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Internal & International >> Internal >>  ESTABLISHING A JOINT STOCK COMPANY IN IRAN >> Part 1 

Part 1 

Part 2

Part 3

Part 4

Part 5

Part 6

Annex A

Annex B 

General

  1.1.              Definition

The Joint Stock company is defined by the law as a company whose capital is divided into shares and the liability of whose shareholders is limited to the par value of their shares. As mentioned in the Foreword, the Joint Stock company may be either a public company (Sherkat Sahami Am) or a private company (Sherkat Sahami Khass). The main difference between the two is that the public company may offer its shares and debt securities to the public while the private company may not. See Annex A for additional differences between the public and private companies.  

1.2.              Other  Forms of Business Association

In addition to the Joint stock company, the Iranian Commercial Code provides for the following types of business association:

(a)                   Limited liability company (Sherkat ba Masouliyat Mahdoud)

(b)                   General partnership (Sherkat Tazamoni)

(c)                    Limited partnership (Sherkat Mokhtalet Gheyr Sahami)

(d)                   Mixed joint stock partnership (Sherkat Mokhtalet Sahami)

(e)                   Proportional liability partnership (Sherkat Nesbi)

(f)                     Production and consumption cooperative (Sherkat Ta’avoni va Masraf)

Of the mentioned listed companies, the limited liability company and the joint stock partnership provide for a limitation of shareholders’ liability to the value of their shares. In the case of the mixed joint stock partner hip, the law provides of both shareholders and unlimited liability partners, The principal difference between the joint stock and the limited liability company is that with the latter, the capital may not be divided into shares and the participants may not transfer their interests therein without the approval of a majority of the participants representing three- fourth (3/4) of the company capital.  

1.3. General Features

The shareholders of a joint stock company participate in the ownership, profit and losses, and distribution of assest in liquidation, in proportion to the shares held. As indicated above, the liability of each shareholder is limited to the par value of his shares and in the absence of fraud or other deceptive practices, there should be no recourse to shareholders for the liabilities of the company. The company has a separate juridical personality by the law and can sue or be sued in its own name. The shareholders possess the usual shareholder rights including, in general, the right to attend shareholders meetings. Receive financial reports, elect and replace the board of directors, and vote on major decisions of the company.  

1.4.              Number of Shareholders

The law specifies that a joint stock company must have a minimum of three shareholders.  

1.5.    Nationality of  Shareholders

There are no legal restrictions with respect to the nationality of persons who may form joint stock companies. As a matter of policy, however, the Iranian Government generally requires Iranian shareholder participation in fields of activity deemed important to the

nation’s development programs.  

1.6.  Shares.

A Joint Stock company may issue both ordinary and preferred shares in either bearer or registered form. While the law does not specifically state what privileges may be accorded to preferred shares, it is’ understood that priorities as to dividends and distribution of assets in liquidation, and multiple voting powers will be honored under the law. The principal differences between registered and bearer shares relate to the manner of transfer and tax implications. See Section 2.6. below.  

1.7.  Management

d Management of a joint stock company is made the responsibility of board of directors which must be elected by cumulative voting of the shareholders at least once every two years. See Part IV below for additional information concerning the board of directors.  

1.8 .  Dissolution and Liquidation

General provisions governing the dissolution and liquidation of a joint stock company are provided in the law and companies are authorized to specify in their Articles of Association any particular provisions they may desire so long as they are not inconsistent with the law. Since the provisions of the law on this subject are general in nature, it is advisable, when drafting Articles of Association, to include procedures for dissolution and liquidation.

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