Explained: Mixed Public-Private Sector Companies in the Agricultural Sector

In late 2023, President Bashar al-Assad issued Law No. 40, which allows for establishing joint stock companies between the state and private investors operating in both the crop and animal agricultural sectors. The new law does not clarify the fate of the rights of workers and farmers on the lands where they work, including usufruct rights when the land ownership transfers to the new joint stock companies.

In Syria, mixed companies refer to companies in which the state partners with the private sector. Often, for a company to be considered mixed, the state must own a minimum of 25 percent of the newly-established company. This is also the case of the mixed joint-stock agricultural companies as specified in Article 2 of Law No. 40.

In practice, Law No. 40 replaces Legislative Decree No. 10 of 1986, which enabled the establishment of joint public-private sector companies in the agricultural sector for the first time since the Baath Party reached power in 1963.

The justifications for issuing the law include keeping pace with agricultural plans and production goals and encouraging companies working in the agricultural sector by giving them more flexibility to carry out their activities.

Law No. 40 requires companies that are established or adjust their status per its provisions to comply with the Companies Law issued by Legislative Decree No. 29 of 2011, which states that a joint stock company is a commercial company, regardless of its subject matter. 

There are two types of such companies; the first is a public joint stock company consisting of no less than 10 shareholders, and the second is a private joint stock company consisting of no less than three shareholders. In both types, shareholders subscribe to tradable shares of equal value and can be sold or transferred to new partners. Applicants receive a certificate that includes their name and the number of shares they hold in the company.

Law No. 40 of 2023 considers the purpose of creating new companies to be agricultural work, allowing them to own and invest in agricultural land, provided that the company’s capital is not less than SYP 50 billion (approximately USD 3.5 million on the black market). The law also sets a maximum ownership limit for any one shareholder (along with their spouse or spouses and minor children) at five percent of the company’s capital shares, subject to the agricultural ownership limits stipulated in the agricultural reform laws and the agricultural property law. Neither Law No. 40 of 2023 nor the Companies Law No. 29 of 2011 specifies a limit on the amount of agricultural land a company can own.

Law No. 40 of 2023 grants these companies multiple facilities, exempting them from import bans and restrictions and allowing them to import all the needs of their projects and facilities, including machinery, equipment, vehicles, and fittings. The law also exempts these companies from all taxes, financial fees, local administration fees, customs duties, and other charges, regardless of their type and nature, for seven years after their first profitable balance sheet. These tax advantages were already present in Legislative Decree No. 10 of 1986.

Law No. 40 of 2023 also stipulates that if a company owns or invests in agricultural land, the acquired rights of the farmers and agricultural workers who were investing in it must be respected, per the laws in force before the issuance and enforcement of Law 40.

However, Law No. 40 did not specify which laws are referred to, leaving the method of respecting or compensating the rights holders unclear. For example, if there is a usufruct right on agricultural land, a joint stock company established under Law No. 40 can own that land. A usufruct right grants the beneficiary the right to use and exploit something, such as property or land owned by someone else. Law No. 40 did not clarify how to protect the usufruct right on that land, the fate of that right, or how its holders could be compensated due to the transfer of land ownership. The law did not set a deadline for compensating the holders of usufruct rights, the amount of their compensation, or even allocate them a number of shares in the newly established company.