Action for Dissolution of a Limited Liability Company
In today’s world, with the advancement and expansion of developments affecting urban life, individuals increasingly seek to achieve greater profits and benefits through collective efforts. Over time, people have pursued their objectives by formalizing cooperation through contracts and establishing companies.
Once registered, companies acquire legal personality and, by virtue of this status, possess rights and obligations similar to those of natural persons. They may lawfully exercise the privileges granted to them under the law. One important aspect of establishing a company is obtaining a national identification number, which is intended to prevent misuse. At present, companies are not permitted to operate without obtaining such an identification number.
Procedure for Filing an Action for Company Dissolution Before the Court
Iranian commercial law classifies companies into seven types, including:
- Joint stock companies, both public and private.
- Cooperative companies.
- General partnerships.
- Limited partnerships.
- Mixed joint stock companies.
- Mixed non-joint stock companies.
- Limited liability companies.
The purpose of this text is to examine limited liability companies and the legal actions related to their dissolution.
Limited Liability Company
A limited liability company is formed by two or more persons for the purpose of conducting commercial activities. In this type of company, each partner’s liability for the company’s obligations and debts is limited to the amount of their contribution to the company’s capital. It is mandatory to include the phrase “Limited Liability” in the company’s name. Failure to do so results in the company being treated as a general partnership for third-party purposes and subject to the regulations governing such partnerships.
The subject matter of a limited liability company may be confined to a specific activity or extend to a broad range of activities. Such a company may be established for a fixed term or for an indefinite period.
Distribution of Profit and Loss
As a general rule, the distribution of profits and losses in a limited liability company is determined by the provisions of the articles of association. If the articles of association do not specify the method of allocation, each partner shares in the profits and losses in proportion to their capital contribution.
Decision-Making Process
In limited liability companies, decisions are generally adopted by a majority representing at least half of the company’s capital. Accordingly, partners exercise voting rights in proportion to their capital contributions, unless the articles of association provide otherwise.
Grounds for Dissolution of a Limited Liability Company
Pursuant to Article 114 of the Iranian Commercial Code, a limited liability company may be dissolved in the following cases:
- When the objective for which the company was formed has been achieved or has become impossible to achieve
- When the company was formed for a fixed term, and such term has expired
- In the event of the company’s bankruptcy
- When partners holding more than half of the company’s capital decide to dissolve the company
- When half of the company’s capital is lost as a result of losses and one of the partners requests dissolution, provided that the court finds the reasons justified, and the remaining partners are unable to pay the share that would be due to the requesting partner upon dissolution
- When one of the partners dies, if the articles of association provide that the death of a partner results in dissolution
Action for Dissolution of a Limited Liability Company
If the extraordinary general meeting of the company fails to act in accordance with the articles of association and applicable legal provisions regarding dissolution when grounds for dissolution exist, any interested party may file a legal claim seeking dissolution of the company. In such cases, the applicant may submit a petition for dissolution via the judicial electronic service offices, thereby initiating the dissolution process.
Pursuant to Article 22 of the Law on Civil Procedure of Public and Revolutionary Courts, the court located at the company’s principal place of business has jurisdiction to hear and adjudicate actions for the dissolution of a limited liability company.
Frequently Asked Questions About Actions for Dissolution of a Limited Liability Company
A limited liability company is a type of commercial company formed by two or more persons for the purpose of conducting commercial activities. Each partner’s liability for the company’s debts and obligations is limited to their share of the company’s capital. The inclusion of the phrase “Limited Liability” in the company’s name is mandatory.
Profits and losses are generally distributed in accordance with the provisions of the articles of association. If no such provisions exist, partners share profits and losses in proportion to their capital contributions.
Decisions are usually made by a majority of partners holding at least half of the company’s capital, unless the articles of association provide a different arrangement.
Under Article 114 of the Commercial Code, grounds for dissolution include fulfillment or impossibility of the company’s objective, expiration of the company’s term, bankruptcy, decision of partners holding more than half of the capital, loss of half of the capital with inability to compensate, and the death of a partner, where stipulated in the articles of association.
If the extraordinary general meeting fails to take action despite the existence of grounds for dissolution, any interested party may file a petition for dissolution through the judicial electronic service system.
The court located at the company’s principal place of business has jurisdiction to hear actions for dissolution, in accordance with Article 22 of the Law on Civil Procedure of Public and Revolutionary Courts. What is a limited liability company?
How are profits and losses distributed in a limited liability company?
How are decisions made in a limited liability company?
What are the grounds for dissolution of a limited liability company?
When can an action for dissolution of a limited liability company be filed?
Which court has jurisdiction over an action for dissolution of a limited liability company?
