Civil Partnerships
In legal terminology, a civil partnership refers to a group of individuals who jointly engage in cultural, social, or non-commercial economic activities.
Civil partnerships are subject to specific rules governing ownership and taxation, which are explained below.
In its literal sense, the term partnership denotes sharing or joint participation. Accordingly, a partnership refers to joint ownership or cooperation among several persons with respect to a single, defined subject matter. Based on this definition, shared ownership of property among multiple individuals constitutes a civil partnership.
Pursuant to Article 57 of the Civil Code of the Islamic Republic of Iran, a partnership is defined as the joint and undivided ownership of property by two or more persons, where each partner holds ownership rights over all parts of the property. In general, partnerships are classified as commercial or non-commercial. Civil partnerships fall within the scope of civil law and are discussed below.
Definition of Civil Partnership and Its Distinction from Commercial Companies
- Contractual Civil Partnerships: A contractual civil partnership arises from joint ownership established by an agreement, such as the joint purchase of a property by two individuals. In this type of partnership, each partner may dispose of the jointly owned property only with the consent of the other partner or partners. Contractual civil partnerships are revocable, meaning that either party may withdraw from the partnership. However, the partnership continues to exist until the jointly owned property is divided.
- Non-Contractual or Compulsory Civil Partnerships: In this type of partnership, joint ownership arises from events such as inheritance or the commingling of property. Inheritance creates joint ownership until the estate is formally divided.
- Commingling: Commingling occurs when properties are mixed in such a way that they can no longer be distinguished from one another.
Legal Rules Governing Civil Partnerships
In civil partnerships, profits and losses are allocated among partners in proportion to their respective shares, as civil partnerships are not formed for commercial trading or profit-driven activities. Accordingly, each partner bears profit and loss in proportion to their ownership share. In certain exceptional cases, a greater share of profit may be allocated to one or more partners by agreement.
With respect to the lease or sale of jointly owned property, each partner is entitled to receive rent or sale proceeds in proportion to their ownership share.
Differences Between Civil Partnerships and Commercial Companies
Commercial companies are formed with the purpose of generating profit and conducting commercial activities by two or more natural or legal persons.
Civil partnerships, by contrast, are not established for commercial operations. The fundamental differences between civil partnerships and commercial companies include the following:
- Representation and Management: In commercial companies, management and representation are carried out by appointed directors acting on behalf of the company. In civil partnerships, management of jointly owned property rests with all partners and is subject to their mutual agreement.
- Legal Personality: All commercial companies are recognized as legal entities under Article 583 of the Iranian Commercial Code. Civil partnerships, however, are not recognized as legal persons under the Civil Code.
- Registration: Commercial companies must be registered with the Companies Registration Office and assigned a registration number, which must be used in official correspondence. Civil partnerships are not subject to mandatory registration.
- Nationality and Legal Domicile: Articles 590 and 591 of the Iranian Commercial Code recognize commercial companies as legal entities with a defined domicile and nationality. The Civil Code contains no provisions regarding the domicile or nationality of civil partnerships.
- Dissolution: Commercial companies are dissolved in accordance with the provisions of the Commercial Code and by the partners’ collective decision. Civil partnerships are dissolved through partition or division of jointly owned property upon the request of any partner.
- Bankruptcy: Under Article 412 of the Iranian Commercial Code, bankruptcy applies only to commercial companies and merchants. Civil partnerships are not subject to bankruptcy rules. In the event of debt or financial loss, general principles of financial hardship apply instead.
Frequently Asked Questions Regarding Civil Partnerships
A civil partnership refers to joint ownership or cooperation among several individuals in relation to a specific property or matter, without the purpose of conducting commercial activities. It is governed by civil law.
A commercial company is formed for profit and engages in commercial activities, has legal personality, and is subject to mandatory registration. A civil partnership is formed for non-commercial purposes and does not require registration or legal personality.
Civil partnerships are divided into two types: contractual partnerships created by agreement, and non-contractual or compulsory partnerships arising from inheritance or commingling.
Profits and losses are divided among partners in proportion to their ownership shares, unless otherwise agreed in exceptional circumstances.
No. Registration of a civil partnership is not mandatory, unlike commercial companies, which must be registered.
No. Civil partnerships are not recognized as legal entities under the Civil Code.
A civil partnership is dissolved through partition and division of jointly owned property upon the request of any partner. What is a civil partnership?
What is the difference between a civil partnership and a commercial company?
How many types of civil partnerships exist?
How are profits and losses divided in a civil partnership?
Does a civil partnership require registration?
Does a civil partnership have legal personality?
How is a civil partnership dissolved?
