Companies and Corporations law
1. Governing Laws
Company law of Iran is incorporated into the Iran’s “Commercial Act” and into “Amended legal Bill of a Part of Commercial Act of Iran”. There are also other regulations regarding companies or foreign companies’ branches in Iran which are mostly related to procedure of registration and establishment.
2. Ownership of a Company
It is possible for a company in Iran to be fully owned by foreign nationals. It is also possible to set up a branch in Iran with foreign shareholders and foreign Directors.
3. Structure of Companies in Iran
There are various kinds of companies in Iran. they include: Private Joint Stock Company, Public Joint Stock Company, Limited Liability Company, General Partnership Company, Limited Partnership Company, Joint Stock Partnership Company, Proportional Liability Partnership Company and Co-Operative Company. However, only Limited Liability Company (LLC) and Private Joint Stock Company are popular among investors as these two companies have more comprehensive and straightforward rules.
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4. Number of Shareholders
Three shareholders needed to establish a Private Joint Stock Company in Iran, however, five shareholders required to establish a Public Joint Stock Company. On the other hand, It would be enough to introduce two shareholders for establishment of a Limited Liability Company (LLC) and other forms of companies.
5. Minimum Charter Capital required to establish a Company
The minimum share capital required to register a Private Joint Stock Company is 1 Million IRR (around 40 USD), and the minimum share capital for registration or Public Joint Stock Company is 5 Million IRR (around 150 USD). On the other hand, there is no specified amount of charter capital in the related rules and regulations for establishing a Limited Liability Company and other forms of companies in Iran, however, the “Companies Registration Office” usually asks for payment of a minor amount before such companies can be registered.
6. In-Kind Contribution
In-kind contribution is allowed in both “private joint-stock” and “limited liability” companies. Theoretically, an in-kind contribution can consist any valuable things; however, real estate properties are more common. According to the Iran’s “Commercial Act”, all in-kind contributions in “private joint-stock” companies have to be valued by an “Official Expert” and shareholders are unable to accept such contributions above the official expert’s appraisal. On the other hand, in “limited liability” companies, all in-kind contributions are valued by the shareholders.
7. Board of Directors
It is mandatory for Private and Public Joint Stock Companies to have a Board of Directors. It is, however, optional for a Limited Liability Company to have a board of directors, but it must have a managing director.
In respect of joint stock companies, the directors must be appointed from amongst the shareholders. This is not a requirement for LLCs. Joint stock companies are required to have a chairman and a vice-chairman of the board of directors, and the board of directors must also appoint a managing director (CEO), although the managing director does not need to be a board member. The board of directors of a company may be either Iranian nationals or foreign nationals, and there is no restriction in this regard.
8. Restriction in Transferring Shares
Transaction of shares in the “private joint-stock” companies does not have any limitation, unless the companies’ statute (articles of association) provides a limitation. On the other hand, transferring of each partner’s share in “limited liability” companies is subject to consent of shareholders who possess three quarters of the company’s charter capital and also they have majority in numbers. Moreover, transferring of a partner’s share in a LLC is possible only by drafting an “official deed”.
9. Procedure for Sale of Shares of an Iranian Company
Based on Iran’s “Commercial Act”, “private joint-stock” companies can issue both named and anonymous shares. If the company’s shares contain the name of a shareholder, the transaction has to be registered in the company’s “Share Registration Book” and signed by the parties. In addition, a minute should be drafted between the two shareholders and sent to the “Companies Registration Office” after the “share trading tax” is paid. Only after this procedure is followed to its end, the title of a named share would be transferred to someone else. On the other hand, if the company’s shares are anonymous; there is no need for paying tax and registration in the “Companies Registration Office”. Therefore, such shares are tradable by giving and taking and drafting a minute between the two parties.
However, as stated earlier, transferring of each partner’s share in “limited liability” companies are subject to consent of shareholders who possess three quarters of the company’s charter capital and also they have majority in numbers (number of shareholders). Moreover, transferring of a partner’s share is possible only by drafting an “official deed”. Therefore, a minute has to be drafted and signed by the mentioned majority and also the two shareholders must refer to a “notary public office” to register their transaction in the form of an official deed.
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All too often other corporate lawyers lose sight of what is important and fail to appreciate the subtleties of business in a particular sector. We are committed to understanding your business and your priorities and to ensuring a smooth transaction.
Our expertise with both large and small enterprises, from owner-managed businesses to listed companies, means that we can tailor our legal advice to your specific needs and offer you the most appropriate, efficient and cost-effective solutions.
Whilst company sales and purchases represent a substantial part of our day to day work, equally important is regulating the effective operation of a business from early on in its life. If you are in business with others, particularly if you are in business with family, it is essential that you are clear about your aspirations from day one.