Conditions of activity of foreign companies in Iran

How foreign companies operate
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What is a company?
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Participating in the word means sharing, opening up and collaborating in doing something.
In the Iranian legal system, there are two types of companies, which are civil company and commercial company.
According to Article 571 of the Civil Code, a company is a community of the rights of multiple owners in a single object in a diffuse manner.

Civil companies
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A civil company is a company that is established in accordance with the articles of the civil law and supervises Mudaraba contracts, masakats, partnerships, etc. The characteristics of civil companies include the following :
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A) They do not have independent legal personality.
B) Do not need to register.
C) Bankruptcy does not apply to them and if the partners become creditors, they will be subject to the rules of hardship.
D) They do not have residence and citizenship.
E) Dissolution of a civil company is done by separation and division of property between the partners.
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On the other hand, in the case of commercial companies, the commercial law does not provide a specific definition, but in general, a commercial company is a company that is formed to make a profit from a certain activity in accordance with the provisions of the commercial law.

Commercial companies in Iranian commercial law are :
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Joint Stock Company – Limited Liability Company – Cooperative Company – Joint Stock Company – Non-Joint Stock Company – Relative Company and Production and Consumption Cooperative
Each of which has its own rules.

The characteristics of commercial companies include the following :

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A) They have independent legal personality.
B) have residence and citizenship.
C) Liquidation of this company has special rules and regulations that must be observed.
D) Bankruptcy applies to these companies.
E) These companies must be registered in accordance with the regulations.

Status of foreign companies in Iran:

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How foreign companies operate in Iran
How foreign companies operate in Iran

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It follows from the provisions of Article 220 of the Commercial Code that foreign companies are required to register in accordance with the provisions of the Companies Registration Law approved in June 1941.
On the other hand, according to Article 81 of the Constitution, granting concessions to foreigners to establish companies and institutions in commercial, industrial, agricultural, mining and service affairs is strictly prohibited.
From the appearance of this principle, it seems that the registration of foreign companies in Iran is prohibited because the constitution takes precedence over ordinary law.
However, according to the Guardian Council’s interpretation on 1/8/1360, foreign companies that have concluded legal contracts with Iranian government agencies can register their branches in Iran in order to carry out their legal affairs and activities within the framework of the contracts concluded under Article (3) of the Companies Registration Law. This is not contrary to Article 81 of the Constitution.
According to the Guardian Council’s theory, in this particular case, when foreign companies have entered into legal contracts with Iranian government agencies, the registration of branches or representative offices of foreign companies in Iran will be unimpeded.
Finally, according to the law permitting the registration of a branch or representative office of foreign companies, they can register a branch or representative office in accordance with the provisions of the Companies Registration Law, subject to reciprocal action by their respective country in the fields determined by the government.

The text of the single article of the law allows the registration of branches or representative offices of foreign companies
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Foreign companies that are recognized as legal companies in the country of registration, subject to reciprocal action by the country, can register their branch or representative office in the fields determined by the Government of the Islamic Republic of Iran within the framework of the laws and regulations of the country.

Note: The executive by-law of this law will be approved by the Cabinet upon the proposal of the Ministry of Economic Affairs and Finance in coordination with other relevant authorities.
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Date of approval 1376.8.21
Date of approval of the Guardian Council 1376.8.28

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This issue is foreseen in Article 7 of the instructions on how to register companies and institutions electronically, and applicants can register branches and agencies of foreign companies through the site

Note: The executive by-law of this law will be approved by the Cabinet upon the proposal of the Ministry of Economic Affairs and Finance in coordination with other relevant authorities.
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Date of approval 1376.8.21
Date of approval of the Guardian Council 1376.8.28
This issue is foreseen in Article 7 of the instructions on how to register companies and institutions electronically, and applicants can register branches and agencies of foreign companies through the site www.irsherkat.ssaa.ir.

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Determining the law governing the registration of foreign companies :
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According to Article 3 of the Companies Registration Law approved in 1310, in order for foreign companies to be able to operate through their branches in Iran, they must be considered legal companies in their own country and must also be registered with the Tehran Registry.
According to Article 3 of the Companies Registration Law, all branches of foreign companies in Iran are registered in the Companies Registration Office.
According to Article 1 of the amendment to the Companies Registration Regulations, foreign companies are made by the Companies Registration and Industrial Property Office.
Combining the above materials, it seems that in the field of registering branches and representative offices of foreign companies, the amendment to the Companies Registration Regulations is the criterion for action, and this is done by the Companies Registration and Industrial Property Office, which in this case Article 6 of the Executive Regulations of the Law on Permitting the Registration of Branches or Agencies of Foreign Companies regarding the dissolution of branches and agencies is also mentioned.
According to the stated materials and the date of approval of each and considering that the mentioned laws are all special laws, the provisions of the law and the executive regulations of the law will allow the registration of a branch or representative office of foreign companies approved in 1997.
Finally, according to Article 1 of the Executive Regulations of the Law on Permission to Register a Branch or Representation of Foreign Companies: Foreign companies that are recognized as legal companies in their country of registration can apply for registration of a branch or representative office in the respective country. The matter is handled by the Companies Registration and Industrial Property Office.

What is meant by a company branch?

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According to Article 2 of the Executive Regulations of the Law on Permission to Register a Branch or Representation of Foreign Companies, the branch of a foreign company is a local unit subordinate to the main company that directly performs the subject and duties of the main company on the spot.

What is the meaning of representing a foreign company?

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According to Article 4 of the recent law, the representative of a foreign company is a natural or legal person who, based on the agency contract, has undertaken to perform part of the subject and duties of the company of the representative party on the spot.

Information and documents for registering a branch of a foreign company

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According to Article 3 of the recent law for registration of a branch of a foreign company, according to other provisions of this law, foreign applicant companies are required to submit the following information and documents along with their written request to the General Office of Companies Registration. These documents include:

Company articles of association, establishment announcement and the latest changes registered in the relevant authorities The latest approved financial reports of the company Explanatory report containing information related to the company’s activities and explaining the reasons and necessity of registering a branch in Iran, determining the type and limits of authority and location of the branch, estimating the required Iranian and foreign manpower, and how to provide foreign currency and Rial funds to manage the branch. .

Information and documents to register a representative of a foreign company

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According to Article 5 of the recent law for registering a representative office of a foreign company, the applicant for registration of a representative office of a foreign company in Iran is obliged to submit the Persian translation of the documents and the original documents and information along with his written request to the General Registry . Certification of the contract subject to Article 4 of this law Applicant identification documents, for natural persons, photo of identity card and legal residence address, and for legal entities, company articles of association and establishment announcement and its latest changes registered with the relevant authorities Provide a history of activity of the person applying for registration of the agency, in the field of matters provided in the agency contracts Articles of Association of the foreign company of the agency, establishment notice and its latest changes registered with the relevant authorities Report on the activities of the foreign company represented by the representative and explain the reasons and necessity of obtaining representation The latest approved financial report of the foreign company representing the representative Introduction of relevant ministries

Dissolution of the branch and representative and matters related to their liquidation

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According to Article 6 of the recent law, the persons whose activity license is revoked by the competent authorities are obliged to dissolve the branch or agency and carry out liquidation affairs within the deadline set by the Companies Registration Office. According to the note of this article, the companies whose activity license is not renewed have 6 months to liquidate the registered company and carry out its liquidation affairs. Other cases . The branches and agencies of the companies are obliged to submit the annual report of the main company including the financial reports audited by the independent auditors residing in the respective country to the relevant body.

11 January 2021
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