The Lebanese Code of - Corporate governance

1 The Lebanese Code of Corporate governance Table of Contents 04 Project Overview and Acknowledgments 07 A Note About the Authors and LTA. The Code: 08 Introduction 14 Shareholders' Rights and Obligations 22 Board of Directors: Structure, Responsibilities, and Prerogatives 28 Auditing and Related Aspects of Corporate transparency The Lebanese transparency Association 30 Appendix A. Bank El-Rif square, Baaklini Center, 4th Floor 31 Appendix B. 50-552, Ain El Remmaneh, Baabda, Lebanon Tel.: +961 1 29 30 45 32 Appendix C. Telefax: +961 1 28 22 38. 34 Appendix D. Email: Webpage: 35 Appendix E. 39 Appendix F. The Lebanese transparency Association 43 Appendix G. Design: matchdh 45 Appendix H. Printing: print shop ISBN: 9953-470-73-1. First Edition, 2006.

2 The Lebanese Code of Corporate governance .5. Project Overview and Acknowledgments LTA wishes to thank the authors of this code Nada AbdelSater AbuSamra, Esq. and Dr. Norman Bishara for offering their knowledge, time and expertise in drafting this Code. We also thank the following persons and institutions for their generous valuable review, support and contribution: Institutions (in alphabetical Order): The Lebanese transparency Association (LTA) would like to thank the project's generous sponsors, the Center for International Private > The American University of Beirut (AUB), the Corporate governance Enterprise (CIPE) for the necessary support and funding to create this Program. Code. > The Center for International Private Enterprise (CIPE).

3 > The Global Corporate governance Forum, Peer Review (IFCGCGF-Peer This Corporate governance Code is representative of the many Review). ongoing efforts by the Lebanese transparency Association, its partners > The International Finance Corporation, IFC. both in Lebanon and internationally, and other organizations and > The Lebanese American University (LAU), the Institute of Family and individuals dedicated towards continually improving the business Entrepreneurial Business at the School of Business. environment in Lebanon. In particular, valuable input was provided by > The Lebanese Association for Certified Public Accountants, LCGTF. members of the Lebanon Corporate governance Task Force (LCGTF) member. and numerous others in the NGO, private, academic and public sectors > The Lebanon Corporate governance Task Force.

4 Who painstakingly reviewed and debated all aspects of the Code. > RDCL, the Lebanese Businessmen Association: Rassemblement des Dirigeants et Chefs d'Entreprises Libanais. This Code is focused on Lebanese joint stock companies. However, the applicability of the principles of good governance embodied herein Individuals (in alphabetical order): can serve as a model for other types of businesses and nonprofit > Mr. Antoine Frem, Chairman and General Manager, INDEVCO. organizations, both in Lebanon and throughout the Middle East. This > Mr. Antoine Farah, General Manager, Projects Development SAL. Code also represents a positive step towards the high level of > Dr. Assem Saffiedine, Associate Professor of Finance, Chairperson of transparency and good governance that is essential for Lebanese the Finance, Accounting and Managerial Economics, and Director of companies to compete successfully in increasingly global markets.

5 The Corporate governance Program at the American University of Finally, well-governed and corruption-free companies that adhere to Beirut. recognized best practices will be better able to absorb political, social, > Chadia El Meouchi, Esq. LTA Board member, head of LCGTF Legal and and economic shocks and serve as stable beacons for other institutions Regulatory Committee, Partner at Badri and Salim El Meouchi Law throughout Lebanese society. Firm. > Mr. Charles Adwan, World Bank, Washington DC; LTA founder and We particularly thank LTA's co-executive director Mr. Badri El Meouchi Board member. and LCGTF's project manager who has unsparingly devoted his time > Mr. Fadi Saab, LTA board member and head of LCGTF's Information, and effort to ensure the success of this code.

6 Communication and Media Committee. Chairman & President, Trans Mediterranean Airways (TMA). > Dr. Fouad Zmokhol, LTA Board member and LCGTF member, and General Manager of Zimco group. The Lebanese Code of Corporate governance .7. > Ms. Joelle Cattan, Director, the Lebanese Businessmen Association A Note About the Authors and LTA. (RDCL). > Dr. Josianne Fahed-Sreih, Associate Professor of Management, Nada AbdelSater-AbuSamra is a Corporate and Finance attorney Department of Economics and Management and the Director of the practicing in Beirut, Lebanon and is also admitted to the courts of Institute of Family and Entrepreneurial Business at the School of New York. In addition to her law degree from the Universite Saint Business of the Lebanese American University.

7 Joseph in Beirut, she holds a BSc from the American University of > Joseph Yazbeck, Esq. Yazbeck Law Firm, LCGTF member. Beirut and an from Harvard Law School at Harvard University > Dr. Kamal Shehadi, Managing Director of Connexus Consulting, LCGTF with emphasis on Corporate governance and Corporate law. She is an Member, and Board Member of LTA. active member of several boards of directors, including LTA, LCGTF. > Ms. Marie Laurence Guy, Projects Officer, Global Corporate governance and the Lebanese Institute for Excellence in Government. She is the Forum IFC. author of various articles and a speaker on Corporate governance in > Mohamed Alem, Esq. LCGTF member, Alem & Associates, Managing several national and international conferences.

8 Partner. > Mr. Mosbah Majzoub, certified accountant. Norman D. Bishara is a Visiting Assistant Professor of Business Law at > Mr. Nabil Sawabini. Chairman and General Manager, MENA Capital. the Stephen M. Ross School of Business at the University of Michigan > Mr. Patrick Farajian, Chairman and CEO of Sodetel, LCGTF member. in Ann Arbor, Michigan, USA where he concentrates his teaching > Mr. Philip Armstrong, Head, Global Corporate governance Forum IFC. and research on business law and ethics, with an emphasis on rule of > Mr. Philippa Grant Project Officer, Private Enterprise Partnership IFC. law and Corporate governance in the Middle East. Dr. Bishara holds > Mr. Sebastian Molineus, Program Manager, Private Enterprise a JD from Cornell Law School, a Master of Public Policy degree from Partnership IFC.

9 The Gerald R. Ford School of Public Policy at the University of > Ms. Sherine Shallah, Consultant at the Ministry of finance, LCGTF Michigan, and a BA from Colgate University he has also practiced member. as a commercial attorney in New York State. > Sleiman Dagher, Esq. Senior attorney at Badri and Salim El Meouchi Law Firm. The Lebanese transparency Association is a preeminent anti- > Tarek Farran, Esq. Farran Law Firm, Partner, LCGTF member. corruption organization in the Middle East. It is an independent, > Mr. Wadih Barbara, Lebanese Association for Certified Public non-partisan non-governmental organization and pressure group Accountants, LCGTF member. focused on curbing corruption and working towards reform > Mr. Yusuf Sidani, CPA, Assistant Professor at the American University of initiatives in Lebanon, and is the Lebanese country affiliate of Beirut (AUB), LCGTF Member.

10 transparency International. Inquiries and comments are appreciated and may be directed to the Gerard Zovighian authors at or or Member of the International Board of transparency International through the LTA website at: Vice Chairman of Lebanese transparency Association's Board Chairperson of the Lebanon Corporate governance Task Managing Partner of BDO Fiduciaire du Moyen-Orient. The Lebanese Code of Corporate Govenance .9. I. Introduction This Lebanese Corporate governance Code 1. A recent survey of Corporate governance commissioned by LTA. backbone of Lebanon's private sector and the developed for Lebanese Joint Stock in partnership with CIPE found, improvement of SME Corporate governance is among other details, that there is companies, establishes principles and a need for Lebanese business, essential to ensuring economic growth and practices to improve the quality of Corporate which is heavily based on SMEs, stability as Lebanon continues to evolve to improve their governance board governance as well as the company's structures.