World Business and Economic Analysis
World Business and Economic Analysis
Farhad Emam
Legal Consultant and International Trade Law Researcher
A Brief Analysis of Private and Public Entities in Iran
A main question during the due diligence process in Iran is about the legal qualification of the local counterpart or partner. The Iranian entity that is interested in dealing with a foreign company is either a company, or an organization, or a “prilic” entity as explained below. Foreign companies normally ask a basic and apparently simple question from their Iranian counterparts: Are you a public or a private entity? What are the best ways of evaluation and verification of the responses to be received from the Iranian entity? It all depends on the legal qualification of the Iranian entity as well as the control that is exerted on it by its real owners.
I. Companies
a. Public companies: In these companies, either more than 50% of the equity belongs to government, or it is a chartered company or it is nationalized or expropriated under law or by a court order.
b. Private companies controlled by government, governmental organizations or public companies: Controlling equity, as defined by Article 1(7) of the Act on Execution of General Policies of Article 44 of the Constitution (the Act), means the percentage of equity that enables its owner to select the majority of members of the board of directors. Article 1(18) of the Act gives a wider meaning to the concept of control by defining a controlling company as an entity that through ownership of all or part of the shares or equity or through management of a company, or through other ways, controls economic activities of other entities in the market.
c. Cooperatives: Under Article 44 of the Constitution, cooperatives are neither private nor public entities. However, shares of a cooperative company may be purchased by public entities up to 49% in less developed regions and up to 20% in other regions of Iran under Article 12(3) of the Act Amending Articles of the Four Development Plan. As a result, a cooperative company can get very close to becoming a public company.
II. Organization (moas’seseh)
Public non-governmental organizations are defined under Article 5 of the Public Audit Act (1987) as entities established under law to carry out public functions or to render public services. The Act Listing Public Non-Governmental Organizations and Entities (1994) must be consulted before entering into an agreement with the entities listed in the above Act. The most famous among them are four foundations: a) Mostazafa’an and Janbaza’an Foundation; b) Martyrs Foundation; c) Housing Foundation; and d) 15 Khordad Foundation. Note 2 of the Act states that provisions of the Act shall apply to the public non-governmental organizations that are under supervision of the spiritual leader only where it is authorized by him.
III. Prilic (khosoolati) entities
In some instances, it becomes really difficult to determine whether an entity is public or private. The reason behind this difficulty is that through a combination of complex equity purchase operations, privatization and management control, certain Iranian entities are standing somewhere between public and private ends of the existing spectrum. The term used in Persian language (khosoolati) is a combination of public (dowlati) and private (khosoosi). As a result, the term used in this text, i.e. “prilic” is a combination of private and public. Prilic entities are created to benefit from advantages of both public and private companies. As a result, special rules apply to their establishment, as well as start and termination of their operations. They will be explained in a separate post.
Law in Iran Group
A. Structure
Law in Iran Group is an international legal network composed of lawyers and experts from 12 different countries including Iranwho have come together to provide legal information and services to the clients who are interested in doing business in or with Iran.
B. Scope of services
Law in Iran Group provides its clients with legal information and services related to oil and gas, foreign investment, technology transfer, intellectual property, transport, banking and finance, tax, labour and employment, legal structures and population movement (including immigration, as well as work and study abroad). Asubsidiary group called “STUDCARAN” is established for sharing information and rendering services related to study, work and stay in Canada.
C. How to contact us
Two websites, two channels and groups on Telegram and one group on Linkedin provide you with information about the above subjects and enable you to avail yourself of the services provided by "Law in Iran" and STUDCARAN groups:
1. http://lawiniran.com/;
2. http://studcaran.com/;
Iran’s Naftiran Intertrade Company Sàrl (NICO) and France’s Total S.A. Company have agreed on sealing an oil swap deal.
Naftiran Intertrade Company Sàrl (NICO), a Swiss-based subsidiary of the National Iranian Oil Company (NIOC), and Total oil company of France have agreed on inking a deal to swap crude oil from Caspian Sea littoral states.
Following the earlier contract between Iran and Franc over exports of 160 to 200 thousand barrels of crude per day, an oil swap deal is also expected to be inked in near future.
In addition to Total, two other oil giants, Vitol of Switzerland and England’s BP (British Petroleum), have also held successful oil swap negotiations with Iran’s NIOC.
So far in the post-JCPOA era, Total has signed a contract to purchase 160 thousand barrels of Iranian crude per day, a confidentiality agreement for development of South Azadegan oilfield as well as a Memoranda of Understanding (MoU) to construct a petrochemical complex in southern Iran.
Hassan Bagherian, Director of the Tehran Department of the Iranian Oil Pipelines and Telecommunications Company, has recently told a press conference that the refinery is prepared for swapping oil with northern neighbors of Iran by building the adjoining facilities.
“the facility can swap over half a million barrels of oil to these countries as well as two other Iranian refineries on a daily basis,” underlined the official adding “Tehran Refinery is ready to receive oil feeds from Kazakhstan, Azerbaijan and Turkmenistan as Iran is planning oil swap with the countries.”
Hamidreza Shahdoust, a local Iranian Oil Terminals Company (IOTC) official in the city of northern city of Neka, had said earlier that Neka Oil Terminal enjoys a total storage capacity of 120 thousand barrels per day in its 12 tanks; “moreover, the project to increase oil swap capacity to 2.5 million barrels per day has kicked off,” he had noted.
Oil Minister Bijan Zanganeh, while pointing to Iran’s readiness for oil swap with Russia, had earlier noted “the Russian side has also voiced willingness for swapping a portion of its oil production through Iran’s route and relevant negotiations are underway.”
“The capacity exists for a maximum swap of 150 thousand oil barrels per day,” underlined Zanganeh stressing “the process would boost Iran’s market share since the replacement is delivered to customers in the Persian Gulf.”
A key player in Iran's energy sector, NICO is a general contractor for the oil and gas industry which also handles trading and swaps operations on behalf of NIOC.
Iran eyes swap arrangements with Azerbaijan, Turkmenistan, and Kazakhstan, under which it ships crude from the Central Asian producers to its Caspian ports. In exchange Iran delivers the equivalent barrels of crude on behalf of the three Central Asian producers to their customers in the Persian Gulf.
Iran Mercantile Exchange has published its first ever English annual report for the fiscal year ending March 19, 2016.
According to the report by the IME’s International Affairs and public relations office, the IME’s first English annual report for the fiscal year ending March 19, 2016 presents to the general public the IME’s position in national economy and its role in creating a competitive, transparent and productive market as well as developing financial instruments, implementing new financial instruments to expand IME's scope of activities and preparing the groundwork for IME with an aim to gear up for more international relations and the necessity of publicizing related information.
With that in mind, the report includes the IME’s General Data, Organizational Structure, General Trading Data, Financial Data Summary, Board of Director’s Message and CEO’s Post, IME’s History, Field of Activity and Strategies, Vision and Mission, Capital and Shareholders, Legal Environment of IME, IME’s Function in 2015, Key Highlights and Best practices, The Market Status and Trading Statistics, Commodities, Suppliers, Commodity-based Securities and Listed Warehouses, Active Brokers and Brokers’ Performance, Company's Financial Position, Comparison between Actual Results and Budgets, IME’s Governance and Management Structure, Board of Directors and Human Resources, Priorities in 2016 (1395) and finally Financial Statements, Independence Auditor’s report and explanatory Notes.
The PDF version of the annual report 2015 is accessed here.
