If there was a show that would best describe the attitude of our government it would be the British sitcom from the 90s “Keeping Up Appearances”.
The Companies Control Department (CCD) recently boasted about the economic recovery and the successful policies it has implemented by stating that more companies have registered in Jordan compared to pre-COVID years in January of this year alone: +11% new companies have registered compared to January of 2023, +20% compared to January of 2019. Their goal is to reach 6000 newly formed companies in 2024.
This is all wonderful! However, just like the British comedy, something else was happening behind the scenes:
In the same period, more than 300 companies have filed for insolvency/administration1. Of course bankruptcy is a natural cycle in the economy. However what they didn’t mention, is that the number of companies that have filed for insolvency have risen by 70% compared to January 2023.2
That’s not even the big picture. An even darker aspect is lurking inside the CCD: in 2023, more than 80,000 (eighty thousand) companies have had their operations ‘suspended’ and could be forced into compulsory liquidation in 2024: 80,000 companies! That is around 42% of ALL registered companies in the Kingdom.
Let’s dig into this mess.
Background
On October 2021, the Financial Action Task Force (FATF) placed Jordan in its ‘grey list’; meaning that the country is under watch and increased monitoring for possible money laundering and terrorism financing (other Arab countries on that list include Syria and the U.A.E.)—this was not a positive development for the country and could’ve put the economy and businesses at risk, especially when it came to internationally money transfers and investments.
November 2021: the government was quick to respond and started implementing the 24 measures of the FATF plan to be removed from the grey list.
October 2023: After review, FATF removed Jordan from the grey list. One must be thankful and appreciate the hard work and achievements done by all parties in this regard!
One of the measures I want to look at is the ‘Beneficial Owner’ (المستفيد الحقيقي): who really owns and controls a company. An example would be a company in Jordan owned by an unknown foreign entity and uses the company’s bank accounts to launder money and siphon cash outside of the country.
A very recent good example is the investigation by the Financial Times who uncovered how Iran used British banks to evade sanctions:
Another example would be an English football club that was recently acquired by Arabs and yet the actual owner is a company registered in some island where the real beneficiaries are not known. Maybe Hamas owns it? (Why isn’t the FATF listing any of these dodgy island corporations in their grey/black lists??)
The FATF were clear in their guidelines3 on what needed to be implemented.
Despite being clear with their guidelines, the FATF admits that it is not always easy to identify the beneficial owner: it’s not always about foreign entities or companies that owns shares in a subsidiary. There are cases where one of the shareholder is a ‘nominator’ to someone else (via a legal arrangement) that cannot be visible on company records.
Policy Implementation
September 2021: Before the FATF even issued a warning, Jordan was already enacting a new amendment to the company’s law4 that required all companies registered with the CCD to submit the ‘Beneficial Ownership’ declaration.5
Jordan was ahead of the curve! The new law even allowed (since we were still under COVID) companies to have general assembly meetings via Zoom and submit everything electronically.
But there were a few problems:
As discussed above, it’s not easy to distinguish between legal persons if they are nominators or real benefactors. A simple declaration (a ✅ ticked box in the companies control department portal) would’ve sufficed: just like when a visa applicant ticks a box that says: “I am not nor was a member of a terrorist organisation”. Ideally, companies owned by Jordanians with a National ID number didn’t have to comply to this unless they wanted to voluntarily declare a hidden arrangement.
As per point 1, the CCD should’ve focused on companies owned by other companies, especially foreign entities (it’s even in the CCD’s own guidelines) to disclose ‘beneficial owners’
The CCD did not do any proper public announcements (via repeated TV appearances, newspapers articles). They did not even send a message to the companies themselves asking them nicely to fill out the declaration. The majority of the public found out from A SOCIAL MEDIA POST in February of 2023. The deadline to submit everything was November 2023.
Despite the lack of public broadcast or reaching out to companies directly, the CCD was actually broadcasting its threats6! It was threatening the companies that if they didn’t file by November 2023, shareholders/C.E.O.s would face a fine of up to 10,000 JODs and/or a jail sentence (art. 279d). Is this considered a healthy public/private relationship?
Consequences
I already spoiled it in the introduction: over 85,000 companies out of around 197,800 total registered companies in Jordan have not filed the ‘Beneficial Ownership’ declaration. In December 2023, 1 month after warning the companies that didn’t do so (again secretly via the CCD gazette which rarely anyone reads), these same 80,000 companies have had their operations suspended (موقوفة) and will be liquidated within 12 months if no action has been taken.7
To be fair, there were a lot of registered companies in Jordan that are sitting idle: a suggestion would have been to add another amendment to the law where companies can change their status to ‘dormant’8 (instead of only suspension for lack of operations or compliance).
Everyone was affected by this law: a few companies owned by banks were suspended, the supposedly most compliant institutions in the country9. Even Oasis500 had 27 of their locally listed investments suspended (only 6 locally registered investments in Jordan remain operational).
Just like with the show ‘Keeping Up Appearances’, the CCD showed to the world that they complied fully. But at what cost? I know that it wasn’t malice nor stupidity (Hanlon’s razor). It was a blind implementation of the law which the CCD did correctly. It’s the law that was just poorly written (especially the threat part), where policy makers didn’t understand the scope of their actions.
I understand the need to comply with FATF, the need for cleaning up the CCD system, clearing the backlog, and opening a new clean chapter for the future digital economy. But that’s not the way to do it.
I really do feel bad for company owners in Jordan: having been through so many shocks in the past 16 years since the 2008 Financial Crisis (including Arab Spring, ISIS, COVID, & more recently the collapse of tourism and disruption of shipping since October 7 2023) that they have lost all the will to keep going (forced only by their obligations and fear of ending up in debtor’s jail). And instead of getting any support from the government, they get beaten when they’re down.
If nothing is done, it’s going to be a prosperous year 🐉 for bankruptcy lawyers10 and record breaking in terms of insolvencies/liquidations registered within a short period of time.
Suggestions
Since the damage has already taken place, here is what I think could be done to amend this:
-head of CCD NOT to resign if there is public backlash (to be fair, compared to previous CCD directors, this one is way better.) Bringing in a new director will only mess things up even more and slow any progress made towards turning Jordan ‘Business Friendly/Ready’.
-CCD needs to reduce the penalty to all companies to the minimum fine and waive them to those who have decided to cooperate and remedy their situation. Some companies deserve a second chance.11
-if a company is an LLC, the CCD has no right to pursue shareholders and blackmail them by freezing up their personal accounts and assets. The CCD and other government entities have to abide by the rules too.
-Continue as is and let the public know that this is a ‘standard clean-up procedure’ of company records for delinquent firms (after the 12 months period have passed).
-Cooperate with efawateercom and CRIFF (and other government entities including Social Security) to create a company credit rating that is available to the public (for e.g. a 3 coloured system red/orange/green). All companies will start on an equal footing and ratings will be reviewed on a quarterly basis.
-with all the extra cash the CCD received from the ‘Beneficial Owner’ declaration forms, use it to create a 1 day (online) course for future managers: no one can become one until they get certified and learn their rights and duties when running a company.
Disclaimer: I may have been directly or indirectly affected by this law. This is my way of pressuring from the bottom.
NB: I will be using insolvency, liquidation, bankruptcy, administration to loosely mean the same thing: تحت التصفية
Data of bankrupt companies (تحت التصفية) has been extracted using OCR (that has a bit of trouble analysing Arabic text and could lead to a margin of error) from the CCD’s official gazette: Link
Full guidelines on Beneficial Ownership: https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Guidance-Beneficial-Ownership-Legal-Persons.pdf.coredownload.pdf
https://petra.gov.jo/Include/InnerPage.jsp?ID=189811&lang=ar&name=news
https://royanews.tv/news/295375
There is an old economist joke that Jordan shouldn’t be classified as a developing economy (نامية) but a dormant (نائمة) one.
Unlike others, Al Hussein Fund for Excellence, a non-profit owned by banks and the Central Bank, was also suspended, but for other non-compliance reasons: CCD Link
On bankruptcy in Jordan:
The government shouldn’t collect old fees and dues via extortion, which has been their modus operandi for a good while. I wrote in the 2024 budget note that there are 250,000 vehicles in the country that haven’t renewed their licenses for more than 3 years. Government should for example allow vehicle owners to pay in instalments to remedy their situation instead of fining/imprisoning the owners or taking their vehicles away from them: