How to set up a company in Algeria

Practical Guide

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Which corporate form is recommended for setting up a sole shareholder subsidiary company in Algeria and why?

In Algeria, there are essentially 7 legal forms for companies:

  • the Algerian retail trader: Entreprise Individuelle (EI);
  • the Algerian one-man limited liability company: Entreprise Unipersonnelle à Responsabilité Limitée (EURL);
  • the Algerian limited liability company: Société à Responsabilité Limitée (SARL);
  • the Algerian general partnership: Société en Nom Collectif (SNC);
  • the Algerian limited partnership: Société en Commandite Simple (SCS);
  • the Algerian joint stock company: Société Par Actions (SPA);
  • the Algerian Economic Interest Grouping: Groupement d'Intérêt Économique (GIE).

The Algerian one-man limited liability company (EURL) and the Algerian limited liability company (SARL) are particularly suitable for founding a subsidiary with a single shareholder. Since the liability of both legal forms is limited to the capital contributed, they are most frequently chosen by foreign companies for their subsidiaries. For both types, the minimum capital is DZD 100,000.

For larger projects that require a large amount of capital and complex administrative structures, the Algerian public limited company (SPA) is a good choice. If the shares are publicly traded, the minimum capital is DZD 5 million; if not, the minimum capital is DZD 1 million.

What are the requirements for capital and ownership of quotas or shares by foreign companies in Algeria?

With the "51/49 rule", foreign shares in a company were limited to 49 % for a long time. It was therefore not surprising that this rule faced strong criticism as a brake on investment and progress and made market entry extremely unattractive for foreign investors. To their delight, this regulation was largely abolished with the Finance Acts 2020.

Since then, the "51/49 rule" only applies for:

  • service and production activities of a strategic nature;
  • import of raw materials, products and goods intended for resale in an unaltered state.

Although the "51/49 rule" has been abolished legally for service and production activities of a non-strategic nature, the commercial register has not yet been updated. Therefore, in practice, the rule still has an effect on this field and it is not yet possible to hold more than 49 % in this field as a foreign investor.

What are the requirements for the corporate governance of the company in Algeria?

Given the proximity of Algerian company law to the French law tradition, the rules on corporate governance are similar to those of other continental European jurisdictions. The manager of a limited liability company - being the most frequent company form chosen by SMEs, must be a natural person. He or she is appointed by virtue of the articles of association or in a general meeting, by a majority of the associates representing more than half of the share capital. The manager can be revoked from office by a decision of the shareholders representing more than half of the share capital. If the dismissal is decided without just cause, it can give rise to a compensation for the damage suffered. Moreover, the manager can be dismissed by the courts for legitimate reasons at the request of any shareholder.

As far as the manger’s powers are concerned, we need to distinguish between those in relation to the shareholders on the one hand and those in relation to third parties. The powers of the manager or managers are determined by the articles of association. In the absence of statutory limitations, the manager may carry out all acts of management in the interest of the company. In case of several managers, they have separate powers to represent the company. Each of them nevertheless has the right to oppose any transaction before it is concluded.

In relations with third parties, the manager is vested with the most extensive powers to act in all circumstances in the name of the company, with the exception of those powers that the law expressly attributes to the shareholders. The company is bound even by the acts of the manager which do not fall within the scope of the company's purpose, unless it proves that the third party knew that the act exceeded this purpose or that he or she could not have been unaware of it, taking into account the circumstances; the mere publication of the articles of association is not considered sufficient to constitute proof of such knowledge of the third party. Hence, clauses in the articles of association limiting the powers of the manager may not be invoked against third parties.

In the case of several managers, opposition by one manager to the acts of another manager is without effect with respect to third parties, unless it is established that they had knowledge of them.

Although the law does not expressly prohibit agreements between the company and the manager, the latter is criminally liable if he or she uses the assets of the company in bad faith for personal purposes or to favour another company in which he is directly or indirectly interested.

What are the legal requirements a foreign company should comply with when incorporating a subsidiary in Algeria?

When setting up a company in Algeria, it is particularly important to note that obtaining the necessary documents takes time. Copies of the passport, birth certificate and other documents must first be certified by a notary public and, in a next step, pre-certified and certified by the respective Algerian consulate.

In addition, the notarisation of the company's articles of association and the contract for the lease or acquisition of the company's registered office in Algeria is required.

What is the process for the incorporation of the subsidiary in Algeria?

Roughly, setting up a company in Algeria can be divided into 6 steps:

  • determination of the company name;
  • notarisation of the articles of association and establishment of the registered office;
  • registration with the National Centre of Commercial Registers (CNRC);
  • application for a tax card and registration for turnover tax;
  • application for statistical identification number (NIS);
  • opening a bank account.

What are the usual challenges for foreign companies setting up a subsidiary in Algeria?

So far, the official procedure has hardly been digitised In Algeria. Investors shall therefore have the necessary documents ready in paper form and expect to have to enter the country at least once. Reliable information on setting up a business is also difficult to find online. In order not to lose time and to keep costs low, the assistance of a local lawyer is highly recommended.

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