Comparative Review of Single-Member Company in Iran Legal System

Document Type : Scientific research

Authors

• abas niazi ¹
• ayam kamarkhani ²
• mohsen jalilian ³

¹ University of Isfaha, Isfahan, Iran

² Shahid Beheshti University, Tehran, Iran

³ Institute of Research Planning and Management

https://doi.org/10.22067/le.v22i8.34314

Abstract

In this paper, we focus on the new draft article 479 of the Commercial Code concerning single-member company and reviewed the legal perspectives of this matter. The reasoning, advantages and disadvantages, and necessary safeguards of this institution are investigated and through a comparative study the most important rules of acceptance of this type of company is reviewed. The terminology , ambiguities in the matter of establishing this type of company, its management and the order of responsibilities of single-member company are discussed. It is explained that single-member company is not limited to family companies or newly established companies, but also may involve the joint stock companies as well if meeting some criteria.
Moreover, essential elements (factors, aspects) for accepting Single-Member Company, as well as the advantages and disadvantages (pros and cons) are discussed.
Single-member company is a type of company which has only one member either it is a limited liability company, or any other type of company. This company can be legally founded originally at the beginning of its establishment, or when all the shares of a company are transferred to one person/member and the number of the members/shareholders reduced to one.
In Islamic law each individual is responsible for his/her on debts and responsibilities and establishing a single-member company to shuffle off responsibility is against this law. This issue can be answered this way that the ruler already waived the aforementioned law by accepting the principal of limited liability and joint stock companies.
Founding a single-member company was in agreement with some votes in England before it was accepted by European Commission.
Establishing single-member company may be connected with some other legal institutions/organization which not taking these organization in account may hinder reaching a comprehensive overview on this matter, therefore, investigating this issues is also considered. In this paper it is assumed that accepting a single-member company, limiting its organization to a limited liability is not the case. This study was carried on by studying the accessible references. It is shown that accepting this type of company in Iran law should be through applying some safeguards and clarifying some ambiguities. The following conditions seem necessary to be considered in this matter:
1- Accepting single-member company should be with respecting and providing the security of the third parties rights in order to minimize misusing and abusing. An important safeguard is piercing/lifting (looking or peeping behind the company, disregarding the corporate entity or personality) veil of company issue which accurate explanation of this issue is with high importance.
The doctrine of piercing the corporate veil facilitated holding directors liable for corporate debt. Nevertheless, the doctrine is not a separate cause of action. Directors are bound by fiduciary duty, duty of loyalty and duty of care and skill to the corporation and its shareholders. However, there is not such a contractual relationship between directors and creditors. Thus, requiring directors to compensate creditors should be justified on tort law. In the Iranian, French and American legal systems, fault-based liability is the cause of action for directors' liability. The author found that in piercing cases, directors' liability follows the traditional rules of fault-based liability unless specified otherwise by statute as strict liability.
2- Single-member company can be included public or private joint-stock companies, and limited liabilities companies with regard to the fact that the purpose of establishing these companies is to assets analysis partner (owner) single partner company is now considering a distinctive personality which only can be reached through the aforementioned companies. Hence, the new Commercial Code article’s point of view on the acceptance of single-member company in the form of a limited liability company can be criticized.
3- Considering the fact that granting permission on establishing single-member company have been considered by the legal system therefore, it is recommended that founding certificate for this type of company be restricted to government related companies, and if there would be a positive feedback after this trial, then the permission for individual can be granted. It is due to the fact that the third-party rights and public order requires that this issue be treated with great caution. For example, accepting this type of legal personality should be restricted to providing appropriate with the government bail; or the property of the owner and the company should be considered as one not as separate things (which is in opposition with limited liability). It is also important that the legal quorum of companies that lose their partners, to be considered. Therefore, it is suggested that if such a case occurred for limited liability or joint stock companies a proper recovery time is considered in the law.


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Keywords

• Single-Member Company
• State Company
• Legal Personality
• and Nominal Partner
• PiercingTthe Corporate Veil

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