iran insight

COMPANY REGISTRATION AND LICENSING

The Commercial Code of Iran provides for seven kinds of trading companies:

  1. The Joint Stock Company (Sherkat-e Sahaami)
  2. The Limited Liability Company (Sherkat ba Masouliyat Mahdoud)
  3. The General Partnership (Sherkat Tazamoni)
  4. The Limited Partnership (Sherkat Mokhtalet Gheyr Sahami)
  5. The Joint-Stock Partnership (Sherkat Mokhtalet Gheyr Sahami)
  6. The Proportional Liability Partnership (Sherkat Nesbi)
  7. The Consumers and Producers Cooperatives (Sherkat Ta'avoni Towlid va Masraf)

 

There are three types of companies that are more common to be established by non-Iranians in Iran:

  • Joint-Stock Company (Sherkat-e Sahaami)

    • Private Joint Stock Company (Sherkat-e Sahaami-e Khaas)
    • Public Joint Stock Company (Sherkat-e Sahaami-e Aam)
  • Limited Liability Company (Sherkat baa Mas'ouliyat-e Mahdood)

 

  1. Joint-Stock Companies

     1.1. Definition

As it is defined by the Commercial Code of Iran, a joint-stock company is a company whose capital is divided into equal parts called shares, and the liability of shareholders for debts of the company is limited to the par value of their shares.

  • A joint-stock company is always considered a trading company even if its operation is not of a commercial nature.
  • The minimum number of shareholders in public joint-stock companies is 5 and in private joint-stock companies is 3 people.
  • "Public joint-stock company" or "private joint-stock company" should be mentioned clearly before or after the name of the company in all papers, gazettes, etc.           

     1.2. Formation

          1.2.1 Public joint-stock company

In a public joint-stock company, the founders must subscribe to at least 20% of the shares and they must first pay at least 35% of the company's capital. They must deposit this amount in an attributable bank account in the name of the company and these paid funds cannot be used in the name of the joint-stock company about to be established until the completion of the registration of the company.

The founders of a public joint-stock company provide part of the company's capital by selling shares to the public.

Moreover, the other requirements for the establishment of a public joint-stock company are as follows:

  • Preparation of an official notification
  • Preparation of articles of association
  • Preparation of stock subscription declaration scheme
  • Deposition of non-cash capital
  • Submitting documents to the company registration authority
  • Publishing the declaration of subscription
  • Subscription
  • Addressing the obligations of subscribers
  • Inviting the Founding General Assembly

 

            1.2.2. Private Joint-Stock company

All the capital of a private joint-stock company must be provided exclusively by the founders at the time of the establishment. In a private joint-stock company, the founders themselves must pay at least 35% of the subscribed capital.

In addition to the abovementioned, to form a private joint-stock company the following steps are required by the founders:

  • Preparation of an official notification
  • Preparation of articles of association
  • Providing the agenda to appoint the first directors and inspectors
  • Selecting a widely circulated newspaper
  • Submitting documents to the company registration authority

 

     1.3. Capital

To form a private joint-stock company, a minimum capital of IRR 1,000,000 is required at the time of formation, and for a public joint-stock company the minimum capital will be IRR 5,000,000.

 

     1.4. Par value

A par value or nominal value is required to be allocated to the shares of a joint-stock company and all shares must have an equal value. A public joint-stock company has a maximum nominal value of IRR 10,000 per share provided by law but there has not been a minimum or maximum nominal value set for the shares of a private limited company.

 

     1.5. Structure

Joint-stock companies comprise 3 organs:

  1. General Assembly: The General Assembly is a meeting of shareholders to discuss and decide on the affairs of the company.
  2. Board of Directors: The board of directors of a company is the executive body of the company and governing body related to it.

A joint-stock company is managed by the board of directors who are elected by the shareholders at least once every 2 years through the elections.

  1. Inspectors of the company: The shareholders shall appoint one or more inspectors that oversee the company's affairs and workflow, supervise the work of the board of directors and the CEO of the company, and inform the General Assembly of the actions taken.

 

     1.6. Dissolution

Dissolution of a company is the cessation of the company's operations for any reason.

The dissolution of a company can be either compulsory or voluntary.

Compulsory dissolution of a company is in cases where the company is dissolved legally or by court order. Such as the impossibility of doing the subject of the company or the bankruptcy of the company.

Voluntary dissolution of the company is in cases where the company is dissolved by the decision of the extraordinary general assembly.

 

 

  1. Limited Liability Company

     2.1. Definition

A limited liability company is defined as a company formed by two or more persons for trading while the company's capital is not represented by shares or bonds. Each partner is responsible for the obligations and liabilities of the company only to the extent of its contribution.

The name of the company is always accompanied by the phrase "limited liability", and the name of the company must not include the name of any partner.

 

     2.2. Formation

The formation of a limited liability company is per a contract signed between the partners.

The office of the Registrar of Companies must be notified in writing of the resolution approving the issue and its publication accompanied by the declaration giving the necessary information.

Further requirements for registering a limited liability company are as follows:

  • Paying all cash capital of the company
  • Evaluating and delivering the shares in kind
  • Regulating an Articles-of-Association

     2.3. Contribution

The contribution or partners' portion is the cash or non-cash capital that indicates the extent of the partners' partnership in the company. The contribution can be cash or non-cash.

 

     2.4. Structure

The limited liability company comprises 3 bodies:

  1. General Assembly: The general assembly is composed of the partners of the company, each of whom will have a vote in the general assembly in proportion to her/his share in the company.
  2. Director: The director(s) in the limited liability companies have all powers to run the company. The director or the directors of such a company does not have to be chosen from among the partners.
  3. Board of supervisors: Board of supervisors consists of at least 3 partners. The General Assembly of Partners shall appoint a board of supervisors immediately after the formation of the company and before any action in the affairs of the company.

 

     2.5. Dissolution

The limited liability company shall be dissolved in the following cases:

  • By decision of a number of partners representing more than half the company's capital.
  • When the company has achieved the purpose for which it was formed, or it has become impossible to do so.
  • When the company is formed for a certain period and it has expired.
  • In the case of the company's bankruptcy.

 

Registering a company in Iran has many complexities and subtle points; Therefore, it is highly recommended to consult with a lawyer specializing in business and commercial affairs before registering any sort of company in Iran.

Karimi & Associates Law Firm’s International Trade Law division is ready to provide company registration services and professional legal advice to you.


Karimi & Associates Law Firm

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