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ALGERIA: Likely changes in the Investment Legal Framework

On 6 October 2015, the Algerian Council of Minister approved draft legislation regarding the development of investments (the “Draft Investment Act“).  The Draft Investment Act contains important potential changes to the investment legal framework and seeks to encourage foreign direct investment.

The Draft Investment Act proposes to

  1. repeal the existing provision requiring a surplus balance in foreign currencies for foreign investors (such obligation was not applied in practice);
  2. repeal the obligation for companies incorporated before the entry into force of the 2009 Supplementary Finance Law and majority or wholly owned by foreign investors to comply with the so‑called “51/49 rule”. Under this rule, at least 51% of the share capital of companies incorporated in Algeria should be owned by national residents.  So far, save for limited exceptions, any modification in the trade registry of these companies, which were incorporated before 2009, triggered the retrospective application of the “51/49 rule”
  3. extend the scope of the “51/49 rule” to all commercial activities, including wholesale transactions;
  4. repeal the provision allowing the exercise by the State and State‑owned companies of their pre-emption right in the event of the transfer abroad of shares or quotas (i) in a company owning shares or quotas in a company incorporated in Algeria and (ii) provided that such company benefited from investment incentives; and
  5. authorise the foreign financing of projects located in Algeria.

The Draft Investment Act still has to go through the legislative process before it comes into force.  It is expected to come into force on 1 January 2016.

For further information, please contact:

Foued Bourabiat:

+213 (0) 775 388 597 (DZ) │ +33 (0) 660 790 822 (FR)

f.bourabiat@bourabiatassocies.com

Amar Benafla:

+213 (0) 552 504 207

a.benafla@bourabiatassocies.com

 

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