Incorporation Law in Iran

In a general view, Incorporation Law in Iran is stipulated in accordance with the Iranian Commercial Code which has been ratified before the Islamic Revolution and subjected to amendments after the Islamic Revolution. This paper aims to present a glance at the relevant regulations base on which you will be able to establish and run your company.

 

What is a company?

A company based on the Iranian Commercial Code is a union of the capital of specific numbers of persons (depends on the type of the company) due to conduct permitted activities. Same as the other countries, the formation of a company needs to register. In this regard, you shall register your company in the framework of the presented company’s type in accordance with the Commercial Code and by submitting the requested documents before the relevant authorities.

 

Which type of companies are allowed?

There are seven types of companies under Article 20 of the mentioned law as below:

  • The Joint Stock Company"<yoastmark
  • The Limited Liability Company
  • The General Partnership
  • The Limited Partnership
  • The Joint Stock Partnership
  • The Proportional Liability Partnership
  • The Consumers and Producers Cooperatives.

Bear in mind that the most registered companies in Iran are Private Joint Stock Company and Limited Liability Company since some difficulties regarding registration and activities under other forms of the companies.

Furthermore, since 2002 it is not necessary for foreigners who have an investment contract with the Organization for Investment Economic and Technical Assistance of Iran to count with an Iranian partner to set up a company in the country in addition to that the nationality of the shareholders does not have any effects on the nationality of the company, but in certain activities deemed important to the nation’s development programs the Government can impose the presence of Iranian shareholders.

 

Is Merge and Acquisition in Iran permitted or not?

As was mentioned previously, all the regulations regarding the Incorporation stipulated by the Iranian Commercial Code, but in the field of merge and acquisition, we are facing the lake of regulation based on the latter.

In general, the merge and acquisition of the companies are permitted but not under the Iranian Commercial Code. Therefore, for the sake of presenting more information, we should refer to the provisions of the Amendment Code of Some Regulations of the Fourth Economic, Social and Cultural Development Program named the “Code of General Politics of Enforcing the Principle 44 of Constitutional Law of Iran”.

Based on Article 1 of the above-mentioned law, the merge defined as an action by which several companies, whilst eliminating either legal personality, form a new and unique legal personality or become absorbed in another. Moreover, there are some restrictions in the law regarding the merge of the governmental companies which specifies the permitted fields in this regard.

Therefore, despite the lack of regulations in the Iranian Commercial Code, by virtue of the above clarifications, the merge of the company shall be authorized in general.

 

How is the process of liquidation and dissolution under Iranian Commercial Code?

Since the liquidation of companies under Iranian law occurs after dissolution, at the stage of liquidation the company will lost its legal personality totally.

Bear in mind that based on Article 200 of the Amended Bill of the Iranian Commercial Code, in the case that the company dissolved based on the bankruptcy, the bankruptcy regulations shall be applicable.

In either types of companies as classified above, the process and requires documents regarding liquidation or dissolution are different from each other.

 

What is the definition of bankruptcy and what are its regulations in Iran?

In accordance with chapter 11 of the Iranian Commercial Code, both natural and legal persons may subject to bankruptcy. In this regard, bankruptcy means the inability of a merchant or the trading company due to pass and pay its debts.

The bankrupt merchant is obliged to declare his/her bankruptcy to the court within 3 days from the date of his/her inability to pay the debts. In this case, the merchant shall be prohibited from any kind of transaction and involvements regarding his/her property from the issuing date of judgment. Therefore, the court will appoint a liquidator under the bankruptcy’s judgment or within 5 days from the date of judgment’s issuance.  The liquidator shall be obliged to the below obligations:

  • Collect the amounts due to the company
  • Cashing the company’s assets
  • Pay the debt of the company
  • Invitation of the extraordinary general council
  • Terminating the liquidation process and notifying the relevant authorities in this regard

 

 

The Incorporation Law in Iran also divides to the below topics particularly:

  • Different types of companies in Iran
  • Company Incorporation in Iran
  • Merge and Acquisition in Iran
  • Liquidation and Dissolution
  • Bankruptcy