Establishing a Business in Iceland

Business operations may be conducted in a variety of forms. Foreigners have customarily established a branch of a limited company in Iceland. It is also possible to establish an independent company (subsidiary) in Iceland or buy stocks in Icelandic companies, though not in certain types of them such as those engaged in fisheries and primary fish processing.

Icelandic company law is in line with the requirements of the company law provisions of the Agreement on the European Economic Area, and consequently EU company law.

• The public limited companies are mainly for many shareholders where the aim is to seek capital from the public, for instance on the stock market. In public limited companies, the minimum is two founders, two shareholders, three directors on the board of directors, and a manager is obligatory. Stricter requirements are in various ways laid down for public limited companies than for private limited companies, but the public limited companies are principally intended for business operations of many parties who even intend to have their shares admitted to trading on a regulated market. In case stock exchange trade be not aimed at there is no obstruction to prevent private limited companies from having numerous shareholders and a high share capital. The minimum share capital in public limited companies is ISK 4 million and share certificates shall be issued in the companies (electronic registration of shares possible on certain conditions). There shall be at least two founders, a minimum of two shareholders, at least one manager and no less than three persons on the board of directors. The registration of a public limited company with the Register of Limited Companies at Laugavegi 166, 150 Reykjavik costs ISK 256,000 including the costs for an identity number and registration in the "Legal Gazette". Income tax is 20%. The liability of individual shareholders is limited to their share capital. Various other rules are similar to those of private limited companies.

• In private limited companies, on the other hand, the minimum is one founder, one shareholder, one director in case shareholders are four or less, and there is no obligation to have a manager. In one-party private limited companies meetings of the board of directors and shareholders are not held. The provisions on branches are similar for both types of companies except that disclosure requirements are somewhat stricter as concerns the public limited companies, and the private limited companies have to inform, upon establishment, whether there are one or more shareholders. Private limited companies are registered with the Register of Limited Companies operated by the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik (office hours 9.30 a.m. – 3.30 p.m. on weekdays, tel.:- (354) 442 1250, fax:- (354) 442 1279, e-mail: [email protected]). The registration fee amounts to ISK 130,500 including costs for an identity number and the publication of notification in the "Legal Gazette". A single party may establish a private limited company and be a shareholder. In such instances a single principal may constitute the board of directors and then there is no need for holding board or shareholder meetings as is else the case. It is not obligatory to appoint a manager in private limited companies. The minimum share capital, ISK 500,000, must be paid into the company prior to its recording in the Register of Limited Companies. Liability is limited and confined to the share capital. The income tax is 20%. Special limiting rules apply to the payment of dividend out of private limited companies and in addition thereto there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies, but certificates from the company's share register concerning ownership and even certificates of shareholdings, while these two are not negotiable instruments as are share certificates in public limited companies in general. Special limiting rules apply to the payment of dividend out of private limited companies and in addition thereto there is a general prohibition against granting loans and the like to shareholders of private limited companies. Share certificates are not issued in private limited companies, but certificates from the company's share register concerning ownership and even certificates of shareholdings, while these two are not negotiable instruments as are share certificates in public limited companies in general.

• In order to establish companies for business operations it is necessary, according to the foregoing, to apply to the Register of Firms with the District Commissioner concerning the establishment of individual's firms, partnerships, limited partnerships and European Economic Interest Groupings, the Register of Limited Companies at the Director of Internal Revenue at Laugavegi 166, 150 Reykjavik, on account of the establishment of public or private limited companies and European Companies, and the Co-operative Societies' Register, at the selfsame place, on account of the establishment of co-operative societies and European Co-operative Societies. In addition to going thus to the company registers concerned an identity number needs to be obtained from the Business Register at the Director of Internal Revenue and thereupon a value-added-tax number from the Director of Internal Revenue, Laugavegi 166, 150 Reykjavik. Special licences may be necessary for the business operations, yet no longer a trading permit, but trade is now connected with registered firms and shall be registered e.g. in the Register of Firms or the Register of Limited Companies.