Commercial LawBankruptcy Rules and Regulations in Iran

Bankruptcy Rules and Regulations in Iran

Bankruptcy Rules and Regulations in Iran consists of two main laws: the code of commerce law and the act of administration of the bankruptcy. There are also a number of crimes relevant in this context, which may result from certain cases of faults and frauds.

 

General Terms of Bankruptcy in Iran

As anywhere else, in Iran merchants get bankrupt because they can’t pay back their debts anymore. The process is the same for the individuals and corporations. According to the article 412 of the Code of Commerce Law, bankruptcy of a merchant could be declared up to the one year after her death. When the merchant declared bankrupt, she loses her control over her properties and liquidator takes her seat, as to clear her debts (article 418). All debts not yet due, will be accelerated and proportionally reduced (article 421).

 

Who can Apply to Bankrupt a merchant?

 Article 415 states that the courts of first instance will proceed to declare bankruptcy of a merchant upon the request of:

  1. The businessman himself;
  2. The public attorney;
  3. The creditors.

 

Before Liquidation Process

The preliminary proceedings shall be done before the liquidation starts. First of all, the court will nullify all transactions detriment to the benefits of the creditors, as authorized in the articles 423 to 426. Then, an observer shall be assigned to record the properties of the bankrupt merchant and keep them under lock and key (article 433).

 

Immune Properties from Distraint

The note under the article 439 indicates to the immune properties from distraint, but doesn’t articulate them. article 24 of the Law on the Manners of Execution of the Financial Convictions enumerates immune properties among them are noticeable items like business and work tools and house. Nevertheless, one should know the stores and other precious items will not be considered as work tools, even though they are necessary means for running a business. Houses, even average ones, may be uncategorized as immune properties from distraint if the bankrupt merchant or her family are not dwelt in it and have rented somewhere else. Article 447 also provides that the merchant may provide for his family a livelihood by using her seized properties, in the face of no other alternative to make a living.

 

Legal Agenda for Liquidation Process

liquidation process is subject to the relevant articles of Code of Commerce Law, and the Act of Administration of Bankruptcy. There is also a regulation of bankruptcy, which is short and to the point: illuminating dark sides of the liquidator terms and conditions within seven articles. But the essential part is still articulated in the two earlier laws which we continue our journey through them.

 

General Duties of the Liquidator

First of all, the liquidator has to accomplish what has been done before him. Article 444 states that some of the items under lock and key, may be taken out from, at the discretion of the liquidator. For example, some properties like food and beverage are liable to get rotten. Some other are capital goods and are profitable by renting or keeping them working, like in a factory.

Creditors don’t want the merchant’s business wind down, on the contrary, they want it to work and make money to pay the debts. The whole liquidation process is based on the assumption that the merchant’s business is not profitable anymore, so why not selling it part by part and clear the debts thereby. If part of the business is still working, or could be profitable in one way or another, the liquidator must make sure that part has not been stymied. (paragraph 3 of the article 444).

 

Selling the Properties and Paying the Debts

After taking into consideration of all modifications mentioned above, liquidator sells the properties through auctions, according to the article 40 of the Act of the Administration of Bankruptcy. This article provides two exceptions to the rul