According to the available information, the most prominent and widely registered companies in Iran are:
- The private Joint Stock Company
- The Limited Liability Company
According to the Amending Bill to Commercial Code of Iran Act, a Private Joint Stock Company is a company whose capital is divided into shares and the liability of its shareholders is limited to the par value of the shares respectively held by them and the share capital, in its entirety, is secured by its founders at the time of its formation.
Limited Liability Company, which is the most common type of corporation in Iran, is defined by Article 94 of the Commercial Code of Iran as a company formed between two or more persons for the purpose of trading while the company’s capital is not represented by shares or bonds and each partner is responsible for the responsibilities and obligations of the company merely to the extent of its contribution.
It may be argued that the reasons for the popularity of these two companies compare to other types of companies that applicants may proceed to establish and register is the structural flexibilities that the formers provide.
The following table indicates the differences between the Iranian limited liability company and the private joint-stock company according to the relevant laws.
| No. | Heading | LLC | PJSC |
| 1 | Company’s Subject | commercial affairs | commercial and non-commercial affairs |
| 2 | Minimum Required Capital | not specified
(in practice: 1/000/000 Rls) |
1/000/000 Rls |
| 3 | In Kind Contribution | allowed | allowed |
| 4 | Appraisal of the In Kind Contribution | by the company’s partners | by a licensed expert |
| 5 | Starting Capital | the whole amount must be submitted upon corporation | 35% of the starting capital must be submitted upon corporation |
| 6 | Company’s Capital | capital is divided into partnership portions | capital is divided into shares |
| 7 | Number of Shareholders | at least two | at least three |
| 8 | Shareholders’ liability | Limited to the amount of contribution, after when the company is dissolved and its assets do not cover its debt. | Limited to the face value of their shares, after when the company is dissolved and its assets do not cover its debts. |
| 9 | Voting Right | proportional to the amount of contribution (AoA may provide otherwise) | proportional to the number of shares |
| 10 | Profit Distribution | proportional to the amount of contribution (AoA may provide otherwise) | proportional to the number of shares |
| 11 | Procedure for Transfer of Share | through an official deed | The transfer of registered shares must be entered in the share register of the company |
| 12 | Formation of the Board of Director | optional | obligatory |
| 13 | Number of BoD Members | not specified | at least three |
| 14 | Appointment of BoD Members | from among or outside of partners | from among the shareholders |
| 15 | BoD Members’ Term of Office | may be limited or unlimited | at most two years |
| 16 | Appointing a Managing Director | obligatory | obligatory |
| 17 | Appointment of the Managing Director | from among or outside of partners | from among of the BoD members |
| 18 | Managing Director’s Term of Office | may be limited or unlimited | at most two years |
| 19 | Inspector | optional-
obligatory in instances where there are more than 12 partners |
obligatory |
| 20 | Formation of the Founding Assembly | not obligatory | not obligatory |
| 21 | Formation of the Ordinary General Assembly | not obligatory | obligatory at least once a year |
| 22 | Formation of the Extraordinary General Assembly | not obligatory | obligatory |
| 23 | BoD Power and Duty | Manage and represent the company.
Board of directors appoints people who can sign documents, General director and chair of the board. |
At least every six months submit a summary of company assets and debts to the inspectors.
The general director has the right to represent the company sign on behalf of the company. Board of directors can appoint General director. Board of directors appoints people who can sign documents. The statute can specify the authorities required for management such as the establishment of branches and rep. office, opening bank accounts, passing executive directives, register company trademarks, take out loans and etc. |
| 24 | Ordinary General Assembly Power and Duty | Shareholders can agree on issues relating to the company and liquidation | Matters not within the exclusive authority of the extraordinary general assembly are to be decided by the ordinary general assembly and requires a simple majority.
E.g.: choice of directors, passing the company balance. |
| 25 | Extraordinary General Assembly Power and Duty | Change of Statute, Transference of Shares.
Requires a ¾ majority. |
Exclusive: to change the statute, change in the share capital and liquidation. Requires a two-thirds majority. |
| 26 | DoB Decisions | numeric majority | numeric majority |
| 27 | General Assembly Decisions | numeric majority+ share majority | simple majority vote |
| 28 | Extraordinary General Assembly Decisions | three-quarters majority | two-thirds majority |
| 29 | The quorum for Amending the AoA | Numeric majority + three-quarters of shares (combined).
AoA may provide otherwise. |
Two-thirds of votes in an extraordinary general assembly. |
| 30 | The quorum for Increase of Capital | requires consensus between all partners | Two-thirds of votes in an extraordinary general assembly. |
| 31 | The quorum for Decrease of Capital | Numeric majority + three-quarters of shares (combined).
AoA may provide otherwise. |
Two-thirds of votes in an extraordinary general assembly. |
| 32 | The quorum for Liquidation of Company | The decision of partners who hold more than 50 percent of shares.
AoA may provide otherwise. |
Two-thirds majority in an extraordinary general assembly. |
| 33 | The quorum for Sale of shares | numeric majority+ three-quarters of shares | No limitations in principal. However, the statute can make it conditional upon approval of the board or the assembly |
| 34 | Selection of a paper of large circulation | optional | obligatory |
| AoA: Articles of Association
BoD: Board of Directors |
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Bayan Emrooz Law Firm renders services to foreign and Iranian natural and legal persons in the field of corporate law, including consulting and registration of a company, branch and representative office. Having an experienced and specialized legal staff, Bayan Emrooz is ready to provide the needed legal services in respect to investment and formation of company in Iran.
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