A branch office is considered as an extension of the parent company and it is not considered a separate legal entity. Given that it is only a part of the parent company, carries out the same activities within the market. While registration procedures of a subsidiary and a branch in Iran are similar, their purposes are completely different. Therefore, it is important to first establish the type of presence you wish to have in Iran before deciding between a subsidiary setup or establishing a branch.
From the structural point of view, subsidiary is a legal identity independent from the parent company i.e. an extension of the same business but in another country. Subsidiary company runs independently from the parent company taking its own risks, and taking into account the regulations and norms of the host country. On the other hand, according to Iranian Law: “the branch of a foreign company is under the rule of its main company and performs directly the main company’s tasks. The branch activities performing in Iran is under the name and the responsibility of the main company”. While a subsidiary is suitable for all business activities in Iran such as trading, investing, import & export, manufacturing etc., a branch office can only be involved in certain activities.
The Act “Permission to Register a Branch or Representative of Foreign Companies” issued in 1997 and the executive by law “of the Act” approved in 1999 are the main rules about foreign branches in Iran.
According to this Act: “Foreign companies registered legally in their own country may submit application to register branch or representative “under Iran legal framework “in activities determined by Government of Islamic Republic of Iran. This is permitted if this action could be done mutually for Iranian in that country”.
According to Article 1 of the Executive by Law of the Act, a foreign branch can be involved in below activities:
a- Providing after-sales services.
b- To implement contents of contracts concluded between Iranian and foreign companies.
c- To study and preplanning for investment in Iran.
d- To cooperate with Iranian technical and engineering companies to work in third states.
e- To extend non–oil exportation from Islamic Republic of Iran.
f- To give technical and engineering services and to transfer technical and technological knowledge.
g- To perform activities like transportation, Goods investigation, banking, marketing and other services that could be permitted by qualified state organizations in Iran.
According to Article 2 of the Executive by Law of the Act: “The branch activities performing in Iran is under the name and the responsibility of the main company”. Therefore, any possible debts of branch office will be compulsorily assumed by the parent company without limitation. In this case, the manager of the branch office shall be the representative of the parent company in the territory where it is located. On the other hand, a subsidiary can carry out its own activities which are different from the activities carried out by the parent company. For this reason, the subsidiary is liable to its own debts and the main company is not affected.
Below documents should be prepared by Parent Company to register a branch office in Iran:
|1. Articles of Association||Must be in English and Certified in Iran Embassy|
|2. Registration Certificate||Must be in English and Certified in Iran Embassy|
|3. POA of a Representative||Must be in English and Certified in Iran Embassy|
|4. Copy of passport of Representative||Must be Certified in Iran Embassy|
|5. Justification Report||Must be in English and Certified in Iran Embassy|
|6. Letter of Commitment||Must be in English and Certified in Iran Embassy|
|7. Resolution of Board of Directors regarding registering a branch in Iran||Must be in English and Certified in Iran Embassy|
|8. Latest Financial Report of Company||Must be in English and Certified in Iran Embassy|
|9. POA to our Lawyers||Must be in English and Certified in Iran Embassy|
- Preparation of Documents: As the first step, Parent company that intends to register a branch in Iran should prepare some documents as listed above.
- Official Translation of Documents: Upon receiving of the documents, we will submit them to official translator in Iran to be translated into Persian.
- Online Registration of Documents and Information: Our Corporate Team will register all the information and details of documents in official database of “Companies Registry of Tehran”. It should be noted that the name of Branch will be the same name as the Parent Company, together with the word “Branch”. An address in Iran with a valid postal code necessary at this stage.
- Preparing Establishment Documents: Our Corporate Team will prepare establishment documents of the company and email them to be signed by Parent Company and its Branch’s representative. There is no need for traveling to Iran for this.
- Registration in Companies Registry: The last step will be registering the signed documents together with translated documents in the “Companies Registry of Tehran” and obtaining registration certificate.
Note: Approximate required time for registration procedure is 30 days starting from the date that we receive all required documents from the Parent Company.