Feasiability Study The legal & investment environmental Feasibility study Chapter 3, This study is considered the first step in the detailed feasibility study, conducted by experts and specialists in the field of law and legislation concerning investment and employment, insurance, taxes... etc,

1. The legal & investment
environmental
Feasibility study
Chapter 3
Feasibility Study
Econ 4315
Prepared by: Abd ElRahman J. AlFar

2. Introduction
• This study is considered the first step in the detailed feasibility study,
conducted by experts and specialists in the field of law and legislation
concerning investment and employment, insurance, taxes... etc,
Prepared by: Abd ElRahman J. AlFar

3. Legal and environmental feasibility study
contains four elements:
• Analysis of investment environment.
• Study of investment laws.
• Enhancing and controlling investments.
• Specifying the legal personality.
Prepared by: Abd ElRahman J. AlFar

4. 1. Analysis of investment environment
this analysis intend to study all the variables affecting investment in all
project’s aspects such as:
• Customs, traditions and social values (habits and social values): these forms
a limits or encouraging demand on the product, there are consumption of
certain products associated with habits at certain times, such as Ramadan,
and some other religious and national events.
• Economic and political system for example, does the economic system in
which investment is to be lunched is a socialist economic system or
capitalist economic system investment in each of the two systems are
viewed differently. E.g. rights and obligations of individuals and institutions,
relations and procedures vary from one system to another.
Prepared by: Abd ElRahman J. AlFar

5. 1. Analysis of investment environment (cont.)
• Grants and subsidies: you may be requested or granted by the State
of various legal forms investors. thereof subsidies productivity (State
support for producers to continue producing or to sell goods for
customers at low prices even when there is a high cost of production
this happen in case that the State will subsidies the difference
between prices and cost).
• Income distribution mechanism: Any investor should identify ways in
which State or society distributes the return of production inputs and
learn about the laws and regulations that specify minimum wages or
earnings ceiling and precedes from leases property rights ... etc.)
Prepared by: Abd ElRahman J. AlFar

6. 2. Study of investment laws.
The investor should consider public laws and regulations that affect costs
and revenues of the project i.e. civil, commercial, and economic laws such
as:
• Incentives and mechanisms to encourage investment.
• Customs and tax laws.
• Commercial and economic laws.
• Pricing policies and production subsidies: examples of price-fixing:
o Essential pricing for sale of goods and services.
o Establish minimum sales quantities of goods and services.
o Initiating a ceiling for the sale of goods and services.
o Specify and limiting the maximum profit rate.
Prepared by: Abd ElRahman J. AlFar

7. 3. Enhancing and controlling investments
There are many decrees and laws that come from the local authorities
may contain advantages or obligations must be studied and analyzed to
know its impact on project statement i.e.
A. Investment restrictions: which is imposed certain conditions for
practicing business such as health and educational projects and
engineering ... etc or restrictions on the participation of citizens in
foreign investment projects, or special legal restrictions on foreign
currencies or limits to prevent foreign investment in the country
Prepared by: Abd ElRahman J. AlFar

8. Enhancing and controlling investments (cont.)
B. Incentives/advantages:-such as tax exemptions, whether temporary
or permanent exemptions and laws governing customs protection
facing of foreign products and customs exemptions on inputs (factors
of productions) ... etc
investment incentives of classified into types:
1- Direct investment incentives: related to financial aids, tax and
customs exemptions.
2- Indirect investment incentives: developing and creating indirect aid
such as to provide State public utility asphalting of roads, water and
electricity to facilitate the project functions.
Prepared by: Abd ElRahman J. AlFar

9. 4. Specifying the legal personality
• Sole Proprietorship
A Sole Proprietorship is one individual or married couple in business alone.
Sole proprietorships are the most common form of business structure. This
type of business is simple to form and operate, and may enjoy greater
flexibility of management, fewer legal controls, and fewer taxes. However,
the business owner is personally liable for all debts incurred by the business.
• General Partnership
A General Partnership is composed of 2 or more persons (usually not a
married couple) who agree to contribute money, labor, or skill to a business.
Each partner shares the profits, losses, and management of the business,
and each partner is personally and equally liable for debts of the partnership.
Formal terms of the partnership are usually contained in a written
partnership agreement.
Prepared by: Abd ElRahman J. AlFar

10. Specifying the legal personality (cont.)
• Limited Partnership
A Limited Partnership is composed of one or more general partners and one
or more limited partners. The general partners manage the business and
share fully in its profits and losses. Limited partners share in the profits of
the business, but their losses are limited to the extent of their investment.
Limited partners are usually not involved in the day-to-day operations of the
business.
• Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) is similar to a General Partnership except
that normally a partner doesn’t have personal liability for the negligence of
another partner. This business structure is used most by professionals, such
as accountants and lawyers.
Prepared by: Abd ElRahman J. AlFar

11. Specifying the legal personality (cont.)
• Corporation
A Corporation is a more complex business structure. A corporation has
certain rights, privileges, and liabilities beyond those of an individual.
Doing business as a corporation may yield tax or financial benefits, but
these can be offset by other considerations, such as increased licensing
fees or decreased personal control. Corporations may be formed for
profit or nonprofit purposes.
Prepared by: Abd ElRahman J. AlFar

12. Specifying the legal personality (cont.)
• nonprofit Corporation
A Nonprofit Corporation is a legal entity and is typically run to further
an ideal or goal rather than in the interests of profit. Many nonprofits
serve the public interest, but some engage in private sector activities.
• A Limited Liability Company (LLC)
is formed by 1 or more individuals or entities through a special written
agreement. The agreement details the organization of the LLC,
including provisions for management, assignability of interests, and
distribution of profits and losses. LLCs are permitted to engage in any
lawful, for-profit business or activity other than banking or insurance.
Prepared by: Abd ElRahman J. AlFar

13. Considerations for selection of the project
legal status:
The legal form should be determined in the light of several considerations,
including:-
• Type of activities, there is a specific legal form imposes by the nature of
economic activities itself.
• Capital structure distributions (capital shares distributions) for different
shareholders.
• The size of the project required performed (project capacity and scale of
production): the larger is the business, the greater is the funding required
to one or several persons requiring equalization’s provided.
Note: Laws and provisions regulating investment projects in the country:
from the outset should study the laws regulating legal forms of projects and
determine the rights and duties of share holders in the project and these
laws should be attached with the legal documents for the project.
Prepared by: Abd ElRahman J. AlFar

14. The most important needed legal documents
required
• Feasibility study (name, objective, studies ... of the project).
• Documentation for project financing partners (safeguards offered
from the size of their contributions in the total capital and should
insure this capital).
• Sharing investments guarantees: it must not be fictitious made only
to benefit from the exemptions and privileges facilitated by the govt...
• Any guarantees required by the State to fulfill obligations may occur
at any moment, such as taxes.
• Contributing documents and property (real estate, rental ... ..)
Prepared by: Abd ElRahman J. AlFar

15. • Statute of the project.
• Construction decisions of joint ventures for private or the public.
• Any documents allow the transfer of technology, and skills from or to
the project as needed.
• It is advisable to add copy of all existing laws and provisions in
country belonging to the project with these documents to facilitate
the licensing procedures.
Prepared by: Abd ElRahman J. AlFar

16. Simple Project mechanisms to deal with others
in the society:
• Letter of intent: letter from your project to others expressing your
desire to work with other project whether others is desire to work
with you are not it could be Government or another project or
suppliers or agents or … ... etc.
• Protocol:-an agreement signed by the parties concerned initialed and
specifying the areas of activity in the document, containing the most
important areas of cooperation and includes some details of the legal
form of the project.
• The final contract:-the most important legal documents in the
relation between cooperators include rights and obligations of its
signatories.
Prepared by: Abd ElRahman J. AlFar

17. Summary
Who preparers the Feasibility study should identify some environmental
components of social, political, and economic study which require certain
elements such as:
• Political environment elements: political environment such as Government
policies in dealing with domestic and foreign investment in the extent of
internal political stability of the country.
• Economic environment:-any items related to the country's economic
philosophy wither a socialist system, or capitalist or mixed economic
system.
• Social environment elements: the social customs and traditions and social
testes ... etc inhabited in the society.
Prepared by: Abd ElRahman J. AlFar

18. Summary (cont.)
• Elements of the environment: legal and legislative institutions
intended to revise the conventions and legal contracts and legal
disputes arbitration efforts as well as the courts ... ... etc.
• Technical environment means technical aspects that might be
available in the production items available in the community.
• Other elements such as the availability of public facilities such as
roads, lighting, water and infrastructure projects in the investment
environment of the society.
Prepared by: Abd ElRahman J. AlFar