Foreign companies willing to operate in Iran have two main options. They can either register a company in Iran or establish a Branch or Representative Office of their own company. Each option offers a number of privileges.
Registration of Company: Thanks to recent changes in the laws and practices of company incorporation in Iran, it is possible for nationals of foreign countries to establish companies in Iran with 100% foreign capital. There is no need to have Iranian partners either. According to article one of Company Registration Act of Iran Commercial Code, ‘any company formed in Iran is an Iranian company’. This is true regardless of the nationality of partners. Therefore, as Iranian companies, companies formed by foreign nationals could use all the incentives, facilities and possibilities available to Iranian companies. For example, an important advantage of incorporating a company in Iran for foreign nationals is that it enables the company to come in possession of immovable property. In fact, according to Iran Ownership of Immovable Property Law, foreign persons are not legally competent to possess any land.
However, foreigners who become partners in an Iranian legal person can buy and possess land in the company’s name. It is also possible for such companies to rent immovable property for any span of time as long as it does not contradict the laws and regulations of the country. The two most popular company types in Iran are Limited Liability Companies and Joint Stock Companies.
Limited Liability Company: A Limited Liability Company (LLC) is a company formed between two or more natural persons for trade purposes without the capital being divided into shares. In this company type, the liability of each partner is strictly limited to the capital they have invested. The name of the company should not contain any of the partners’ names, otherwise that partner will have unlimited liability vis-à-vis third parties. The minimum number of partners for this company type is two people, which differs from Joint Stock Companies.
Joint Stock Companies: The other very commonly used corporate vehicle in Iran is Joint Stock Companies (JSC). This company type is characterized by division of capital into shares. Joint Stock Companies are divided into Public and Private Joint Stock. The distinction lies in the possibility of trading the shares publicly in Public Joint Stock Companies. The minimum number of shareholders in Private Joint Stock Companies is three, while Public Joint Stock Companies require a minimum of five shareholders who should all together provide at least one-fifth of the total capital.
Branch and Representative Office: In addition to incorporation of Iranian companies, foreign entities have the option of registering a Branch or a Representative Office in Iran. In order for foreign companies to be allowed to work in Iran through a Branch or a Representative Office, such companies need to be legally recognized in their country of origin. A single-article law, passed in the Iranian Parliament In 1997, allows companies legally registered in foreign jurisdictions to register a Branch/ Representative in Iran. Such Branches/ Representative Offices can engage in the following activities:
7.Engaging in activities that have been authorized by legally competent authorities in Iran such as rendering services in transportation, insurance/ inspection of goods, banking, marketing, etc.
Management of a Branch or a Representative Office needs to be done by one or more natural persons residing in Iran. A Branch is a local unit of the foreign company directly responsible for conducting activities of the foreign company locally. The Branch shall act in the name and with the responsibility of the company. In contrast, the Representative, who could be a natural or legal person, shall act in its own name and responsibility. Foreign companies desiring to register a Branch in Iran need to submit some documents attached to their application to the Company Registration Bureau (CRB).
As for Representative Offices, an Iranian legal or natural person must be introduced as a Representative. Each company is allowed to have one official Representative Office registered in Iran. The Representative will, subject to the agency agreement, deliver parts of the duties of the foreign company in Iran. The Representative shall submit certified translation and original documents enclosed to an application to the Corporate Registration Bureau. Representative Office and Branches that are not licensed to conduct transactions and exclusively deal with market research for their mother company and receive payments from mother companies to cover their costs are not taxed for such payments received from mother companies.
Bayan Emrooz is a boutique Law Firm, founded in 2008 in Tehran, that renders legal services at international levels for foreign and local clients. The firm enjoys the support and cooperation of highly qualified associates and legal experts each specialized in one or two legal fields. The firm has five main departments namely, Energy Law, Investment Law, Intellectual Property Law, International Commercial Law and Domestic Law departments. In addition to the named departments the Arbitration and Litigation section of the firm takes a leading role in support of our clients and firming up our services in different departments. We are pleased to provide legal services to foreign and local companies in different legal aspects of their business and commercial activities. Our various legal services depend largely on the type of investment as well as the requirements of each individual business project. While each company requires a degree of general legal information and background, our team of experts also renders services that would be more specifically tailored to the needs of each specific sector. The firm owes its unrivaled position to the spirit of team work; having brought some of the finest experts in named areas together. For further information on our services and core team, please visit our website, printed at the back side and feel free to contact us should you need any further information.
Bayan Emrooz Law Firm was founded in 2008 under the registration No. 23211 in Tehran, and renders legal consultation and attorneyship services to foreign or domestic legal and natural persons. Our approach and main purpose is to expand the culture of utilizing legal consultation in civil and commercial matters in order to prevent high personal or social costs spent on resolution of disputes before judicial and non judicial authorities.