International & Iran Regulation

Internal & International >> Internal >>  ESTABLISHING A JOINT STOCK COMPANY IN IRAN >> Part 4

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Part 4

Part 5

Part 6

Annex A

Annex B  

Board of Directiors

4.1 Number

Although the law prescribes that a public joint stock company must have a minimum of five directors, there is no minimum prescribed for private joint tock companies . However, since the board of a private company, as well as a public company, is required to elect a  Chairman and a Vice Chairman, and a board is required by law, the board of a private company  must consist of at least two directors.

4.2 Election and Removal

Directors must be elected from among the shareholders at least once every two years. It is mandatory that the election be by cumulative voting and that if takes place at an ordinary general meeting .Any one or more of the directors and subject to removal by the shareholders. Directors are also eligible for re-election Legal entites may be elected as directors.

4.3 Duration of Office

The term of office for directors must be fixed in the Articles of Association but may not be for more than two years. However, if the term expires before successor directors are elected, the existing directors continue to be responsible for the affairs and management of the company until the new directors and elected.

4.4Security Shares

Directors are required to possess the number of shares specified by the Articles of Association and this may no be less than the number required for voting at general meeting. Each director must place the required number of shares in the custody of the Company for the duration of his term of office to serve as security against losses which may result to the company through violations by the directors of their duties .These shares must be registered shares. The law provides that failure to comply with the requirements will result in the offending director being considered to have resigned from his office.

4.5 Authority

The law specifically provides the board with all necessary authorities for the management of the company within the limits of the company’s objectives as stated in Articles of Association . However, the board may exercise any power which have been expressly reserved to the shareholders acting in general  meeting, and limitations on the board’s authority which will be valid as between the directors and shareholders, but not respect of third parties,may be written into the Articles of Association.

4.6 Liability

Directors are not only subject to the ordinary rules of fair play in respect of the company, its shareholders, and third parties dealing with the company, and thus liable  for any violations of these rules, but they are also, individually and jointly, subject to criminal prosecution for specified acts and omission.

4.7 Meetings

The board is expected to act in meeting at which a quorum of a majority of the directors is present. The manner of calling board meetings including any notice requirement should be specified in the Articles of Association. In any event, the law provides the board chairman and any group of direction constituting one-third(1/3) of the board with authority to call meeting . Resolutions will be adopted when passed by the favorable votes of a majority of the directors present at the meeting, unless a higher vote requirement is specified in the Articles of Association.

Minutes for each meeting must be kept and signed by a majority of the directors who attended the meeting. The minutes must show the names of the directors who attended and who were absent, a summary of the deliberations and actions taken, and the date of the meeting.

4.8 Actions without Meeting

Actions of the board are valid without a meeting if approved in writing by all of the directors.

4.9 Proxies

Although there is no specfic  authority in the 1969 amendments to the commercial Code for director’s proxies, such have been recognized in  practice. The Code, prior to the amendments provided for proxies with the caveat that the director remained responsible For his proxy's acts.

4.10 Alternate Directors

Alternate directors are authorized but not manatory.

4.11 Managing Director

The law requires that at least one person be appointed by the board as the managing director to manage the daily operations of the company. This person may not be a member of the board but he may not also hold the position of chairman of the board unless the shareholders meet and approve the arrangement by a three-fourth (3/4) vote. The scope of the managing director’s authority should be specified by the board at the time of   his appointment and he is then considered to be the company's legal representative with authority to sign on behalf of the company.

4.12 Compensation

Directors as such may not be paid by company except reasonable fees for attending meeting, and a “bonus” voted by the shareholders out of company profits. For the private company this bonus is limited to 10% of dividends and for public company, to 5% of dividends. Directors may serve as officers or employees of the company, however, and be compensated in such capacities.

4.13 Doing Business with the Company

A director (and the managing director) may not enter into an enforceable business transaction is approved by the board without the interested director participating in the vote, and the matter is reported both to the participating in the vote, and the matter is reported both to the company inspectors and the shareholders, Even where this is done, if losses result to the company from transaction  the directors who a[[roved may be held liable. The law specifically provides that loans and guarantees by the company to directors and void except where the director is legal entity.

4.14 competing with the Company

If any director  (or the managing director) concludes transaction in competition with the company, and the company suffers a loss of profits as a result, the director will be liable to indemnify the company for the loss.

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