Joint Venture & the Law of Iran

Where two or more persons, whether natural or juridical, put together their assets to start a business activity in order to reap the benefits and to avoid the losses, they form a joint venture. Due to complexity of joint ventures, on the one hand, and strong desire of the partners to a joint venture to agree on every aspect of their venture, on the other, it is necessary that the partners found their relationship on a well-drafted and sufficiently detailed joint venture agreement.

The next step is to choose the type of their joint venture partnership. They may opt for a simple, contract-based, and limited form of partnership. Two parties to the joint venture agreement cooperate in the framework of a joint venture agreement that sets up their objectives, plans, joint properties, as well as the method of calculation and payment of their profits.
Simplicity of this legal structure might not match the complex activities that the parties intend to initiate. In that case they provide for detailed procedure of establishing a joint venture company (JVC) that will function as their common pool of interest. Parties to the joint venture contract become shareholders or partners in a company. As a result, they have to agree on name, capital, head office, shareholders, types of shares, general meetings, and many other aspects of establishing a company in their shareholders agreement as well as in the Articles of Association (AoA) of their JVC. All the agreements related to their common interests, especially those related to transfer of technology, intellectual property rights (IPRs), purchase and sale of realties, etc. must be annexed to the joint venture agreement too.
Appropriate drafting of the above agreements require a thorough understanding of the legal context of Iran. The recently passed Commercial Code of Iran is one of the laws that must be studied and analyzed carefully before starting negotiations on establishing a joint venture in Iran. Impact of the sanctions imposed on Iran is another major issue of concern for every foreign investor in Iran. We will discuss this latter issue later.