Indian government sources have said that New Delhi has recently allowed investment in Indian rupees in Iran, the Again Age reported on Friday.
The announcement was made simultaneous with Iranian President Hassan Rouhani beginning his visit to India from Hyderabad on Thursday.
Sources said this will not violate U.S. sanctions on Iran since transaction will not be in U.S. dollars. The Indian move will hugely help the Iranian economy as it will draw in more Indian investment into Iran.
If an Indian businessman wants to invest a certain amount in rupees in the bona fide concerned Iranian account in one of the Indian banks and the equivalent amount of Iranian rials will then be deposited in the venture in Iran, sources said.
India’s contribution to the development of Iran’s Farzad B gas field in the Persian Gulf and its operation of Chabahar Port in southeast of Iran are among the issues to be discussed between President Rouhani and Prime Minister Narenda Modi on Saturday during delegation-level talks.
Indian government sources have said that New Delhi has recently allowed investment in Indian rupees in Iran, the Again Age reported on Friday.
Iran’s state company in charge of thermal power plants has announced that it is planned to reduce the government’s footprint in the key energy industry through selling a part of its shares in such power plants.
In this regard, Mohsen Tarztalab, TPPH’s Managing Director has stated “Thermal Power Plants Holding Company aims to sell stakes in an undisclosed number of power plants with a combined installed production capacity of 11,570 megawatts to the private sector”. He has also added “Four power plants have been listed by Iranian Privatization Organization for sale and the outcome of their tenders will be publicized on Feb. 13”. Such four power stations planned for sale are located in the northern Gilan Province, Semnan Province east of Tehran and the East Azarbaijan Province.
And perhaps the most important part of Mr. Tarztalab’s speech was that there is no restriction on foreign investors taking over Iranian power stations which offers a great opportunity for foreign investors to secure a strong foothold in Iranian energy sector.
In general, the divestment program will account for nearly 15% of Iran’s total installed power generating capacity that stands at 77,000 MW. The efforts are aimed at breathing new life into an aging power industry that is overshadowed by state control over most of the production and supply chain, a lack of investment and ballooning debts to power plant operators.
TPPHC is in charge of developing 7,000 MW of gas-powered units in Jahrom, Sabalan, Kashan, Urmia, Chabahar and Asalouyeh combined cycle power plants as well as completing Parand Power Plant south of Tehran.
Iran requires increase in power generation capacity to shore up domestic power supply and increase electricity exchange with neighbors as part of it strategic scheme to establish a regional power network throughout the Middle-East.
Tehran is scheduled to be host of the first International Power Generation and Turbo Machinery Exhibition and Conference, also known as IPGTEC 2018. The event will be held in Tehran International Fairground from March 2 to 5. IPGTEC is a platform in which power industry meets the flow of information on modern power generation and achieved technological advancement. It also provides an opportunity for scientific society to discuss the newest findings and promising ideas on eco-friendly approaches of power generation as well as potential challenges. For the ones who are involved in energy industries, this event is a good chance to discuss solutions for advancing future of energy in Iran and the region.
The participants of this conference are more than 100 Iranian as well as foreign companies. Italy, the Netherlands, Germany, the United Kingdom, Japan, Belgium, Taiwan and China will participate in the event to showcase their latest products and services related to turbo systems, generators and rotating machinery. It helps the businessmen to access a wealth on technological advancements on power and turbomachinery industries to drive new business and partnerships with power industry’s leaders. It’s a networking tool that enables exhibitors and delegates to search and arrange meetings either in advance or during the exhibition. Trade professionals and leaders of power industry as well as companies are the ones whom the visitors will network with at IPGTEC 2018.
There will be also several workshops on the latest trends and challenges of this industry in the region. IPGTEC workshop sessions are about Asset management in power industry, Condition monitoring and value added maintenance, Gas turbine life assessment and extension, Root cause analysis in power industry and turbomachines, OEM & non-OEM related insurance liability and risk management in power industry, etc.
Due Iran’s power generation sector is moving towards one of the world’s most modern power industries and it is one of the largest power sectors in the Middle East, with a rapid forecasted annual growth rate, attending such conference will help to grow the industry and undoubtedly these kind of specialized exhibitions are known as the most effective platform for enhanced collaboration.
Chief of the Central Bank of Iran, who heads the entity regulating the financial market, said “transparency in the capital market is undoubtedly a prior condition for the development of this market and promoting its role in the economy.”
According to CBI website, Valiollah Seif said that transparency begins with the rules and regulations governing the market and then encompasses trade mechanisms and strong oversight.
“Among these, one of the most important elements is transparency in the financial reporting system and financial reporting of securities issuers,” he said.
“Perhaps there is no other characteristic in the stock market that equals financial transparency because in today’s world decision-making is based on forecasting and good forecasting is dependent on healthy and transparent information.”
CBI as the financial sector’s regulator and the Securities and Exchange Organization as the entity regulating the stock exchanges have in the past been at loggerheads over certain issues.
Mandatory upgrades in banks’ financial reporting standards which led to the adoption of the International Financial Reporting Standards (IFRS) by all Iranian lenders in 2016 caused disruption in their stock functions after unhealthier balance sheets emerged in light of the new standards.
Dismayed by the new revelations, Tehran Stock Exchange had to halt the trading of many of its listed banks in the aftermath. For some of the banks, the trading suspension has yet to be lifted.
Seif referred to this reform in banks’ financial statements along with curbing the inflation rate, management of the currency market, organizing the unlicensed credit institutions and enhancing supervision over banks as steps taken by the CBI to promote transparency.
Seif called for drawing on the experience of other countries in stock-related issues in order to put a permanent end to “bad accounting” practices in the country.
The official called for a resolution to the conflict of interest between accounting and auditing by devising three main sectors to handle the issue separately. He referred to the three sectors as one for “devising accounting rules,” the other “regulating the works of auditors” and the last for “auditing the public sector.”
He announced plans for the full adoption of the latest IFRS standards for banks and said the regulator is willing to enhance cooperation with the SEO to promote transparency, which he said would ultimately benefit both the capital and the monetary market.
The largest banking event of the year was held at Tehran’s iconic Milad Tower on Monday. This event centered on financial technology and innovative solutions to succor an economy which is in a dire need to reform. The entity in charge of organizing such major event is Ali Divandari, director of the Monetary and Banking Research Institute. A large number of high-level officials, industry players and local and foreign experts are attending the Seventh Conference on Electronic Banking and Payment Systems.
The ever-increasing importance of fintechs and the boons they bring for consumers are the main points of the meeting. This year’s conference is focused on promoting innovation and optimizing efficiency in financial businesses. In line with this subject, Governor of the Central Bank of Iran Valiollah Seif, called on bank executives and board members to develop a comprehensive understanding of financial technology and block chain innovation.
Communications Minister Mohammad Javad Azari Jahromi was one of the top-tier speakers of the event as well. He warned that the monopoly in payment systems effects market expansion in a detrimental way. He also called the administration’s commitment to combating digital and cyber fraud. He also announced that in a month with collaboration of ministries of economy and industries and central bank, the strategic blueprint of digital economy will be submitted to the parliament. Jahromi promised granting of a bigger role to a digital economy in the government’s plans for the fiscal 2018-19 that begins on March 21.
Digital Banking and Fintechs
Another keynote speaker of the event was the head of CBI’s Innovative Technologies Department. He determined the policies of the monetary regulator in financial innovation and technology. He outlined that the central bank has planned six documents in three phases to provide “regulatory frameworks”. He mentioned that they do not seek just some rigid regulations, but the want to take stance on fintechs and cryptocurrencies. Two of the mentioned documents dealing with payment initiators and facilitators have already been published. The rest of them will be disclosed publicly by the end of next year’s second quarter on Sept. 22. On this subject, the industry players’ feedback will absolutely be considered.
The annual conference had a number of other roundtables which discussed on Europay, Mastercard and Visa technology, open banking and conformity to international standards. In this event, some scientific research articles were also presented. The major subjects were about Banking supervision, confidentiality of information, automation systems, anti-money laundering and combating the financing of terrorism laws and global banking trends.
Iran exported more than €8.24 billion worth of commodities to the 28 member states of the European Union during the 10 months to Oct. 31, 2017, indicating a 109% hike compared with the similar period of 2016, according to Eurostat statistics shared with Financial Tribune.
Italy, with more than €2.58 billion worth of purchases, was Iran’s main export destination over the period. The figure shows a 315% hike compared with the corresponding period of 2016.
Italy and France with over €2 billion, Spain with €1.15 billion, Greece with €1.05 billion and the Netherlands with €690.7 million worth of imports from Iran, registering a 109%, 85%, 102% and 47% year-on-year growth respectively.
Imports from the EU countries during the same period exceeded €8.4 billion, registering a 32% rise year-on-year.
A 57% rise in imports of transportation machinery and equipment, which constitute 25.5% of total imports, was the main reason behind the increase in imports.
Germany with more than €2.35 billion was the main European exporter to Iran. The figure experienced a 19.2% rise compared with last year’s similar period.
Other major exporters to Iran include Italy with €1.38 billion, France with €1.17 billion, the Netherlands with €653.6 million and Belgium with €495.2 million worth of exports to Iran, indicating a 14.5%, 119.5%, 10.5% and 33.3% year-on-year growth respectively.
As such, Iran- european union trade over the period amounted to €16.65 billion, registering a 61.6% upsurge compared with the corresponding period of last year.
The Eurostat data show Iran’s main trade partners during Jan.-Oct. 2017 were Italy with more than €3.96 billion worth of exchanges, France with €3.18 billion, Germany with €2.66 billion, Spain with €1.48 billion and the Netherlands with €1.34 billion, registering a 117%, 112%, 20%, 66% and 27% year-on-year rise respectively.
In accordance with Iranian Auto Importers Association Report during the last 9 months, 55,816 automobiles with the total value of $1.47 billion have been imported into Iran indicating a 13% rise in comparison with the same period last year.
According to the latest statistics among all the imported cars, Renault and Hyundai have the largest importation share in the Iranian automobile market among foreign companies with 15,114 and 12,687 cars respectively. In this regard, Renault has increased its share 13% this year reaching 27% of the total imports. Its closest competitor i.e. Hyundai holds 23% of the market share currently, though it has lost 7% of the market.
Renault has been successful since it has established its business in Iran in partnership with Negin Khodro and they have recently set up after-sales service centers in almost all major cities. The French carmaker also has a trilateral joint production deal with Negin Khodro and Iran’s Industrial Development and Renovation Organization.
SUV Koleos (4,387) is the most popular model of Renault’s car in Iran, followed closely by Renault’s sedan Talisman (4,161) and then subsequently Captur (3,400), Duster (1,870) and lastly the Symbol (1,274).
Hyundai Motor Decline
According to the existing statistics, Hyundai’s share has decreased to 7% and is currently around 23% meaning that the South Korean company dominance on the Iranian market has ceased. Hyundai has also an Iranian partner called Kerman Motor which is the second largest private car company in Iran.
During last the nine months 12,687 of Hyundai cars have entered Iran and Tucson is the most popular model with 4475 units. After Tucson, Santa Fe (3,618), Sonata (3,294) and Elantra (1,144) are the most popular Hyundai models
Other Automobile Companies
Two major Japanese carmakers Nissan and Toyota jointly claim the title of the third most popular imported brands, each with 9% share of the market.
KIA Motors share of the Iranian market has sharply i.e. 11% declined to 6%, pushing the South Korean firm to fourth place.
During the nine-month period, 4,306 cars produced by the South Korean firm were imported. The most popular Kia model was the mid-size crossover Sorento with 1,578 units, followed by Optima with 1,487.
SsangYong Motor with 3,578 units of its mini SUV Tivoli. The company had 6% share of the market. During the period 2,931 BMWs, 2,604 Lexus and 2,185 Mitsubishis were also imported.
Mammut Khodro as the official distributor of Volkswagen started sales of two models, Tiguan and Passat, in Tehran last week. The cars found a warm welcome.
Iranian customers bought 2,000 units in less than a day, according to company officials.
The noteworthy sales by the German car-maker means it has been able to claim a 4% share of the domestic imported car market in less than a day. According to data released by Iran Auto Importers Association, close to 50,000 cars entered Iran during the nine months to Dec. 21.
VW as one of the most important automobile manufactures has recently come Iranian huge automobile market. With implementation of the nuclear deal in January 2016 and easing of economic sanctions, major international car-makers made a foray into Iran. Companies like Peugeot, Citroen, Renault, Hyundai and Mahindra forged joint production deals with local car-makers and firms like Taiwan’s Luxgen and Germany’s Borgward introduced official representatives.
VW has had an inconsistent presence in Iran. Prior to the imposition of sanctions, local automotive company Kerman Motor assembled VW’s hatchback model, the Brazilian-designed Gol. The assembly lines were shut down in 2010. Later, Mammut imported the New Beetle, Golf and Passat models, the imports were also halted later.
However, VW’s success in the market does not come as surprise. According to a survey conducted by Iran Standard and Quality Inspection Company, German cars are the most popular among Iranians. The relatively low price of VW cars compared to its German peers in Iran market has apparently given the company a competitive edge.
VW Global Sales
Since news about the company diesel emissions test cheating scandal broke in 2015, VW has been struggling to keep up its sales. The company installed secret software in vehicles in order to elude emissions tests. Better known as Diesel gate the scandal has cost VW about $30 billion.
Perhaps one of the first questions for starting a business concerns the corporate structure of the business. In this regard, it is necessary to fully identify the available corporate vehicles and then proceed to establishment of company. This article provides a short comparative study of two important corporate vehicles under the Iranian law.
A. Corporate Vehicles
Legal or natural persons whether Iranian of foreigner can establish a company in Iran under the Commercial Code. The Commercial Code has provided the following corporate vehicles:
• Public Joint Stock Company (Sherkat Sahami Aam);
• Private Joint Stock Company (Sherkat Sahami Khas);
• Limited Liability Company (Sherkat ba Masouliyat Mahdoud);
• General Partnership (Sherkat Tazamoni, cooperative partnership);
• Limited Partnership (Sherkat Mokhtalet Gheyr Sahami);
• Joint Stock Partnership (Sherkat Mokhtalet Sahami);
• Proportional Liability Partnership (Sherkat Nesbi);
• Production and Consumption Cooperation Company (Sherkat Tavavoni Tolid va Masraf).
In practice most persons choose either the Private Joint Stock Company (PJSC) or the Limited Liability Company (LLC) mainly because in both vehicles the liability of shareholders is limited to value of their share. In general LLC is contemplated to be appropriate for trading and small investments and PJSC is suitable for large investments or joint ventures. In any case selecting either vehicles require studying and reviewing the business plan and also legal framework of the business sector since for example in some sectors the only available option is PJSC.
B. Limited Liability & Private Joint Stock Company in a Glance
Limited Liability Company (Sherkat ba Masouliyat Mahdoud) is formed between at least two partners whether individual or company. The main characteristic of such company is that liability of shareholders is limited to the amount contributed to the company capital. Also, capital is divided into partnership portions and not shares. The term “Limited Liability Company” must appear immediately before or after the company’s name; otherwise, if it does not appear in the aforementioned manner, the company shall be considered as a general partnership. The name of the company must not include the name of any partners, otherwise the partner whose name appears will be considered as a member of a general partnership with unlimited liability towards the third party. Regarding management, LLC may be managed by one or more directors, with or without salary from within the partners or outside of their circle for unlimited period. LLC has a distinct and independent legal personality and is able to start proceedings against others and also it may be sued.
Private Joint Stock (Sherkat Sahami Khas) shall consist of at least 3 shareholders. The capital is divided into shares and the liability of each shareholder is limited to the nominal value of their shares. Like the LLC, PJSC enjoys from a separate legal personality which is distinct from its shareholders. Consequently, personal property of shareholders is immune from debts of the company and no creditor may be able to use such property for payment of debt. Also, due to distinct legal personality of such company, it may sue others and it may be sued. As it is inferred from the term “private”, shares are not offered to the public. Transfer of shares may be restricted in articles of association. Furthermore, the term “Private Joint Stock Company” must be appeared immediately before or after the name in a legible printing in all letter heads, notices and etc.
Although liability of the shareholders in both LLC and PJSC is limited to their shares, these two company types have the following differences:
• LLC is based on an old law which has been enacted in 1928 and does not contain detailed provisions on governance of the company and overall is not transparent enough for third parties. On the other hand, PJSC is governed by relatively newer regulations enacted in 1969. Such law contains detailed regulations on the internal structure and decision making of the company and is more appropriate for investment;
• In LLC, there should be at least 2 partners but if shareholders are more than 12 persons, then a Inspector Board shall be formed in accordance with article 109 of the Commercial Code. However, in PJSC, there should be at least 3 partners and inspectors shall be appointed in any case;
• LLC may have paid or unpaid directors or director for unlimited period from among or outside of the shareholders. In contrast, A PJSC may have paid or unpaid directors or director for a limited period, only chosen from among the shareholders;
• On the one hand, LLC governance structure is comprised of a General Assembly of Shareholders and Directors; If the shareholders are more than 12 persons, then appointment of an Inspector Board is mandatory. On the other hand, PJSC governance structure is comprised of General Assembly of Shareholders (Founding, Ordinary or Extraordinary), Director or Board of Directors and also inspectors;
• In accordance with Iranian Commercial Code, in PJSC one-twentieth (1/20) of gross profit shall be deducted as “Legal Reserve Fund” until such Reserve amounts to one-tenth (1/10) of the company capital; after that this requirement would not apply. However, no such provision applies to LLC;
• LLC shall be dissolved by the decisions of the shareholders who own more than 50 percent of the capital. But PJSC may be dissolved by convening an Extraordinary General Assembly meeting and passing a resolution on dissolution of the company, the company goes into the process of liquidation; for this purpose, a liquidator shall be chosen by the said assembly and usually takes around 2 years to finish the liquidation;
• In Joint Stock Company we have the concept of subscribed share capital which means although the shareholders must subscribe 100% of the capital, only 35% of the company’s capital need be paid at the time of formation. In LLC, all the capital must be acknowledged to have been received by the directors but no amount shall be paid at the time of formation;
C. Registration Procedure
In this part, an overview of the company registration has been provided. There is no difference between PJSC and LLC from registration point of view EXCEPT in PJSC 35% of the capital shall be paid to the bank in the process of formation. The practical phases are:
• Documents Preparation: The applicants are required to prepare some documents for the purpose of registration;
• Translation: In case of foreign applicants whether company or individual, all documents shall be translated by certified and official translator;
• Obtaining FIDA Code: In case of foreign applicants, FIDA is an identification code given to foreign natural and legal persons regardless of their title whether partner or manager or inspector; such code is issued by Iranian Tax Administration based on the information of such persons and their ID cards;
• Online Registration: Upon preparation and/or translation of all required documents and obtaining FIDA code, online registration of the company will begin.
• Signing the Documents: After online registration, the applicant shall sign all relevant documents; such documents shall be mailed to Company Registration General Office. After check and control of documents by the Office, the company registration applicant shall pay all costs and fees to obtain registration code and official newspaper.
A brief introduction on LLC and PJSC was provided in this essay; more detailed and elaborate insight on such corporate vehicles requires a deep and thorough analysis of the contemplated business. As a result, it is necessary to make decision in regard to company registration in accordance with the business plan and also legal advice.
On Sunday, top officials from the Central Bank of Iran and Turkey had a meeting in Tehran. Along with senior bankers, they had a high level talks to discover a new way of developing banking relations. One of the measures of the central banks of both countries is the currency swap agreement, which recently signed between Iran and Turkey.
This agreement is a very appropriate way to continue and increase cooperation. It is expected after the infrastructures are set in place, the implement procedure will be commenced as soon as possible. After rounds of negotiation, the officials of two countries’ central banks finally agreed on conducting bilateral trade in local currencies. Regarding to the agreement, both parties allocated a credit of 5 billion Lira and its equivalent in Rial to their agent banks. Bank Melli Iran and Ziraat Bank are the respective agent banks which such credit allocated to them. Both countries’ traders can use this credit as letters of credit with a repayment period of one year.
Based on this agreement, the payment tools such as letters of credit and remittances will be issue in the local currency. The traders will no longer need to use intermediate currencies. By such method the costs for both countries’ traders will reduce.
The future goal between two countries is connecting their bank cards. This movement allows their citizens to benefit from mutual electronic banking services and facilitate tourism.
Development of Strategic Relations
Referring to the longstanding history of trade between two countries, the expansion of the ties is very important. The implementation of the currency swap agreement is a step toward such aim. The CEO and other top-level executives of Ziraat Bank and Halkbank participated in the meeting. In addition to stating their opinion about the currency swap agreement, they expressed their willingness to improve the correspondent banking relations with their counterparts.