Financial Assistance for Acquisition of Own Share: A Solution for Iranian Law

Abstract

The ban on financial assistance for purchase of own shares, is rooted in the prohibition on a company acquiring its own share that the latter stems from the ban on distribution of capital to shareholders under capital maintenance rules. Although long ago the giving of financial assistance was absolutely forbidden, gradually along with the modification of commercial transactions and the influence of financial assistance on the development of business the absoluteness of this ban was set aside. However, legal systems have variously regulated financial assistance in such a manner that in some countries like England and European Union, financial assistance is principally proscribed with some limited exceptions, and some countries like United States have leniently addressed this issue so that up until the company is not insolvent, giving of financial assistance cannot be impeded. In Iranian Law, the legislator has not enacted an explicit rule for financial assistance and none of the current regulations provide any solution for this issue. Therefore, this essay studies the leading legal systems and suggests a solution consistent with Iranian law.

Keywords

• financial assistance
• share purchase
• fraudulent transfer
• maintenance of capital