SOMALIA LAW BLOG · I · ENTERING & OPERATING / FLAGSHIP GUIDE
Doing business in Somalia in 2026: the legal questions to answer before you enter
IL
Insaaf Law Group · 31 August 2026 · 10 min read
IN THIS BRIEF
01The old Somalia memo expires quickly
02Choose the structure after you understand the business
03Somalia's regulators increasingly matter at the beginning of the transaction
04Employment law changed. Check what your template still assumes.
05The last question is the one most entrants ask too late
06The practical point
Somalia is easier to enter than many foreign companies expect. It is also easier to enter badly. The distinction usually appears after incorporation, when the company discovers that registration was the simplest legal question it had.
A foreign company considering Somalia will often begin with the same practical question: how difficult is it to set up?
The answer can be surprisingly encouraging.
Somalia has had a modern Companies Law since 2019. The Ministry of Commerce and Industry operates an online business-registration and licensing system, and foreign companies can register to operate in the country. The government is continuing to digitise that system; in July 2026 the Cabinet approved a further Business Registration and Licensing Bill and sent it to Parliament.
But incorporation is no longer the part of a Somalia entry that should occupy most of the legal conversation.
A company can be properly registered and still have the wrong entity for its licence. It can hire staff under an employment template written for a law that has been repealed. It can sign a contract with a public institution without resolving whether that institution can grant every right the contract assumes. It can send Somali employee data into a regional cloud system without asking what the Data Protection Authority now requires. It can choose London arbitration because that is what its regional precedent says, without first checking where the counterparty's assets are.
That is the Somalia entry problem in 2026.
It is increasingly not an absence-of-law problem.
It is a which-law, which-institution, which-version and which-jurisdiction problem.
01 — The old Somalia memo expires quickly
A surprising amount of advice about Somalia is simply out of date.
Somalia became the eighth full member of the East African Community in March 2024.
The country adopted a new Labour Code, Law No. 36 of 2024, replacing the 1972 code. It entered into force in 2025 and was formally launched by the government in February 2026.
Parliament adopted a major financial-law package in 2025, including a new Financial Institutions Law and amendments to the AML/CFT framework. The Central Bank has since continued building out regulations for microfinance, Takaful and other parts of the financial sector.
The Data Protection Authority moved from institution-building into active implementation: implementing regulations were approved in January 2026 and registration of controllers and processors formally launched in May.
And Somalia is in the middle of another significant trade transition. It has completed its domestic ratification of the African Continental Free Trade Area Agreement, but as of this article the international step still matters: the AfCFTA Secretariat says Somalia intends to deposit its instrument in September 2026, at which point it would become the 50th State Party.
That last distinction is a useful example of how we think Somalia legal work should be done.
"Somalia has ratified AfCFTA" is broadly true.
"Somalia is already the 50th State Party" is, as of 31 August, premature.
In a fast-moving market, those small distinctions are often the work.
A Somalia legal memo should therefore have something many international memoranda treat as administrative: a meaningful date.
02 — Choose the structure after you understand the business
Consider a regional consulting or technology company that has won its first substantial Somalia contract.
Its instinct may be to register a branch. The parent already exists. The project team wants to move quickly. The local operation may begin with only a few staff.
A branch may be completely sensible.
But the question is not whether the Registrar will accept the branch. The question is what the business is likely to become.
Will it hire locally? Hold licences? Contract with government? Import equipment? Bid for additional work? Bring in another shareholder? Enter a regulated sector? Separate Somalia risk from the parent company?
A subsidiary can create more work at the beginning and much less work later.
The opposite can also be true. A company entering for one finite contract should not create an elaborate local structure simply because somebody told it that "serious foreign companies use subsidiaries."
The Companies Law recognizes local and foreign company structures, and the government's electronic registration system has made the mechanics increasingly straightforward.
The legal work should therefore happen before the registration form.
What will this entity actually do?
That sounds obvious. It is not.
We repeatedly see market-entry documents drafted in the order that government websites present them: incorporation first, licences later. For regulated businesses, the commercial order can need to be the reverse. Understand the licence and ownership requirements first; then establish the entity that can hold them.
This matters particularly in financial services.
The Central Bank currently lists 15 commercial banks, 17 money-transfer businesses, six mobile-money services and 21 microfinance institutions. It operates a regulatory framework that now includes separate rules for banks, mobile money, money transfer, microfinance and Takaful.
A foreign payments business entering through a Somali bank does not answer its own licensing question merely by confirming that the bank is licensed.
That deserves its own article, and we have written one below.
03 — Somalia's regulators increasingly matter at the beginning of the transaction
For years, foreign companies sometimes treated regulatory analysis in Somalia as secondary to relationships and commercial execution.
That is becoming a poor assumption in several sectors.
The financial sector is the clearest example. Somalia now has a national payments architecture connecting licensed banks, and the Central Bank launched the Somalia Instant Payment System in January 2025 to enable real-time transfers across banks, mobile wallets and other payment channels.
Electricity is another.
The National Electricity Act was signed in March 2023 and created the legal basis for a national regulator. The National Electricity Authority now describes licensing generation, transmission and distribution as part of its core mandate and has begun issuing the methodologies and regulations that sit around those licences.
Then there is data.
Until recently, a multinational might reasonably have asked whether Somalia's 2023 Data Protection Act had moved from legislation into actual regulatory implementation.
That question now has a much clearer answer.
The Data Protection Authority has an operating registration programme and states that organizations collecting, storing or otherwise processing personal data in Somalia must register.
For an international company, this creates ordinary operational questions with legal consequences.
Where does the Mogadishu payroll data go?
Where are employee passport copies stored?
Who can access customer information from Nairobi, Dubai or London?
Which entity is the controller?
The mistake is waiting for a regulator to ask those questions before the company does.
The entry question is rarely whether a door exists — it is which one to open first.
04 — Employment law changed. Check what your template still assumes.
This is one of the most important corrections to older Somalia business guides.
Somalia is not still operating under the 1972 Labour Code.
Law No. 36 of 2024 replaced it. The ILO's NATLEX database records the new Code as repealing the 1972 legislation, and Somalia's official gazette records Law No. 36 as issued on 24 December 2024 and published in May 2025.
That means any Somalia employment template built around the premise that the governing code is fifty years old should be reopened.
The issue goes beyond changing a statutory reference.
International companies often bring into Somalia an employment architecture developed elsewhere: a Kenyan contract, a Gulf-region HR manual, a global disciplinary policy, a consultancy agreement used across several African offices.
Some of that material will travel perfectly well.
Some will not.
The question is whether the contract and the employer's internal rules now align with the current Somali framework on employment contracts, working conditions, workplace protections, collective rights and dispute resolution.
The new Code is itself an example of why Somalia advice needs to be dated. A 2023 employment memo can be very well written and still now be wrong.
Tax requires the same discipline. Somalia adopted a new Income Tax Law in 2025. We would therefore resist reproducing an internet rate table inside an evergreen business guide and instead confirm the current tax treatment against the statute and regulations for the particular business being established. The official gazette records the 2025 Income Tax Law as Law No. 37.
The objective is not to be coy about numbers.
It is to avoid creating the peculiar situation in which a law firm's supposedly helpful guide becomes the source of a client's incorrect financial model two years later.
05 — The last question is the one most entrants ask too late
Then there is the contract itself.
Foreign counsel will usually focus on governing law, limitation of liability, warranties, termination and dispute resolution.
All of those matter.
In Somalia, we would add another question much earlier:
If this relationship goes wrong, where does the remedy actually need to work?
Somalia is not currently a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The United Nations' current treaty status records 172 parties; Somalia is not among them.
That does not mean foreign arbitration is wrong for a Somalia transaction.
It means that foreign counsel should not choose the arbitration clause as though Convention enforcement into Somalia can simply be assumed.
Where are the counterparty's assets?
Is there a parent or affiliate elsewhere?
Could payment mechanics reduce the amount ever exposed?
Does the contract preserve local relief where a local asset is the thing that matters?
Those questions can materially change a clause that looked perfectly sensible when it was copied from the firm's East Africa precedent.
Somalia's own dispute-resolution system is also moving. The Ministry of Justice opened consultations on proposed arbitration and evidence legislation in October 2025, and in February 2026 the Ministers of Justice and Commerce agreed to advance the establishment of specialized commercial courts. Those are significant reforms. They are also reforms in progress, not institutions foreign counsel should write into a contract as though they already exist.
The same discipline applies to public projects, land and concessions.
A signature from "the government" is not the end of the authority analysis in a federal state. Depending on the sector and location, the project may require rights, licences, land interests or approvals from different institutions.
That is why our first question on major projects is often a basic one:
Who is granting this right, and what gives them the power to grant it?
06 — The practical point
Somalia is not a market where foreign businesses should wait for perfect institutional maturity before entering.
That would be a strange conclusion to draw from what is actually happening.
The country has a functioning company registry, expanding financial regulation, a modernized labour law, an operating data regulator, a national electricity regulator, EAC membership and an active process toward AfCFTA implementation.
The more useful conclusion is the opposite.
The legal system is changing fast enough that old assumptions are now a bigger risk than an absence of rules.
PRACTICAL CHECKLIST
Enter with the right entity.
Confirm the current sector regime before committing the structure.
Hire against the law in force, not the template already sitting on the group server.
Map the data.
Understand every public counterparty's authority.
Design the dispute architecture around where the transaction actually lives.
In Somalia in 2026, that is what "doing business" legal advice increasingly means.
This article is general information, not legal advice. The regulatory position should be confirmed against the facts and date of a particular transaction.
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Doing Business in Somalia is maintained by the partners of Insaaf Law Group and updated as the framework moves. For a question about a specific market or structure, the contact page routes it to the right partner. Discuss a market entry →