The Complementary Finance Law for 2020 (the "2020 CFL") was published in the Official Journal on June 4, 2020. The 2020 CFL demonstrates the commitment of the Algerian government to encourage foreign investment and diversify the Algerian economy by significantly easing the control of foreign investments.

Revision of the "49/51" rule: this rule, which limited the participation of foreign investors to 49% of the share capital in Algerian companies, is now only applicable to companies carrying out the following activities:

(i) purchase and resale of products;

(ii) production of goods and services of in the following sectors of strategic importance:

• The exploitation of the national mining domain, as well as any underground or surface resource related to an extractive activity on the surface or underground, with the exception of quarries of non-mineral products;
   
• Upstream of the energy sector and any other activity governed by the law on hydrocarbons, as well as the exploitation of the distribution and routing network of electrical energy by cables and gaseous or liquid hydrocarbons by overhead or underground pipes;
   
• Industries initiated or related to military industries under the authority of the Ministry of National Defense;
   
• Railways, ports and airports;
   
• Pharmaceutical industries, with the exception of investments linked to the manufacture of innovative essential products, with high added value, requiring complex and protected technology, intended for the local market and for export.

With the exception of these activities which remain subject to the 49/51 rule, any other activity of production of goods and services is now open to foreign investment without obligation of association with a local party holding more than the majority of the share capital (Articles 49 and 50 of the 2020 CFL).

Introduction of prior authorization in the event of the sale of securities in strategic sectors by a foreign shareholder for the benefit of another foreign investor: an authorization from the Algerian Government will now have to be obtained to proceed with a transfer of securities between foreigners if the transfer concerns a company having an activity of producing goods or services in one of the strategic sectors presented above (art. 52 of the 2020 CFL).

Abolition of the state's pre-emption right: transfers of shares or corporate shares carried out by or for the benefit of foreign investors are no longer subject to a pre-emption right of the  Algerian State (art. 53 of the 2020 CFL).

Abolition of the right of purchase of the State: the right of purchase which the Algerian State could have in the event of indirect transfer of more than 10% of an Algerian company having benefited from advantages is also abolished (art. 53 of the 2020 CFL).

Abolition of the obligation to resort to local financing: the recourse to external financing was not possible until now except for the realization of investments qualified as strategic (art. 54 of the 2020 CFL).

Abolition of the obligation for vehicle dealers to invest in an industrial and / or semi-industrial activity or any other activity having a direct link in the sector of the automobile industry in order to keep the car dealer license ( art. 59 of the 2020 CFL).

This legal update is not intended to be and should not be construed as providing legal advice. The addressee is solely liable for any use of the information contained herein and the Law Firm shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of the information by the addressee.

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