments, bureaucratic headaches and barriers.

Doing Business in Lebanon 2011 Report is available on this link