Explained: State-owned Properties in the Law for the Establishment and Management of State-owned Companies

On February 14, Law No. 3 on the establishment and management of public joint-stock companies and joint ventures was issued to contribute to the development of the public economic sector, i.e., state-owned companies. The law stipulates the creation and regulation of three types of companies: public joint-stock companies, public holding joint-stock companies, and joint ventures.

Law No. 3 of 2024 allows public sector institutions and companies to transform into public joint-stock companies or public holding joint-stock companies, ensuring their ownership remains with the state. Moreover, the law permits public sector companies and institutions to enter into partnerships with the private sector under specific conditions outlined in Law No. 5 of 2016, which regulates the provisions of the partnership between the public and private sectors.

Law No. 3 of 2024 is the latest in a series of laws issued recently to modernise the legislative framework for companies in Syria. This began with Law No. 3 of 2023 regarding the merger of companies and their conversion into joint-stock companies, followed by Law No. 40 of 2023 concerning the establishment of joint agricultural sector joint-stock companies in both the plant and animal sectors and Law No. 43 of 2023, which deals with the creation of the General Commission for the Management and Protection of State Properties.

Public Joint-Stock Company

According to Law No. 3 of 2024, a public joint-stock company is one in which the state holds all shares, with no private sector partnership. Its establishment requires a decree from the Council of Ministers based on a proposal submitted by a relevant ministry.

A public joint-stock company is managed by a board of directors formed by a decision from the prime minister based on a recommendation from the company’s general assembly. The board of directors can consist of five to 13 members, with a tenure of four years, renewable once. The board has the authority to manage the company and oversee its operations. This includes developing plans, monitoring their implementation, preparing projects, submitting proposals, studies, and approvals. Additionally, the prime minister appoints the company’s CEO for a term of four years, renewable once, upon a recommendation from the board of directors. The CEO is the highest administrative officer responsible for executing the board’s decisions, preparing the annual budget and budget plan or conducting contracts according to the new law.

The law grants the movable and immovable assets of the public joint-stock company the status of the state’s private property. As a result, these properties cannot be sold, acquired, or seized by others. According to Law No. 252 of 1959, the state’s private properties are classified into 12 types, including Amiri land, properties registered in the land registry in the state’s name, properties listed in the state property department’s records, resolved properties, and vacant available lands or abandoned lands.

This relationship between the public joint-stock company and the state’s private properties makes Law No. 3 of 2024 closely related to Law No. 43 of 2023, which concerns the establishment of the General Commission for the Management and Protection of State Properties. The Commission aims to generate steady and permanent resources for the public treasury through the management, maintenance, and investment of the state’s private properties.

A public joint-stock company can obtain loans from the state and also be dissolved, merged, or divided by a decision from the Council of Ministers. Public sector companies can transform into public joint-stock companies by converting their capital into shares owned by the state, but these shares are not offered for public subscription. As the state-run Tishreen newspaper reported on February 26, public institutions such as the Public Establishment for Transmission and Distribution of Electricity or the General Establishment for Drinking Water and Sewage can be transformed into a public joint-stock company. The company’s board of directors assumes responsibility, including pricing flexibility and market competition, without waiting for governmental decisions, thus allowing more ease in operations and service evaluation.

Before Law No. 3 of 2024, public joint-stock companies were subject to the provisions of closed joint-stock companies organised by Companies Law No. 29 of 2011.

Public Holding Joint-Stock Companies

Law No. 3 of 2024 defines a public holding joint-stock company as a public joint-stock company that manages or owns other public joint-stock companies or any other joint-stock companies, including joint ventures and limited liability companies. The Council of Ministers, by decree, determines which companies are owned or managed by the public holding joint-stock company. The shares of the companies owned or managed by the holding company form part of its capital, as do the shares it holds in partnership with other companies, as well as its real estate and fixed assets. This company can own movable properties and real estate necessary for its operations. It also has the right to invest its funds in public or private sector entities and own shares in joint-stock companies.

Law No. 3 of 2024 does not provide for the public offering of shares of the public joint-stock company or the public holding joint-stock company.

Joint Ventures

According to Law No. 3 of 2024, a joint venture is considered a private company if the state’s contribution is at most 49 percent of its capital. If the contribution surpasses this percentage, it is regarded as a public joint-stock company.

A joint venture is established following the approval of the Council of Ministers for public companies and institutions to partner with the private sector. Such a company has bylaws that specify the amount of capital, the state’s contribution percentage, and the company’s structure, including the general assembly, the board of directors, the CEO, and their respective powers. The movable and immovable assets of the joint venture are considered private assets.

Contrary to Law No. 3 of 2024, Law No. 40 of 2023 sets a minimum state contribution in the joint-stock companies in the agricultural sector at no less than 25 percent of their capital. However, Law No. 40 considers a joint-stock company in the agricultural industry a private company regardless of the extent of state contribution. This is assumed to grant the company greater freedom in operations compared to the bureaucratic restrictions imposed on public sector companies.