Branch and Representative Office of foreign companies under Iranian law
The present article has been prepared by Iran best lawyer in order to provide you with the legal points of the branch and representative office of foreign companies in Iran.
Registration and operation of branch offices of foreign companies
Registration and operation of branch offices of foreign companies in Iran are governed by the provisions of the Act Authorizing Registration of Branches or Representative Offices of Foreign Companies in Iran of 1997 (the “Act”) and the its Executive Bylaw of 1999 (the “Bylaw”). In accordance with Article 1 of the Act, foreign companies that are legally registered in their own countries may submit application to register a branch or representative office for specific activities in Iran, provided that their host countries afford reciprocal treatment to Iranian companies. As per the provisions of the Act and the Bylaw, branch and representative offices might be established for and operate a rather wide range of activities, namely:
- Providing after-sales services for goods and services of parent company;
- Conducting operational activities pertinent to agreements concluded between Iranian nationals and the parent company;
- Preparation of grounds for investment of parent company in Iran;
- Cooperation with Iranian technical and engineering companies for doing business in a third country;
- Activities aimed at increasing Iran’s non-petroleum exports;
- Providing technical and engineering services and transfer of know-how and technology; and
- Carrying out businesses which requires licenses issued by governmental entities which are legally authorized to issue such licenses such as transportation, insurance, banking, marketing and etc.
Branch and Representative Office of foreign companies
The Act and the Bylaw define a branch office as the local office of a foreign parent company. Accordingly, a branch is established with the aim of directly conducting the business of the parent company in Iran. An important legal character of branch office is that it does not have a distinct legal personality separate from its parent company.
In contrast, a representative office may be registered by an Iranian natural person or legal entity and undertake to carry out activities of a foreign company in Iran to the extent provided in its representative agreement. Therefore, it has an independent personality and the representative bears legal re-possibility with respect to its activities.
In the next section, we have briefly described legal and practical differences between these two types of presence in Iran. In addition, and for your ease of reference, we have attached hereto two separate lists of required documents for establishing branch and representative office in Iran, respectively, as Annex I and Annex II.
LEGAL AND PRACTICAL DIFFERENCES BETWEEN BRANCH AND REPRESENTATIVE OFFICE
Responsibility of parent company
Branch office does not enjoy a distinct legal personality from parent company. Therefore, the parent company is responsible for its obligations and liabilities. In contrast, representative office has a separate legal personality from the foreign company, and the latter will not be responsible for the representative’s obligations.
Management and control
The activities of a branch office are managed by one or more managers who must be natural persons and resident in Iran. The branch manager will be directly appointed by the parent company itself and the parent company reserves the right to dismiss the same at its own discretion. Therefore, the parent company will have more control over the activities of branch office.
In contrast, a natural or legal person will conclude a representative agreement with the parent company and carries out its business in Iran. Therefore, a representative office has, in principle, separate management, unless the parent company contractually bind the representative to meet certain managerial requirements.
Termination / dissolution
The parent company may dissolve and liquidate the branch at any time. In contrast, representative is formed based on an agreement and therefore, the parent company does not have standing and capacity to decide upon issues of dissolving the representative as a separate entity. As such, dissolving a representative agreement follows the same rules as termination of agreements.
Opening bank account
In case of branch offices, the bank account will be opened in the name of branch office on behalf of the parent company. Please note, however, that the manager of the branch will have full authority to manage the bank account (e.g. deposit and withdraw money etc.). Similarly, the bank account will be opened in the name of representative itself which might be a natural or legal person. However, the ultimate responsibility as to the account will be borne by the representative itself.
ANNEX I. REQUIRED DOCUMENTS FOR ESTABLISHMENT OF BRANCH OFFICE OF A FOREIGN COMPANY IN IRAN
| No. | Documents / Actions | Party Responsible |
| 1. | FIDA Code for foreign nationals (natural or legal persons) | Iran Best Lawyer |
| 2. | Written request of the parent company to the Company Registration Office | Parent Company
(Iran Best Lawyer will provide the template) |
| 3. | Certified and legalized copies of the parent company’s Articles of Association (AoA), the notice of incorporation, and the notice of last changes to the company | Parent Company |
| 4. | Last financial statement of the parent company | Parent company |
| 5. | The Letter of authorization by the parent company to the manager of the branch in Iran. | Parent Company
(Iran best Lawyer will provide the template) |
| 6. | A report justifying the company’s activities in Iran which must include the following:
|
Parent Company
(Iran Best Lawyer will provide the template) |
| 7. | A letter of undertaking whereby the parent company undertakes to wind up and close down its branch office in Iran in case the activity license given to the branch office by Iranian authorities is revoked and cancelled. | Parent company
(Iran Best Lawyer will provide the template) |
| 8. | Operation license
Some specific activities (banking, transportation, insurance, etc.) require obtaining a license in Iran and registration of branch shall be subject to obtaining such license. |
Requiring an operation license depends on the object of branch and the scope of activity
Iran Best Lawyer advises the client whether a license is required or not. |
| 9. | Legalized copy of passport of the non-Iranian branch manager and its official translation | Parent company |
| 10. | Identity documents and certificate of clean criminal record of Iranian managers | Branch manager, If Iranian |
ANNEX II. REQUIRED DOCUMENTS FOR ESTABLISHMENT OF A REPRESENTATIVE OFFICE IN IRAN
| No. | Documents/ actions | Party responsible |
| 1. | Certified copy of the representative agreement | Parent company/representative |
| 2. | Identification documents of the representative
|
Representative |
| 3. | Activity record of the applicant for registration of representative office in the respective field. | Representative |
| 4. | Certified and legalized copies of the parent company’s Articles of Association (AoA), the notice of incorporation, and the notice of last changes to the company | Parent company |
| 5. | Last financial statement of the parent company | Parent company |
| 6. | Report on the activities of the parent company including reasons for registering a representative office in Iran | Parent company |
| 7. | A letter of introduction from the ministry concerned | Representative/ Iran best Lawyer |
