Joint Venture under Iranian Law (Part I)
The term “Joint Venture” is frequently used in the field of foreign investment, as this contractual framework is employed by investors in many legal systems for investment.
The joint venture model, as a favorable contract which decrease risks and costs of investing, has always been of interest to investors.
However, the application of this form of contract will be subject to compliance with the requirements which are usually determined by the laws and regulations governing the contract.
Considering the laws and regulations of an investee country, the subject matter of the project and its performance requirements, sometimes it is advisable to build a joint venture in the form of a company which has a separate legal personality from its members and often called “corporative joint venture”. Some other times, partnering without establishing a company and through concluding a contract is a safer choice for investment, which is known as “contractual joint venture”.
Partnership as a kind of contract form is not the purpose of investment, but it is a method by which foreign investors achieve their investment objectives as specified in their business plan.
In various legal systems, this form of investment has different names such as “joint venture” “partnership” “consortium” and sometimes “shareholders’ agreement”.
In some legal systems, these titles differ in some aspects which analyzing them is beyond our brief discussion. In Iran’s legal literature, legal form of partnership is mentioned in Civil Law (article 501-606), the Commercial Code (companies’ section) and also it is implied in Interest-Free Banking regulation (article 18).
Article 3 of FIPPA also states civil partnership as a method of investing, which can be established in the form of a joint venture.
In the corporative joint venture, partners establish a company known as a joint venture company (JVC) which is a kind of business companies with an independent legal entity, then each of them possesses specific percent of its shares. In this case, partners are known as shareholders and it is the company which is responsible for implementation of the project which is the subject of the joint venture. On the other hand, in the contractual joint venture, partners who decided not to establish a company, directly implement the investment scheme based on their contract.
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