Foreign Investment Regulation & law

Posted on Posted in Business Guidelines

Generally speaking, Iran has two types of laws concerning foreign companies. The first is laws that address issues concerning foreign companies directly such as the Foreign Investment Promotion and Protection Act (FIPPA) and the second is general laws of which certain articles or by-laws address foreign companies, for instance the Taxation Law and the Labor Law. Iran’s natural environment is protected by laws and the Department of the Environment is in charge of evaluating the impact of the projects and their monitoring.

In 2001, parliament approved an act called FIPPA (Foreign Investment Promotion and Protection Act) to encourage foreign investment which you can see the details in appendix (Islamic Parliment Research Center, 2016)

Also by such rules, Non-Iranians and Iranians who are living overseas can invest in stock market if the source of money came from abroad. Investment could be done in Exchanges (Tehran Stock Exchange Co.), OTC market (Farabourse Co.), as well as Futures Market of Iran Mercantile Exchange (IME).

There are different trading instruments such as Shares, rights, Futures (on shares and different commodities such as underlying assets), corporate certificates, different Islamic fixed income securities (Sukuk).

By the law, there are limitations for FPI, referring to Article 7 of “the Regulation Governing Foreign Investment”:

The restrictions imposed on the possession of shares by the non-strategic foreign investors on every exchange or OTC market are set as follows:

  • The number of shares owned by the total foreign investors shall not exceed twenty (20%) percent of the total shares number of the companies listed on the exchange or on the OTC market or twenty percent (20%) of the shares number of any company listed on the exchange or on the OTC market. SEO will supervise the limitations mentioned
  • The number of shares owned by each foreign investor in any company listed on the exchange or on the OTC market shall not exceed ten percent (10%) of the shares number of such company.
  • There were no limitations for trading in rights issued.

Strategic foreign investor who intends to possess over 10 percent of a listed share, should contact “Organization for Investment, Economic and Technical Assistance of Iran (OIETAI). They grant the license to buy up to 100 percent of a listed share (as Foreign Direct Investment “FDI”). Such investor cannot withdraw its capital whenever he /she may. Investor may be granted license from OIETAI again.

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