Yemeni Law Insights
March 2026
Practice Area(s): Commercial and corporate
Commercial agencies and distribution in Yemen
Executive Summary
Law No. 23 of 1997, concerning the regulation of agencies, branches of foreign companies, and firms, is a fundamental piece of legislation aimed at regulating commercial activity related to foreign companies within the Republic of Yemen. It establishes a comprehensive legal framework governing the relationship between the local agent and the foreign company or firm, regulating how this activity is conducted in a way that protects the rights of all parties, safeguards the local market, and enhances the efficiency of business operations.
The law defines foreign companies or firms, foreign branches, foreign commercial agencies, and various types of commercial agents, including commission agents, distributors, insurance agents, transport agents, aviation agents, shipping agents, and others. These definitions form the basis for determining the scope of the law and regulating legal relationships.
With regard to disputes, the law stipulates that the courts of the Republic of Yemen are the only competent courts to decide on disputes arising from a commercial agency contract or related to a branch of the company or the foreign house.
Regulating the agencies of foreign companies and houses
The law stipulates that the agent of a foreign company or trading house must be a natural or legal person holding Yemeni citizenship and permanently residing in the country. They must possess a commercial registration of the category appropriate to the nature of the agency and have a registered business premises in the area where the agency activity is conducted. Furthermore, an agent practicing agency activities in the Republic must be a direct agent of the foreign company or trading house. Agency activities may not be carried out without prior authorization from the Ministry. Licenses are granted upon written application, submitted according to a specific form containing required information, to the relevant department within the Ministry (Ministry of Industry and Trade). This information includes details about the foreign company or trading house, its name, and its head office; the agency activity, its type, and the date it was obtained; the applicant's trade name, business address, and commercial registration number; and any additional data or information specified in the law's implementing regulations. The application must be accompanied by the original agency agreement, a certified copy, or an official translation if it is in a foreign language. In all cases, the agreement must be signed by the parties to the contract and authenticated by the relevant official authorities. The agency agreement must clearly specify the name, nationality, and address of both the agent and the principal, the goods covered by the agency, the duration and type of the agency, the dispute resolution mechanism, and the agent's commission. If the agency pertains to devices, machinery, equipment, pumps, and various means of transport, the agreement must stipulate the principal's obligation to provide technicians, maintenance workshops, and spare parts, and the agent's obligation to the ministry to do so.
The competent authority grants licenses to agencies that meet the legal requirements. These agencies are then registered in the Commercial Agencies Register. During the first three years from the date of initial registration, the agent must submit a renewal application within 30 days of the license's expiry, provided the agency agreement is still valid. If the agency agreement is not renewed within six months of its expiry date, the registration and license are considered null and void unless the agreement stipulates automatic renewal. After the initial three years, the license is automatically renewed without requiring the agreement to remain valid, provided the agent submits the renewal application within 60 days of the expiry date. The license is renewed annually.
Regulating branches of foreign companies and firms
The law specifies the sectors in which foreign companies and firms are permitted to operate within Yemen through licensed branches. These sectors include banking, technical and consulting services, construction and building contracting, tourism and hospitality, and investment in industry, agriculture, livestock, fisheries, and petroleum and minerals. The law stipulates that an official license must be obtained before opening any branch of a foreign company or firm. The license is granted upon a written application submitted to the relevant department within the Ministry, using a designated form that includes essential information such as the nationality of the foreign company or firm, its headquarters, its field of activity, its capital, the location of its main branch in Yemen and any subsidiary branches, the activities the branch will undertake, the names and addresses of those authorized to manage the branch, and any additional data or information specified in the law's implementing regulations. The application must be accompanied by documents including an official certified copy of the commercial register of the foreign company or trading house; the company's articles of association and bylaws (for capital companies), and a copy of the memorandum of association (for partnerships); a certified certificate of the company's or foreign trading house's capital proving that it is not less than the minimum stipulated by the Banking Law (for banks) or the Investment Law (for other foreign companies and trading houses); a certified copy of the company's financial statements for the fiscal year preceding the date of the license application, signed by the chief executive officer of the company or foreign trading house or their authorized representative; and an official power of attorney issued by the company's or foreign trading house's head office and certified by the competent authorities, naming the representative or manager responsible for managing the branch. This representative or manager must reside at the branch's location within the country and be directly affiliated with the company's or foreign trading house's head office. The representative or manager may be a foreign national or a Yemeni citizen. If the documents are in a foreign language, an official certified Arabic translation must be attached. The representative or manager of the company or foreign trading house shall exercise all their legal and contractual powers upon issuance of the branch license. The license shall be published at the branch’s expense in the Official Gazette within thirty days following its issuance.
It should be noted that the law prohibits branches of foreign companies or firms from representing other foreign companies or firms or acting as their agents. This ensures the separation of the activities of the local agent from those of the foreign branch. The law also requires branches to notify the Ministry of any changes to the company's data, articles of incorporation, bylaws, management, or other relevant information. These amendments become effective only after the Ministry's approval and publication in the Official Gazette. Furthermore, the law mandates that branches maintain and organize all their business accounts in Yemen, including the preparation of the annual balance sheet and profit and loss statement by a certified public accountant in Arabic, and submit them to the Ministry. A branch of a foreign company or firm may not offer its shares to the public or issue its own bonds within the country without the Minister's approval. The branch's license is renewed annually upon application within thirty days of its expiry date, in accordance with the procedures specified in the law's implementing regulations.
Disputes: Termination, Liquidation, and Deletion
The Minister may revoke a license in specific cases, such as if the license was granted based on false statements or inaccurate information; if the agent permanently ceases to conduct business or discontinues operations for a year without acceptable justification; if three consecutive years pass without the agent renewing the license; if the agent breaches their legal obligations; or if the agent uses the license for purposes other than those specified. In all cases, the agent has the right to appeal to the courts. The regulations are based on two fundamental principles: first, the requirement for a formal application from the company's head office or foreign branch; and second, the protection of third-party rights through public notice and the provision for appealing the revocation.
The liquidation of a branch or foreign company is a highly significant legal matter, given its direct connection to terminating the legal presence of a foreign entity within the Republic of Yemen, and the resulting financial, administrative, commercial, and legal implications. The executive regulations of the Law Regulating the Agency and Branches of Foreign Companies and Firms have addressed this issue with precise procedures aimed at protecting rights and providing a clear legal path for liquidation.
In the event of a dispute arising from the agency agreement between the local agent and the foreign company or firm, the competent authority may not appoint another agent at the request of the principal/company or foreign firm until the existing dispute has been resolved, either amicably or by a final court judgment. For litigation purposes, the branch's registered office shall be considered the foreign company's or firm's place of residence within the country.
Procedural steps for liquidating a branch of a foreign company or house.
Submitting a liquidation request from the head office
The regulations stipulated that the commencement of liquidation procedures must be based on an official letter issued by the company's headquarters or the foreign house.
The existence of this condition confirms that the decision to close the branch cannot be made individually by the branch management in the country, but requires explicit approval from the parent entity, to ensure that the decision represents the unified legal will of the company, i.e., the activity of a foreign branch cannot be terminated without an explicit and stated desire from the parent company.
Obtain approval from the relevant authority (if an agreement exists):
If a foreign branch operates under an agreement with a government entity or public institution, its closure is only effective after obtaining the approval of that entity. This procedure protects the rights of the state and its contractual obligations, particularly in projects such as construction, technical services, petroleum and mining, consulting, and long-term agreements. In these cases, the branch's operations cannot be terminated without ensuring the contract has expired and that no outstanding obligations remain. It also guarantees that no work is pending or that the state has any outstanding rights against the branch. These procedures prevent a legal vacuum or contractual breach that could harm the government entity.
Publication in an official newspaper for three consecutive days:
The announcement represents one of the most important guarantees of transparency provided for by the regulations. The text stipulates that the branch must publish the closure announcement for three consecutive days in one of the official daily newspapers, at its own expense. This announcement aims to:
Informing the branch's customers of the closure decision.
Giving potential rights holders the opportunity to file an objection.
Protecting creditors and contractors from losing their rights.
Waiting period (one full month for accepting objections):
After the announcement is published, a 30-day waiting period begins, which is considered an important legal phase, aimed at:
Receiving any objections from affected partiesا.
Enabling the administration to examine objections, if any.
Ensuring that the branch is not written off before its obligations are settled.
Payment of fees and notification of the branch's removal from the register:
After the objection period expires without any substantiated objections, the relevant department collects the fees owed by the branch. These fees are part of the branch's obligations to the state and a prerequisite for deregistration. The deregistration process signifies the termination of the branch's legal existence with the Ministry, the cessation of the use of the branch's name, and the prohibition of any commercial transactions under that registration.
Deletion of the branch's registration from the commercial register:
In addition to being removed from the branch register at the Ministry, the regulations require the foreign branch to complete the removal of its registration from the Commercial Register in accordance with the Commercial Register Law. This condition ensures the closure of the branch’s legal file before all parties, thereby ending the branch’s legal existence with the Ministry and preventing any commercial dealings under this register.
Issuance of an official certificate of branch closure:
The relevant branch management issues an official certificate confirming the branch's closure. This document serves as the sole legal proof of the completion of liquidation procedures. It is typically used for purposes such as terminating contracts, communicating with banks, submitting documents to government agencies in the parent company's country, and settling employment and financial obligations.
Conclusion
The provisions of the Law Regulating Agencies, Branches of Foreign Companies, and Foreign Firms, along with its implementing regulations, demonstrate a clear legislative trend toward regulating foreign commercial activities within the Republic of Yemen. This is achieved through the establishment of precise rules governing licensing requirements, regulating the relationship between the local agent and the foreign entity, and defining the obligations and duties of branches in a way that ensures transparency and protects rights. This regulation is particularly evident in its comprehensive coverage of the stages of operation and termination, especially regarding liquidation procedures, which are carefully designed to safeguard the rights of the state, clients, and creditors, and to prevent any uncontrolled termination of the legal existence of foreign branches. This legal framework reflects the legislator's commitment to achieving a balance between encouraging foreign investment, on the one hand, and protecting the public interest and enhancing confidence in the business environment, on the other. This makes the law a fundamental pillar for regulating foreign commercial activity within Yemen and ensuring its alignment with the requirements of governance and economic stability.
For further information or advice on this topic, please contact Osan Sultan Naji or visit our website www.osanlaw.com.
DISCLAIMER: Nothing contained in this article is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Osan Sultan Naji Law Firm disclaims liability for actions taken based on the materials.