International Joint Venture

An international joint venture is an agreement between two persons from different countries and consists of the creation or acquisition of a subsidiary joint common market of the foreign partner.

The creation of a joint venture involves sharing of specific unique skills, whether commercial (distribution network), technical (production, licenses,) or managerial, but also means financial and human resources from each partner in a common spirit of cooperation. They share the management, control, risks and profits associated with this common structure. Successful joint ventures involve real cooperation and total adherence to a common goal. These depend strongly on the characteristics of the respective partners. International joint venture is one of the significant form of FDI in Iran and globally expansion/development of the multinational companies. In Iran, joint venture partners can invest in all areas that are open to the private sector. In practice, one can see several joint venture companies in construction projects and in the railway, power generation, transport, tourism, and automotive industries.

A joint venture company registered in Iran is regarded as an Iranian company and is subject to Iranian law, even if its majority of shares belong to a foreign partner. Therefore, Iranian laws and regulations normally govern the legal relationship between parties. Iranian investment laws are mainly reflected in the Foreign Investment Promotion and Protection Act, the Third Five-Year Economic, Social, and Cultural Development Plan, the Forth Five-Year Economic, Social, and Cultural Development Plan, the Fifth Five-Year Economic, Social, and Cultural
Development Plan, the Law on the Administration of Special Economic Zones, and the Law on the Administration of Free Trade-Industrial Zones. In addition to investment laws, foreign joint venture partners should be familiar with Iran’s general business laws, such as the Code of Commerce, Tax Code, Export and Import Regulations, Labor Law, and Law for Registration of Patent and Trade Marks.

The parties can opt for a contractual JV. If this is the case, their relationship will be construed as a voluntary partnership under Article 573 of the Iranian Civil Code. The parties to a contractual JV can regulate all aspects of the JV in detail in their contract.
The parties may also decide to use a corporate form existing under the Iranian Commercial Code, such as a:
•    Joint stock company (JSC).
•    Limited liability company (LLC).
•    Limited partnership.
•    General partnership.

The most recommended corporate structures for the establishment of JVs in Iran are JSCs and LLCs.