how to start a business in iran ?
The necessity of a complete and professional due diligence prior to start your business in Iran
The present article has been prepared by Iran Best Lawyer to provide you with the necessary elements which shall be controlled prior to start your business in Iran as a foreign company or private investor.
What is the business due diligence?
The business due diligence is the process of gathering, recognition and analyzing all the possible risks of starting a new business. A complete due diligence has different parts like, legal, financial and commercial due diligence.
Normally people get used to minimize the application of due diligence to one of the stage of the M&A transaction. This idea, especially when you are going to start your business in a new country is completely illusory.
In this article, we are going to explain the different steps of a successful due diligence that you are required prior to come to the Iranian market.
Prior to anything else, please bear in mind that the successful process of due diligence requires the assistance of a very good international lawyer in Iran. Indeed, the person who is in charge of the due diligence shall be elected among the top Iranian lawyer with the great record of performance in his or her previous experiences.
The scope of a professional due diligence required for the market of Iran?
In order to start your business in Iran, you may choose among these two options; find a local partner or incorporate your own company.
The process of the due diligence when you are choosing to have an Iranian partner
1. First step; who is exactly your partner?
Firstly, you have to know the exact position of your partner. Is it a registered company? Is it a well-known company among the others in its field of activity?
I remember one of my Italian clients who went to an exclusive license agreement with an Iranian individual who introduced himself as the managing director of a company in the field of elevator’s engine and gearbox. It was true that the Iranian individual was in this field for many years but he had never registered a company for this purpose. This is an alert for you that your prospect partner lying to you at a very beginning stage of cooperation.
If your prospect local partner in Iran, is a company you have to know the exact type of its company, is it a private joint-stock or it is a limited liability Co.? The answers to these questions determine the scope of its liability in accordance to the Iranian law. Indeed, notwithstanding of the contractual commitments, the type of companies may reduce the liabilities that committed by a company in an agreement.
The third point is the registered capital of your local partner, in Iran the financial liabilities of most companies are limited to the amount of their registered capitals.
The actual property of a company is another important issue that should be controlled by your Iranian lawyer.
2. Second step; check the legal status of your prospect partner
This is the most technical part of the job of an Iranian good lawyer to check the legal background of your possible partner by referring to the court’s cases, the information of the relevant syndicate and by investigation from third-parties. This part of a due diligence is super important.
3. Third step; check the financial precedent of the Iranian partner
By referring to the background of its bank accounts, only a professional Iranian lawyer, may find some elements regarding the financial precedent of a company, the important issues that should be controlled at this stage is the precedent of the failed financial commitments and debts, the precedent of the bounced check and etc.
4. Fourth step; check the latest status of the projects which are supposed to implemented by your prospect partner
At the final stage, a top Iranian lawyer should control and site visit the projects that are supposed to perform by your future Iranian partner to see the quality of work in practice.
When you are going to elect an Iranian individual as your future partner, in addition to the above mentioned steps, it is required to check his/her official criminal record to make sure that the latter is not a commercial criminal.
