Download Legal Aspects Iran

Legal Aspects of Doing Business with Iran
A short presentation by:
Ali Shahabi
Legal Counsel - International Law Office of Dr. Behrooz Akhlaghi & Associates
Frankfurt am Main, 19 January 2016
Table of Contents
1. General Points
2. Joint Venture Companies
3. Branch or Representative Office of Foreign Companies in Iran
4. Due Diligence
5. Legal Developments
6. Legal & Practical Difficulties
7. Corporate Governance
2
General Points
The main sources of the Iranian Business Law are as follows:
1. Civil Code of Iran
2. Commercial Code of Iran
3. Other laws and regulations ratified later on in connection with different business matters.
3
General Points
Joint Venture Companies:
JVC is a registered Company in Iran, which is formed, based on the investment and
cooperation of a foreign and an Iranian Company. Based on a general practice, the amount of
participation by a foreign company can range from %10 to %90 for the foreign company.
4
General Points
Branch or representative office of foreign companies in Iran:
One of the simplest and most common means for commercial and investment transactions in
Iran is the establishment of branch or representative offices of foreign companies in Iran.
The law permitting the registration of branch or representative offices of foreign companies
was ratified on November 12th, 1997 so as speeden this new process.
5
General Points
Due Diligence:
For the purpose of conducting a due diligence, we can only refer the Iranian Official Gazette in
order to check the most recent board members of the relevant companies. However, the
other shareholders, the share percentage thereof and the real controller of the said
companies cannot, through the publicly available sources, be detected.
6
Legal Developments
As Iran has paved a lot in order for the foreign investment to be eased, as well as the whole
trade ambiance to be motivated, we would like to surrender an outline, as an instance, of
such endeavors within the legal sphere:
Foreign Investment Promotion and Protection Act "FIPPA" (ratified on March 04, 2002):
 Methods of foreign investment under FIPPA as previously cited. [Slide #8]
 Foreign investors enjoy all of the facilities and exemptions as same as the national
investors. [Article 8]
 Foreign investor shall not be deprived of its ownership unless in case of Public benefits
based on a lawful procedure.
7
Legal Developments
Act on Management of State Services (ratified on October 10, 2007):
In order to promote the privatization, the Act on Management of State Services as well as the
Act of Execution of the General Policies re Principle 44 of Iranian Constitution allowed the
private companies to take part and invest in many economic sections as mentioned in
Principle 44 of Constitution.
8
Legal Developments
Act of Execution of General Policies re Principle 44 of Iranian Constitution (ratified on June
14, 2008 at the Expediency Discernment Council, and further amended on June 22, 2014 by
Parliament):
Competition rules under Iranian laws and regulations are so poor. However, the lately ratified
"Act of Execution of General Policies re Principle 44 of Iranian Constitution" provide for
regulations as to competition, inter alia, as follows:
 Public non-governmental entities/institutions and their affiliates/subsidiaries are
authorized for taking over, whether directly or indirectly, of up to 40% of the market share
of any goods or services. [Article 6, para 2]
9
Legal Developments
 The companies/institutes owned by the following entities are obliged, as the case may be,
to arrange for their complete fiscal information to be submitted to Securities & Exchange
Organization ("SEO"), and the SEO should deliver the same information, per case, to the
"Competition Council": Public non-governmental entities/institutions; Military and police
related entities; Charity organizations/entities; Vaghfi organizations/institutions and holy
shrines; All the retirement funds; Revolutionary institutions. [Article 6, para 5]
 Any kind of conspiracy between the contracting parties in order to apportion the relevant
market among two or more persons/entities, is forbidden. [Article 44, Note 6]
10
Legal Developments
Act on Removal of some of the Production Bars and Industrial Investment (ratified on
November 15, 2008 at the Expediency Discernment Council):
Due to "Act on Removal of some of the Production Bars and Industrial Investment" several
provisions within the associated Acts (including the Act re Standard and Industrial Researches'
Institution, Labour Act & Mines Act) were modified/added in order to facilitate and promote
the matter of local industrial productions.
11
Legal Developments
Act on Constant Improvement of Trade Ambiance (ratified on April 05, 2011):
 The national indicators of trade ambiance in Iran shall be prepared and declared through
the Chambers (i.e. Chambers of Commerce and the Chambers of Cooperatives), annually
or for each season, depending to any province, any section and/or any economic activity.
[Article 4]
 The national economic establishments shall be listed through the Chambers (i.e. Chambers
of Commerce and the Chambers of Cooperatives). [Article 5]
12
Legal & Practical Difficulties
 The executive procedures, despite all the legal measures made for the acceleration
(including the provisions within the "Act on Constant Improvement of Trade Ambiance"),
are still lengthy, complicated and time consuming.
 In terms of legal perspective, there still remained ambiguities vis-à-vis compliance of the
substance of many type of international contracts with the general principles of Iran
contract law and particularly the religious rules, which may put such contracts subject to
severe risks with respect to interpretation.
13
Legal & Practical Difficulties
 No major systematic protection of IP rights is provided based on the current enactments
in Iran.
 Respecting the Principle 81 of Iranian Constitution, most of the previous bars were
removed during the last decade as the foreigners can currently incorporate the wholly
owned companies in Iran.
14
Legal & Practical Difficulties
 It, in fact, took much time and expense for both the Iranian and European partners, during
the recent years following the imposition of the sanctions regime, to terminate the
previous contracts as well as to dissolve the companies and branches in Iran which
delivered the rooms for the companies from the other areas to replace them.
 At the present and assuming whole the restrictions to be lifted, we are still confronted
with a number of unsettled disputes between the Iranian and European partners that shall
be addressed in advance, notwithstanding the interconnected relations between the
foreign companies (mostly, the Chinese companies) that have already come into long-term
transactions with Iranian companies/governmental bodies.
15
Corporate Governance
The main law specifying the general regulation of the companies is Commercial Code of Iran
(hereinafter “CCI”) adopted on 03 May 1932 and amended on 15 March 1969. There are 7
types of trading company stipulated in CCI as follows:
(i) Joint Stock Company
(ii) Limited Liability Company
(iii) General Partnership
(iv) Limited Partnership
(v) Joint Stock Partnership
(vi) Proportional Liability Partnership
(vii) Producers and Consumers Co-operative
16
Corporate Governance
The more organized management and the modalities of funding the corporate activities
permitted in the PJSCs and LLCs made these forms of companies specifically designed for the
structuring and implementation of projects and significant investments.
PJSCs are particularly recommended when it comes to structure a joint venture company for
instance between Iranian and foreign parties. LLCs are closed companies usually used in case
of small projects not requiring major financing but the Articles of Association (AoA) of a LLC
may need to be specifically refined due to less stringent and detailed statutory rules than for
PJSCs.
17
Contact
GERMELA
International Law Office
Dipl. Pol. Alexander M. Haghani
Ali Shahabi
Business Development Executive
Legal Counsel
Lehmweg 17
No. 8, Razagh Zadeh Alley, Viliasr Ave.,
20251 Hamburg
Tehran, Postal Code 1965633953
Germany
Iran
Phone: +49 (40) 414 252 60
Phone: (+98 21) 22 66 93 74-8
[email protected]
[email protected]
www.germela.com
www.akhlaghi.net