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The New Commercial Laws
To achieve its goal
of establishing and implementing a legal and regulatory framework capable of
ensuring the efficient and equitable operation of a market economy, the Ministry
of Commerce and Industry has drafted a total of 10 new commercial laws. The
first four laws listed below have been implemented by Presidential decree and
have been passed by Parliament. The MoJ's Legislation Department has begun
reviewing the remaining six laws.
Corporations and
Limited Liability Companies Law
Partnership Law
Arbitration Law
Mediation Law
Contracts Law
Agency Law
Trademarks Law
Copyright Law
Registration of Foreign Patents
Law
Standards Law
Corporations and
Limited Liability Companies Law
The Corporations and
Limited Liability Companies Law (CLLCL) provides Afghanistan with the legal
rules for the organization of business enterprises in Afghanistan. The law
defines two types of enterprises:
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"Corporation": a business company whose
capital is definite and divided into shares, with the share and responsibility
of each shareholder limited to the proportion of his share; and
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"Limited Liability company"; "Limited" is a
business company whose capital is not divided into shares with the
responsibility of each shareholder limited to the amount of capital agreed to
[by such shareholder] in the company.
The Law
sets the registration requirements for corporations by indicating the documents
that may be registered in a Central Registry, which include a Business License,
the Articles of Incorporation and Annual Reports.
The
Central Registry would be under the authority of the MoCI and absolve to a
number of functions originally performed by the Commercial Court, chiefly the
authority where new companies are registered.
The Corporation under
this law has a two-tier Board of Directors including a Board of Supervisors that
oversees the Board of Directors and can inspect the Corporation's books and
records. The new Law provides for duties and standards of the Board of
Directors including the duty to disclose a conflict of interest regarding
transaction effected by the corporation.
Corporations must hold
Annual Meetings where Directors are elected and other business is transacted.
Before such meetings, the Corporation must deliver the financial statement to
all Shareholders and the financial statement, including the balance sheets, must
comply with international accounting standards.
The law also provides
more transparent rights and protections of shareholders such as the ability to
inspect the books and records of the corporation and lawsuits by a shareholder
in the right of a corporation against a Director or Officer for failure to
perform, or other violation of his duties in management of the Corporation.
The law sets the rules for when a corporation may pay dividends and how much of
a reserve fund is necessary.
The law also defines a
limited liability company that are for 2 to 50 shareholders and whose shares are
not to be sold on a public stock exchange.
These new provisions
will enhance the ability of a corporation to attract investment.
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Partnership Law
According to the new
Partnership Law (PL), a partnership is created by two or more persons who file
and register their partnership agreement. When a partnership is created, it has
a legal personality and can execute transactions, sign contracts and own
property. The Law defines two types of partnerships;
'General Partnership' and
'Special Partnership'.
A key distinctive
factor of a partnership (in contrast to a corporation) is that there is no limit
of liability for general partners. In other words, if the partnership cannot
timely meet its financial obligations the general partner(s) is/are responsible
for paying off the partnership's creditors. However, partners can limit their
liability to a fixed amount if they enter into a Special Partnership as
described in the Law. Special Partnerships must have a General Partner as a
member and Special Partners may not interfere in the administrative matters of
the General Partnership.
Partners can limit the
ability of a general partner to participate in the management of a partnership
but they cannot limit a partner's access to information about the management of
the partnership. Partners have a duty not to compete with the partnership or to
use the partnership assets as their own. A partnership agreement may vary
certain provisions in the law. It can provide for continuity after the death or
withdrawal of a partner and the division of profits and losses among the
partners.
A partnership may
dissolve for many reasons such as death, bankruptcy, or withdrawal of a partner,
the realization of the objective of the partnership or upon the order of the
court. Upon dissolution, the partnership must follow liquidation procedures to
protect creditors and partnership assets.
The Law's purposes
include ensuring all partners have access to financial information and ensuring
transparency to third parties of its legal structure and current operations so
they can better assess the risks of doing business with the partnership.
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Arbitration Law
The Arbitration Law
establishes nationally and internationally applicable transparency procedures
for a binding arbitration tribunal to resolve business disputes that cannot be
amicably settled. Parties will be able to choose their own panel of
arbitrators. These procedures will be available to Afghan and foreign
businesses (and individuals) alike. The Law permits anyone with an unsatisfied
arbitration award to sue to enforce it in Afghanistan's commercial court.
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Mediation Law
This Mediation Law
offers both Afghan and foreign businesses an alternative to court litigation or
binding arbitration for resolving their disputes. Mediation generally offers the
benefits of speed and lower cost compared to arbitration or court proceedings
but since it is not binding the parties must voluntarily honor the settlement
for it to be effective. Once Mediation has commenced, the running of any
statutory limitation period is stopped during the Mediation. The Mediator has no
authority to impose a settlement on the parties. (By way of contrast in binding
arbitration, the arbitrator can impose a decision on the arbitrating parties.)
However, should the parties agree to a settlement, the settlement becomes
binding and enforceable as with any other commercial agreement.
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Contracts Law
The Contracts Law
regulates and protects the rights of parties to agreements. The law includes
essential elements of the contract, formation and remedies. The law also
includes specific elements for sales contracts, gifts, carriage contracts,
warehousing and employment and labour contracts.
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Agency Law
The Agency Law
regulates and protects the rights of agency relationships where a principal
authorizes another person in the place of himself (the agent) in an ascertained,
permitted transaction. This creates a contractual relationship and allows the
agent to act as though he were the principal in many situations. The law defines
the types and scope of the agent relationship and the duties of care of an
agent. The law describes the obligations of the principal and the termination of
the agency relationship.
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Trademarks Law
The Trademark Law
regulates trademarks by allowing the owner of the mark to register his/her
trademark to identify his/her goods or services. The Law specifies under what
conditions the trademark will be protected, such as it must be distinctive and
not misleading or deceptive. The law will also have enforcement provisions
against counterfeiters who use similar distinctive signs to market inferior or
different products or services.
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Copyright Law
The copyright law
will provide legal protection to the owner of the rights in an original work
he/she has created such as a literary, musical, artistic or scientific work.
The law defines the various economic and moral rights of the owner, including
the rights of reproduction. The law will provide the terms for the limits of
the protection, how the works may be exploited and enforcement provisions for
infringement of the copyright.
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Registration of Foreign Patents
Law
This law provides
for the registration of patents that have previously been registered in another
country. The patent must be registered in Afghanistan within two years of
having been granted a patent in the original country. This will allow companies
to import and manufacture goods while protecting the original patents on those
goods. After registering the patent, the registrant must
"operationalise the
patent", by using or producing the patent in Afghanistan within a certain period
of time.
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Standards Law
The Standards Law
provides for an Afghan National Standards Authority (ANSA) that will set
standards for products, processes or services in order to protect consumers and
the environment. ANSA will also harmonize Afghan standards with international
standards so there are no technical barriers to trade. ANSA will have authority
to enforce this law and laboratories to inspect goods.
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