Real Estate Investment In Spain – Financial and Tax Information

13 December 2025

  • Spain
  • Investments
  • Real Estate

In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

Taxation of individuals and legal entities

Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

Acquisition costs

Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

Property Tax/VAT/ITPJAD

If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

Other expenses

Basically, they will be as follows:

  • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
  • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
  • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

Property In Progress And Tax Obligations

Once you own the property, you will need to take care of the following expenses and obligations:

  • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
  • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
  • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
  • Private utilities, such as water, electricity, gas, or internet.
  • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

Joint Ownership Communities

When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

  • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
  • Permitted uses of communal areas,
  • Maintenance responsibilities,
  • Approval of extraordinary levies (derramas).

Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

Maintenance Responsibilities

All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

  • Cleaning of common areas,
  • Minor repairs,
  • Utility bills for communal services.

Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

Technical Building Inspection (Inspección Técnica de Edificios, ITE)

Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

Conclusion

A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

Summary

The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

An UBO is, namely, any individual who:

  • possesses at least 25% of voting rights;
  • possesses at least 25% of the fair market value of all shares; or
  • has enough influence to exercise de facto control of the business.

All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

  • names and aliases;
  • home address (and optionally, business address);
  • date of birth;
  • type of control exercised or percentage of shares, interests, or units held;
  • date at which he/she became an UBO and date at which he/she ceased to be one.

Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

  • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
  • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

  • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
  • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
  • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

Let’s see the changes introduced by the regulation point by point.

No Use of Foreign Currency in domestic Contracts

New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

All Contracts Must be Amended within 30 days

The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

Import and Export of Goods and Services

The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

There is no limitation in bringing foreign currency into country.

Sanctions

New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

Conclusion

This move is considered as one of the steps of measure step to support the ailing local currency.

Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

New Policy

In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

Import and Export of Goods and Services

According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

Foreign Currency for Abroad Travels

In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

Allocation of Foreign Currency to Finance Contracts

After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

Currency Exchanges

In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

Conclusion

By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

Convertible Note and SFP

Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

SAFE Agreement

The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

The author of this post is Milena Prisco.

In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

The average Iranian user

Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

Online Business Licenses in Iran

Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

  1. Virtual Business;
  2. Network Marketing.

According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

Requirements for the Online Business License

Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

  1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
  2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
  3. Upload of the required documents, which we will list below.
  4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
  5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

  1. Office or legal domicile address of the applicant;
  2. Negative criminal record from the Police;
  3. Certificate of the relevant Tax Organization regarding tax compliance;
  4. Certificate for attendance in educational courses of commerce and business;
  5. Confirmation of specialized features regarding virtual business issued by the CDED;
  6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
  7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

Successful Examples of Iranian Start-ups

In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

  1. Snapp

Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

  1. Digikala

Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

  1. Pintapin

Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

  1. Bamilo

Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

  1. Eskano

Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

The author of this post is Mohammad Rahmani.

In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

  1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
  2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
  3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
  4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

The author of this post is Tomás García Navarro.

Javier Gaspar

Practice areas

  • Distribution
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Contact Javier

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    Québec’s New Transparency Rules for Businesses’ Ultimate Beneficial Owners

    24 May 2023

    • Québec
    • Compliance
    • Investments

    In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

    In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

    Taxation of individuals and legal entities

    Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

    Acquisition costs

    Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

    Property Tax/VAT/ITPJAD

    If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

    If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

    As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

    Other expenses

    Basically, they will be as follows:

    • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
    • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
    • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

    Property In Progress And Tax Obligations

    Once you own the property, you will need to take care of the following expenses and obligations:

    • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
    • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
    • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
    • Private utilities, such as water, electricity, gas, or internet.
    • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

    Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

    Joint Ownership Communities

    When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

    Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

    • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
    • Permitted uses of communal areas,
    • Maintenance responsibilities,
    • Approval of extraordinary levies (derramas).

    Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

    Maintenance Responsibilities

    All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

    • Cleaning of common areas,
    • Minor repairs,
    • Utility bills for communal services.

    Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

    In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

    It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

    Technical Building Inspection (Inspección Técnica de Edificios, ITE)

    Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

    This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

    Conclusion

    A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

    Summary

    The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

    On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

    The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

    An UBO is, namely, any individual who:

    • possesses at least 25% of voting rights;
    • possesses at least 25% of the fair market value of all shares; or
    • has enough influence to exercise de facto control of the business.

    All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

    • names and aliases;
    • home address (and optionally, business address);
    • date of birth;
    • type of control exercised or percentage of shares, interests, or units held;
    • date at which he/she became an UBO and date at which he/she ceased to be one.

    Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

    By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

    Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

    The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

    Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

    The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

    Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

    Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

    With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

    RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

    The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

    The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

    The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

    Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

    RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

    Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

    • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
    • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

    The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

    RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

    • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
    • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
    • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

    RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

    Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

    Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

    President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

    The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

    Let’s see the changes introduced by the regulation point by point.

    No Use of Foreign Currency in domestic Contracts

    New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

    Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

    All Contracts Must be Amended within 30 days

    The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

    There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

    The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

    Import and Export of Goods and Services

    The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

    There is no limitation in bringing foreign currency into country.

    Sanctions

    New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

    Conclusion

    This move is considered as one of the steps of measure step to support the ailing local currency.

    Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

    Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

    The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

    Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

    The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

    New Policy

    In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

    Import and Export of Goods and Services

    According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

    The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

    Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

    Foreign Currency for Abroad Travels

    In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

    Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

    Allocation of Foreign Currency to Finance Contracts

    After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

    In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

    Currency Exchanges

    In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

    Conclusion

    By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

    Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

    Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

    The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

    This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

    In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

    These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

    Convertible Note and SFP

    Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

    The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

    The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

    SAFE Agreement

    The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

    Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

    In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

    Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

    Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

    Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

    In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

    The author of this post is Milena Prisco.

    In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

    We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

    The average Iranian user

    Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

    According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

    What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

    In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

    Online Business Licenses in Iran

    Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

    E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

    On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

    1. Virtual Business;
    2. Network Marketing.

    According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

    According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

    The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

    Requirements for the Online Business License

    Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

    1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
    2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
    3. Upload of the required documents, which we will list below.
    4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
    5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

    Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

    1. Office or legal domicile address of the applicant;
    2. Negative criminal record from the Police;
    3. Certificate of the relevant Tax Organization regarding tax compliance;
    4. Certificate for attendance in educational courses of commerce and business;
    5. Confirmation of specialized features regarding virtual business issued by the CDED;
    6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
    7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

    In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

    Successful Examples of Iranian Start-ups

    In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

    1. Snapp

    Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

    1. Digikala

    Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

    1. Pintapin

    Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

    1. Bamilo

    Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

    1. Eskano

    Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

    The author of this post is Mohammad Rahmani.

    In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

    In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

    The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

    1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
    2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
    3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
    4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

    Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

    Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

    Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

    Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

    Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

    Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

    If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

    The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

    In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

    Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

    The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

    Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

    Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

    The author of this post is Tomás García Navarro.

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      In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

      In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

      Taxation of individuals and legal entities

      Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

      Acquisition costs

      Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

      Property Tax/VAT/ITPJAD

      If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

      If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

      As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

      Other expenses

      Basically, they will be as follows:

      • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
      • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
      • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

      Property In Progress And Tax Obligations

      Once you own the property, you will need to take care of the following expenses and obligations:

      • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
      • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
      • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
      • Private utilities, such as water, electricity, gas, or internet.
      • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

      Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

      Joint Ownership Communities

      When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

      Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

      • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
      • Permitted uses of communal areas,
      • Maintenance responsibilities,
      • Approval of extraordinary levies (derramas).

      Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

      Maintenance Responsibilities

      All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

      • Cleaning of common areas,
      • Minor repairs,
      • Utility bills for communal services.

      Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

      In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

      It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

      Technical Building Inspection (Inspección Técnica de Edificios, ITE)

      Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

      This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

      Conclusion

      A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

      Summary

      The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

      On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

      The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

      An UBO is, namely, any individual who:

      • possesses at least 25% of voting rights;
      • possesses at least 25% of the fair market value of all shares; or
      • has enough influence to exercise de facto control of the business.

      All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

      • names and aliases;
      • home address (and optionally, business address);
      • date of birth;
      • type of control exercised or percentage of shares, interests, or units held;
      • date at which he/she became an UBO and date at which he/she ceased to be one.

      Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

      By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

      Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

      The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

      Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

      The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

      Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

      Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

      With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

      RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

      The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

      The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

      The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

      Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

      RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

      Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

      • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
      • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

      The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

      RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

      • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
      • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
      • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

      RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

      Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

      Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

      President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

      The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

      Let’s see the changes introduced by the regulation point by point.

      No Use of Foreign Currency in domestic Contracts

      New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

      Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

      All Contracts Must be Amended within 30 days

      The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

      There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

      The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

      Import and Export of Goods and Services

      The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

      There is no limitation in bringing foreign currency into country.

      Sanctions

      New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

      Conclusion

      This move is considered as one of the steps of measure step to support the ailing local currency.

      Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

      Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

      The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

      Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

      The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

      New Policy

      In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

      Import and Export of Goods and Services

      According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

      The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

      Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

      Foreign Currency for Abroad Travels

      In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

      Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

      Allocation of Foreign Currency to Finance Contracts

      After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

      In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

      Currency Exchanges

      In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

      Conclusion

      By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

      Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

      Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

      The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

      This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

      In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

      These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

      Convertible Note and SFP

      Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

      The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

      The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

      SAFE Agreement

      The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

      Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

      In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

      Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

      Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

      Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

      In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

      The author of this post is Milena Prisco.

      In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

      We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

      The average Iranian user

      Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

      According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

      What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

      In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

      Online Business Licenses in Iran

      Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

      E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

      On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

      1. Virtual Business;
      2. Network Marketing.

      According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

      According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

      The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

      Requirements for the Online Business License

      Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

      1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
      2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
      3. Upload of the required documents, which we will list below.
      4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
      5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

      Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

      1. Office or legal domicile address of the applicant;
      2. Negative criminal record from the Police;
      3. Certificate of the relevant Tax Organization regarding tax compliance;
      4. Certificate for attendance in educational courses of commerce and business;
      5. Confirmation of specialized features regarding virtual business issued by the CDED;
      6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
      7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

      In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

      Successful Examples of Iranian Start-ups

      In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

      1. Snapp

      Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

      1. Digikala

      Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

      1. Pintapin

      Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

      1. Bamilo

      Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

      1. Eskano

      Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

      The author of this post is Mohammad Rahmani.

      In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

      In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

      The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

      1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
      2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
      3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
      4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

      Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

      Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

      Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

      Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

      Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

      Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

      If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

      The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

      In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

      Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

      The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

      Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

      Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

      The author of this post is Tomás García Navarro.

      Federico Vasoli

      Practice areas

      • Corporate
      • Foreign investments
      • M&A
      Contact Federico

      Contact Federico





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        Turkey – New Regulation on mandatory use of Turkish Lira

        14 September 2018

        • Turkey
        • Distribution
        • Investments

        In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

        In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

        Taxation of individuals and legal entities

        Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

        Acquisition costs

        Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

        Property Tax/VAT/ITPJAD

        If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

        If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

        As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

        Other expenses

        Basically, they will be as follows:

        • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
        • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
        • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

        Property In Progress And Tax Obligations

        Once you own the property, you will need to take care of the following expenses and obligations:

        • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
        • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
        • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
        • Private utilities, such as water, electricity, gas, or internet.
        • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

        Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

        Joint Ownership Communities

        When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

        Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

        • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
        • Permitted uses of communal areas,
        • Maintenance responsibilities,
        • Approval of extraordinary levies (derramas).

        Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

        Maintenance Responsibilities

        All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

        • Cleaning of common areas,
        • Minor repairs,
        • Utility bills for communal services.

        Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

        In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

        It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

        Technical Building Inspection (Inspección Técnica de Edificios, ITE)

        Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

        This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

        Conclusion

        A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

        Summary

        The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

        On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

        The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

        An UBO is, namely, any individual who:

        • possesses at least 25% of voting rights;
        • possesses at least 25% of the fair market value of all shares; or
        • has enough influence to exercise de facto control of the business.

        All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

        • names and aliases;
        • home address (and optionally, business address);
        • date of birth;
        • type of control exercised or percentage of shares, interests, or units held;
        • date at which he/she became an UBO and date at which he/she ceased to be one.

        Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

        By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

        Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

        The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

        Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

        The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

        Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

        Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

        With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

        RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

        The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

        The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

        The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

        Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

        RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

        Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

        • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
        • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

        The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

        RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

        • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
        • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
        • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

        RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

        Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

        Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

        President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

        The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

        Let’s see the changes introduced by the regulation point by point.

        No Use of Foreign Currency in domestic Contracts

        New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

        Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

        All Contracts Must be Amended within 30 days

        The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

        There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

        The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

        Import and Export of Goods and Services

        The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

        There is no limitation in bringing foreign currency into country.

        Sanctions

        New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

        Conclusion

        This move is considered as one of the steps of measure step to support the ailing local currency.

        Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

        Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

        The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

        Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

        The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

        New Policy

        In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

        Import and Export of Goods and Services

        According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

        The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

        Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

        Foreign Currency for Abroad Travels

        In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

        Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

        Allocation of Foreign Currency to Finance Contracts

        After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

        In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

        Currency Exchanges

        In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

        Conclusion

        By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

        Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

        Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

        The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

        This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

        In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

        These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

        Convertible Note and SFP

        Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

        The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

        The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

        SAFE Agreement

        The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

        Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

        In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

        Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

        Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

        Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

        In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

        The author of this post is Milena Prisco.

        In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

        We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

        The average Iranian user

        Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

        According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

        What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

        In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

        Online Business Licenses in Iran

        Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

        E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

        On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

        1. Virtual Business;
        2. Network Marketing.

        According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

        According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

        The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

        Requirements for the Online Business License

        Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

        1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
        2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
        3. Upload of the required documents, which we will list below.
        4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
        5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

        Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

        1. Office or legal domicile address of the applicant;
        2. Negative criminal record from the Police;
        3. Certificate of the relevant Tax Organization regarding tax compliance;
        4. Certificate for attendance in educational courses of commerce and business;
        5. Confirmation of specialized features regarding virtual business issued by the CDED;
        6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
        7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

        In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

        Successful Examples of Iranian Start-ups

        In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

        1. Snapp

        Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

        1. Digikala

        Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

        1. Pintapin

        Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

        1. Bamilo

        Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

        1. Eskano

        Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

        The author of this post is Mohammad Rahmani.

        In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

        In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

        The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

        1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
        2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
        3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
        4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

        Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

        Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

        Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

        Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

        Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

        Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

        If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

        The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

        In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

        Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

        The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

        Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

        Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

        The author of this post is Tomás García Navarro.

        Berk Çektir

        Practice areas

        • Contracts
        • Corporate
        • Investments
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          Iran – New Regulations on Transaction of Hard Currencies

          20 June 2018

          • Iran
          • Investments

          In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

          In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

          Taxation of individuals and legal entities

          Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

          Acquisition costs

          Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

          Property Tax/VAT/ITPJAD

          If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

          If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

          As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

          Other expenses

          Basically, they will be as follows:

          • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
          • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
          • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

          Property In Progress And Tax Obligations

          Once you own the property, you will need to take care of the following expenses and obligations:

          • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
          • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
          • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
          • Private utilities, such as water, electricity, gas, or internet.
          • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

          Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

          Joint Ownership Communities

          When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

          Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

          • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
          • Permitted uses of communal areas,
          • Maintenance responsibilities,
          • Approval of extraordinary levies (derramas).

          Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

          Maintenance Responsibilities

          All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

          • Cleaning of common areas,
          • Minor repairs,
          • Utility bills for communal services.

          Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

          In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

          It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

          Technical Building Inspection (Inspección Técnica de Edificios, ITE)

          Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

          This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

          Conclusion

          A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

          Summary

          The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

          On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

          The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

          An UBO is, namely, any individual who:

          • possesses at least 25% of voting rights;
          • possesses at least 25% of the fair market value of all shares; or
          • has enough influence to exercise de facto control of the business.

          All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

          • names and aliases;
          • home address (and optionally, business address);
          • date of birth;
          • type of control exercised or percentage of shares, interests, or units held;
          • date at which he/she became an UBO and date at which he/she ceased to be one.

          Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

          By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

          Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

          The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

          Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

          The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

          Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

          Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

          With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

          RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

          The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

          The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

          The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

          Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

          RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

          Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

          • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
          • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

          The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

          RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

          • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
          • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
          • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

          RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

          Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

          Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

          President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

          The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

          Let’s see the changes introduced by the regulation point by point.

          No Use of Foreign Currency in domestic Contracts

          New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

          Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

          All Contracts Must be Amended within 30 days

          The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

          There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

          The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

          Import and Export of Goods and Services

          The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

          There is no limitation in bringing foreign currency into country.

          Sanctions

          New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

          Conclusion

          This move is considered as one of the steps of measure step to support the ailing local currency.

          Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

          Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

          The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

          Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

          The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

          New Policy

          In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

          Import and Export of Goods and Services

          According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

          The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

          Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

          Foreign Currency for Abroad Travels

          In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

          Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

          Allocation of Foreign Currency to Finance Contracts

          After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

          In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

          Currency Exchanges

          In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

          Conclusion

          By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

          Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

          Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

          The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

          This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

          In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

          These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

          Convertible Note and SFP

          Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

          The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

          The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

          SAFE Agreement

          The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

          Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

          In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

          Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

          Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

          Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

          In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

          The author of this post is Milena Prisco.

          In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

          We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

          The average Iranian user

          Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

          According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

          What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

          In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

          Online Business Licenses in Iran

          Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

          E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

          On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

          1. Virtual Business;
          2. Network Marketing.

          According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

          According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

          The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

          Requirements for the Online Business License

          Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

          1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
          2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
          3. Upload of the required documents, which we will list below.
          4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
          5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

          Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

          1. Office or legal domicile address of the applicant;
          2. Negative criminal record from the Police;
          3. Certificate of the relevant Tax Organization regarding tax compliance;
          4. Certificate for attendance in educational courses of commerce and business;
          5. Confirmation of specialized features regarding virtual business issued by the CDED;
          6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
          7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

          In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

          Successful Examples of Iranian Start-ups

          In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

          1. Snapp

          Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

          1. Digikala

          Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

          1. Pintapin

          Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

          1. Bamilo

          Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

          1. Eskano

          Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

          The author of this post is Mohammad Rahmani.

          In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

          In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

          The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

          1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
          2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
          3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
          4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

          Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

          Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

          Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

          Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

          Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

          Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

          If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

          The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

          In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

          Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

          The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

          Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

          Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

          The author of this post is Tomás García Navarro.

          Encyeh Sadr

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            Italy – Start-up investments

            19 December 2017

            • Italy
            • Investments
            • Start-up

            In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

            In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

            Taxation of individuals and legal entities

            Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

            Acquisition costs

            Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

            Property Tax/VAT/ITPJAD

            If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

            If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

            As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

            Other expenses

            Basically, they will be as follows:

            • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
            • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
            • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

            Property In Progress And Tax Obligations

            Once you own the property, you will need to take care of the following expenses and obligations:

            • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
            • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
            • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
            • Private utilities, such as water, electricity, gas, or internet.
            • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

            Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

            Joint Ownership Communities

            When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

            Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

            • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
            • Permitted uses of communal areas,
            • Maintenance responsibilities,
            • Approval of extraordinary levies (derramas).

            Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

            Maintenance Responsibilities

            All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

            • Cleaning of common areas,
            • Minor repairs,
            • Utility bills for communal services.

            Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

            In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

            It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

            Technical Building Inspection (Inspección Técnica de Edificios, ITE)

            Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

            This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

            Conclusion

            A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

            Summary

            The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

            On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

            The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

            An UBO is, namely, any individual who:

            • possesses at least 25% of voting rights;
            • possesses at least 25% of the fair market value of all shares; or
            • has enough influence to exercise de facto control of the business.

            All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

            • names and aliases;
            • home address (and optionally, business address);
            • date of birth;
            • type of control exercised or percentage of shares, interests, or units held;
            • date at which he/she became an UBO and date at which he/she ceased to be one.

            Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

            By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

            Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

            The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

            Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

            The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

            Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

            Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

            With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

            RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

            The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

            The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

            The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

            Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

            RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

            Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

            • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
            • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

            The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

            RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

            • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
            • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
            • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

            RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

            Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

            Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

            President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

            The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

            Let’s see the changes introduced by the regulation point by point.

            No Use of Foreign Currency in domestic Contracts

            New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

            Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

            All Contracts Must be Amended within 30 days

            The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

            There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

            The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

            Import and Export of Goods and Services

            The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

            There is no limitation in bringing foreign currency into country.

            Sanctions

            New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

            Conclusion

            This move is considered as one of the steps of measure step to support the ailing local currency.

            Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

            Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

            The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

            Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

            The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

            New Policy

            In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

            Import and Export of Goods and Services

            According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

            The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

            Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

            Foreign Currency for Abroad Travels

            In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

            Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

            Allocation of Foreign Currency to Finance Contracts

            After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

            In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

            Currency Exchanges

            In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

            Conclusion

            By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

            Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

            Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

            The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

            This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

            In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

            These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

            Convertible Note and SFP

            Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

            The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

            The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

            SAFE Agreement

            The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

            Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

            In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

            Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

            Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

            Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

            In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

            The author of this post is Milena Prisco.

            In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

            We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

            The average Iranian user

            Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

            According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

            What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

            In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

            Online Business Licenses in Iran

            Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

            E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

            On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

            1. Virtual Business;
            2. Network Marketing.

            According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

            According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

            The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

            Requirements for the Online Business License

            Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

            1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
            2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
            3. Upload of the required documents, which we will list below.
            4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
            5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

            Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

            1. Office or legal domicile address of the applicant;
            2. Negative criminal record from the Police;
            3. Certificate of the relevant Tax Organization regarding tax compliance;
            4. Certificate for attendance in educational courses of commerce and business;
            5. Confirmation of specialized features regarding virtual business issued by the CDED;
            6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
            7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

            In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

            Successful Examples of Iranian Start-ups

            In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

            1. Snapp

            Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

            1. Digikala

            Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

            1. Pintapin

            Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

            1. Bamilo

            Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

            1. Eskano

            Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

            The author of this post is Mohammad Rahmani.

            In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

            In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

            The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

            1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
            2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
            3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
            4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

            Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

            Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

            Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

            Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

            Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

            Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

            If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

            The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

            In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

            Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

            The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

            Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

            Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

            The author of this post is Tomás García Navarro.

            Iran – Online business and eCommerce

            5 December 2017

            • Iran
            • eCommerce
            • Investments
            • Start-up
            • Tourism

            In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

            In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

            Taxation of individuals and legal entities

            Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

            Acquisition costs

            Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

            Property Tax/VAT/ITPJAD

            If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

            If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

            As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

            Other expenses

            Basically, they will be as follows:

            • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
            • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
            • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

            Property In Progress And Tax Obligations

            Once you own the property, you will need to take care of the following expenses and obligations:

            • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
            • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
            • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
            • Private utilities, such as water, electricity, gas, or internet.
            • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

            Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

            Joint Ownership Communities

            When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

            Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

            • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
            • Permitted uses of communal areas,
            • Maintenance responsibilities,
            • Approval of extraordinary levies (derramas).

            Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

            Maintenance Responsibilities

            All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

            • Cleaning of common areas,
            • Minor repairs,
            • Utility bills for communal services.

            Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

            In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

            It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

            Technical Building Inspection (Inspección Técnica de Edificios, ITE)

            Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

            This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

            Conclusion

            A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

            Summary

            The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

            On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

            The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

            An UBO is, namely, any individual who:

            • possesses at least 25% of voting rights;
            • possesses at least 25% of the fair market value of all shares; or
            • has enough influence to exercise de facto control of the business.

            All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

            • names and aliases;
            • home address (and optionally, business address);
            • date of birth;
            • type of control exercised or percentage of shares, interests, or units held;
            • date at which he/she became an UBO and date at which he/she ceased to be one.

            Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

            By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

            Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

            The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

            Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

            The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

            Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

            Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

            With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

            RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

            The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

            The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

            The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

            Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

            RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

            Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

            • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
            • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

            The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

            RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

            • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
            • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
            • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

            RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

            Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

            Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

            President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

            The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

            Let’s see the changes introduced by the regulation point by point.

            No Use of Foreign Currency in domestic Contracts

            New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

            Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

            All Contracts Must be Amended within 30 days

            The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

            There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

            The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

            Import and Export of Goods and Services

            The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

            There is no limitation in bringing foreign currency into country.

            Sanctions

            New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

            Conclusion

            This move is considered as one of the steps of measure step to support the ailing local currency.

            Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

            Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

            The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

            Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

            The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

            New Policy

            In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

            Import and Export of Goods and Services

            According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

            The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

            Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

            Foreign Currency for Abroad Travels

            In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

            Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

            Allocation of Foreign Currency to Finance Contracts

            After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

            In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

            Currency Exchanges

            In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

            Conclusion

            By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

            Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

            Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

            The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

            This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

            In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

            These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

            Convertible Note and SFP

            Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

            The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

            The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

            SAFE Agreement

            The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

            Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

            In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

            Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

            Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

            Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

            In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

            The author of this post is Milena Prisco.

            In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

            We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

            The average Iranian user

            Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

            According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

            What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

            In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

            Online Business Licenses in Iran

            Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

            E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

            On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

            1. Virtual Business;
            2. Network Marketing.

            According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

            According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

            The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

            Requirements for the Online Business License

            Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

            1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
            2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
            3. Upload of the required documents, which we will list below.
            4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
            5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

            Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

            1. Office or legal domicile address of the applicant;
            2. Negative criminal record from the Police;
            3. Certificate of the relevant Tax Organization regarding tax compliance;
            4. Certificate for attendance in educational courses of commerce and business;
            5. Confirmation of specialized features regarding virtual business issued by the CDED;
            6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
            7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

            In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

            Successful Examples of Iranian Start-ups

            In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

            1. Snapp

            Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

            1. Digikala

            Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

            1. Pintapin

            Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

            1. Bamilo

            Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

            1. Eskano

            Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

            The author of this post is Mohammad Rahmani.

            In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

            In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

            The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

            1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
            2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
            3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
            4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

            Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

            Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

            Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

            Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

            Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

            Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

            If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

            The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

            In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

            Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

            The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

            Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

            Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

            The author of this post is Tomás García Navarro.

            Foreign investments in Argentina – Sociedades Anónimas (“SA”)

            14 March 2017

            • Argentina
            • Corporate
            • Investments

            In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

            In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

            Taxation of individuals and legal entities

            Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

            Acquisition costs

            Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

            Property Tax/VAT/ITPJAD

            If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

            If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

            As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

            Other expenses

            Basically, they will be as follows:

            • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
            • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
            • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

            Property In Progress And Tax Obligations

            Once you own the property, you will need to take care of the following expenses and obligations:

            • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
            • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
            • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
            • Private utilities, such as water, electricity, gas, or internet.
            • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

            Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

            Joint Ownership Communities

            When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

            Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

            • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
            • Permitted uses of communal areas,
            • Maintenance responsibilities,
            • Approval of extraordinary levies (derramas).

            Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

            Maintenance Responsibilities

            All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

            • Cleaning of common areas,
            • Minor repairs,
            • Utility bills for communal services.

            Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

            In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

            It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

            Technical Building Inspection (Inspección Técnica de Edificios, ITE)

            Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

            This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

            Conclusion

            A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

            Summary

            The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

            On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

            The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

            An UBO is, namely, any individual who:

            • possesses at least 25% of voting rights;
            • possesses at least 25% of the fair market value of all shares; or
            • has enough influence to exercise de facto control of the business.

            All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

            • names and aliases;
            • home address (and optionally, business address);
            • date of birth;
            • type of control exercised or percentage of shares, interests, or units held;
            • date at which he/she became an UBO and date at which he/she ceased to be one.

            Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

            By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

            Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

            The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

            Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

            The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

            Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

            Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

            With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

            RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

            The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

            The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

            The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

            Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

            RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

            Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

            • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
            • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

            The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

            RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

            • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
            • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
            • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

            RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

            Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

            Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

            President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

            The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

            Let’s see the changes introduced by the regulation point by point.

            No Use of Foreign Currency in domestic Contracts

            New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

            Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

            All Contracts Must be Amended within 30 days

            The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

            There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

            The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

            Import and Export of Goods and Services

            The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

            There is no limitation in bringing foreign currency into country.

            Sanctions

            New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

            Conclusion

            This move is considered as one of the steps of measure step to support the ailing local currency.

            Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

            Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

            The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

            Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

            The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

            New Policy

            In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

            Import and Export of Goods and Services

            According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

            The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

            Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

            Foreign Currency for Abroad Travels

            In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

            Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

            Allocation of Foreign Currency to Finance Contracts

            After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

            In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

            Currency Exchanges

            In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

            Conclusion

            By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

            Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

            Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

            The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

            This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

            In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

            These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

            Convertible Note and SFP

            Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

            The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

            The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

            SAFE Agreement

            The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

            Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

            In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

            Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

            Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

            Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

            In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

            The author of this post is Milena Prisco.

            In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

            We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

            The average Iranian user

            Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

            According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

            What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

            In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

            Online Business Licenses in Iran

            Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

            E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

            On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

            1. Virtual Business;
            2. Network Marketing.

            According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

            According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

            The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

            Requirements for the Online Business License

            Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

            1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
            2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
            3. Upload of the required documents, which we will list below.
            4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
            5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

            Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

            1. Office or legal domicile address of the applicant;
            2. Negative criminal record from the Police;
            3. Certificate of the relevant Tax Organization regarding tax compliance;
            4. Certificate for attendance in educational courses of commerce and business;
            5. Confirmation of specialized features regarding virtual business issued by the CDED;
            6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
            7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

            In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

            Successful Examples of Iranian Start-ups

            In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

            1. Snapp

            Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

            1. Digikala

            Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

            1. Pintapin

            Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

            1. Bamilo

            Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

            1. Eskano

            Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

            The author of this post is Mohammad Rahmani.

            In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

            In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

            The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

            1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
            2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
            3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
            4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

            Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

            Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

            Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

            Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

            Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

            Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

            If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

            The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

            In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

            Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

            The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

            Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

            Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

            The author of this post is Tomás García Navarro.

            Cyprus – Establishing an alternative investment fund

            6 November 2016

            • Cyprus
            • Private equity
            • Investments

            In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

            In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

            Taxation of individuals and legal entities

            Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

            Acquisition costs

            Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

            Property Tax/VAT/ITPJAD

            If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

            If it is a second-hand home, you will have to pay Property Transfer Tax (ITP – Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

            As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

            Other expenses

            Basically, they will be as follows:

            • Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
            • Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          
            • Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

            Property In Progress And Tax Obligations

            Once you own the property, you will need to take care of the following expenses and obligations:

            • If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
            • Property tax (IBI – Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
            • Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
            • Private utilities, such as water, electricity, gas, or internet.
            • Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

            Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

            Joint Ownership Communities

            When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

            Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

            • Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
            • Permitted uses of communal areas,
            • Maintenance responsibilities,
            • Approval of extraordinary levies (derramas).

            Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

            Maintenance Responsibilities

            All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

            • Cleaning of common areas,
            • Minor repairs,
            • Utility bills for communal services.

            Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

            In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

            It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

            Technical Building Inspection (Inspección Técnica de Edificios, ITE)

            Spanish regulations require buildings over a certain age – typically 45 years, though this varies by region – to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

            This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

            Conclusion

            A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.

            Summary

            The Loi visant principalement à améliorer la transparence des entreprises came into force in Québec on March 31, 2023, imposing new obligations on businesses in the province. The law requires businesses to disclose information about their ultimate beneficial owners (UBOs) to the Registraire des entreprises. UBOs are individuals who possess voting rights, fair market value of shares, or de facto control over the business. Certain entities are exempt from disclosing their UBOs. The information disclosed will be accessible to the public, except for the date of birth and, in some cases, the home address.

            On March 31, 2023, the Loi visant principalement à améliorer la transparence des entreprises (Act mainly to improve the transparency of enterprises) came into force in Québec, imposing new obligations for businesses in the province.

            The new law modifies the Loi sur la publicité légale des entreprises (Act respecting the legal publicity of entreprises) and seeks to increase corporate transparency, namely by requiring businesses to provide to the Registraire des entreprises (the “REQ”) information about their bénéficiaires ultimes, i.e. ultimate beneficial owners (“UBO”).

            An UBO is, namely, any individual who:

            • possesses at least 25% of voting rights;
            • possesses at least 25% of the fair market value of all shares; or
            • has enough influence to exercise de facto control of the business.

            All UBOs of a business must be disclosed, although some entities such as non-profit organizations, legal persons established in public interest, public corporations, financial institutions and trust companies are not required to disclose their UBOs. For every UBO, the following information is required to be communicated to the REQ:

            • names and aliases;
            • home address (and optionally, business address);
            • date of birth;
            • type of control exercised or percentage of shares, interests, or units held;
            • date at which he/she became an UBO and date at which he/she ceased to be one.

            Most of this information will be accessible to the public, with the exceptions of the date of birth and, in cases where a business address is provided, the home address. The names and home addresses of minors are also hidden from public access.

            By providing access to shareholder information, the Province of Québec was already the only Canadian corporate jurisdiction that required public disclosure of the names and domiciles of the three principal shareholders. The province again takes the lead by forcing disclosure of corporations’ UBOs. For now, in the rest of Canada, the identity of UBOs for privately held companies is not a matter of public record.

            Entities doing business in Québec should ensure to conduct a proper examination of their organizational structure, so as to correctly and fully disclose the information required by the new transparency rules. Any failure to do so can lead to immediate revocation of the business’ registration under the REQ, as well as to fines ranging from CAD 1,000 to CAD 40,000.

            The new rules only require the businesses themselves to take the necessary measures to confirm the identities of their UBOs. Professional advisers do not have any due diligence obligations in this regard.

            Under Vietnam’s presidency of the Association of South East Asian Nations (ASEAN), after eight years of negotiations, the ten ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) on 15 November 2020 signed a groundbreaking free trade agreement (FTA) with China, Japan, South Korea, Australia and New Zealand, called Regional Comprehensive Economic Partnership (RCEP).

            The ASEAN economic community is a free trade area kickstarted in 2015 among the above-mentioned ten members of the homonymous association, comprising an aggregate GDP of US$2.6 trillion and over 622 million people. ASEAN is China’s main trading partner, with the European Union now slipping into second place.

            Unlike the EuroZone and the European Union, ASEAN does not have a single currency, nor common institutions, like the EU Commission, Parliament and Council. Similarly to what happens in the EU, though, a single member holds a rotational presidency.

            Individual ASEAN Countries, like Vietnam and Singapore, have recently entered into free trade agreements with the European Union, whilst the entire ASEAN block had and still has in place the so-called “plus one” agreements with other regional Countries, namely The People’s Republic of China, Hong Kong, The Republic of Korea, India, Japan and Australia and New Zealand together.

            With the exception of India, all the other Countries with “plus one” agreements with ASEAN are now part of the RCEP, which will gradually overtake individual FTAs through the harmonisation of rules, especially those related to origin.

            RCEP negotiations accelerated with the United States of America’s decision to withdraw from the Trans-Pacific Partnership (TPP) upon the election of President Trump in 2016 (although it is worth noting that a large part of the US Democratic Party also opposed the TPP).

            The TPP would have then been the largest free trade agreement ever and, as the name suggest, would have put together twelve nations on the Pacific Ocean, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the USA.  With the exclusion of the latter, the other eleven did indeed sign a similar agreement, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

            The CPTPP has however been ratified only by seven of its signatories and clearly lacks the largest economy and most significant partner of all. At the same time, both the aborted TPP and the CPTPP evidently exclude China.

            The RCEP’s weight is therefore self evidently heavier, as it encompasses 2.1 billion people, with its signatories accounting for around 30% of the world’s GDP. And the door for India’s 1.4 billion people and US$2.6 trillion GDP remains open, the other members stated.

            Like most FTAs, RCEP’s aim is to lower tariffs, open up trade in goods and services and promote investments. It also briefly covers intellectual property, but makes no mention of environmental protections and labour rights. Its signatories include very advanced economies, like Singapore’s, and quite poor ones, like Cambodia’s.

            RCEP’s significance is at this very moment probably more symbolic than tangible. Whilst it is estimated that around 90% of tariffs will be abolished, this will only occur over a period of twenty years after entry into force, which will happen only after ratification. Furthermore, the service industry and even more notably agriculture do not represent the core of the agreement and therefore will still be subject to barriers and domestic rules and restrictions. Nonetheless, it is estimated that, even in these times of pandemic, the RCEP will contribute some US$40billion more, annually, to the world’s GDP, than the CPTPP does (US$186billion vis-à-vis US$147billion) for ten consecutive years.

            Its immediate impact is geopolitical. Whilst signatories are not exactly best friends with each other (think of territorial disputes over the South China Sea, for instance), the message is clear:

            • The majority of this part of the world has tackled the Covid-19 pandemic remarkably well, but cannot afford to open its borders to Europeans and Americans any time soon, lest the virus spread again. Therefore, it has to try and iron out internal tensions, if it wants to see some positive signs within its economies given by private trade, in addition to (not always good) deficit spending by the State. Most of these Countries do rely heavily on Western talents, tourists, goods, services and even strategic and military support, but they are realistic about the fact that, unless the much touted vaccine works really well really soon, the West will struggle with this coronavirus for many months, if not years.
            • Multilateralism is key and isolationism is dangerous. The ASEAN bloc and the Australia-New Zealand duo work exactly in this peaceful and pro-business direction.

            The ASEAN’s official website (https://asean.org/?static_post=rcep-regional-comprehensive-economic-partnership) is very clear in this regard and states, in fact that:

            RCEP will provide a framework aimed at lowering trade barriers and securing improved market access for goods and services for businesses in the region, through:

            • Recognition to ASEAN Centrality in the emerging regional economic architecture and the interests of ASEAN’s FTA partners in enhancing economic integration and strengthening economic cooperation among the participating countries;
            • Facilitation of trade and investment and enhanced transparency in trade and investment relations between the participating countries, as well as facilitation of SMEs’ engagements in global and regional supply chains; and
            • Broaden and deepen ASEAN’s economic engagements with its FTA partners.

            RCEP recognises the importance of being inclusive, especially to enable SMEs leverage on the agreement and cope with challenges arising from globalisation and trade liberalisation. SMEs (including micro-enterprises) make up more than 90% of business establishments across all RCEP participating countries and are important to every country’s endogenous development of their respective economy. At the same time, RCEP is committed to provide fair regional economic policies that mutually benefit both ASEAN and its FTA partners.

            Still, the timing is right also for EU businesses. As mentioned, the EU has in place FTAs with Singapore, South Korea, Vietnam, an Economic Partnership Agreement with Japan, and is negotiating separately with both Australia and New Zealand.

            Generally, all these agreements create common rules for all the players involved, thus making it is simpler for companies to trade in different territories. With caveats on entry into force and rules of origin, Countries that have signed both an FTA with the EU and the RCEP, notably Singapore, a major English speaking hub, that ranks first in East Asia in the Rule of Law index (third in the region after New Zealand and Australia and twelfth worldwide: https://worldjusticeproject.org/sites/default/files/documents/Singapore%20-%202020%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release.pdf), could bridge both regions and facilitate global trade even during these challenging times.

            President Erdogan made a presidential decree that mandatorily requires use of Turkish lira for transactions concluded between parties resident in Turkey. The Decree amending the Decree on Protecting the value of Turkish Lira, (The Decree) is published in the Official Gazette and came into force on 13th September 2018.

            The Decree orders use of Turkish Lira for purchase and sale of all kinds of goods, commodities, services and real estate. All kinds of lease and rental of vehicles and all kinds of goods and real estate must also be made by using Turkish Liras. The decree also stipulates that no reference to currency exchange tying a contract payment or value to foreign currency can be made and the all contracts between Turkish residents even if foreign owned must be based on Turkish Liras.

            Let’s see the changes introduced by the regulation point by point.

            No Use of Foreign Currency in domestic Contracts

            New currency policy states that all payments related to contracts between local parties i.e. Turkish Residents whether legal persons or real persons must be made in Turkish liras.

            Accordingly all real estate transactions must be made in Turkish liras and no reference can be made to foreign currencies.

            All Contracts Must be Amended within 30 days

            The Decree establishes also that all contracts between Turkish residents made before 13th September 2018 must be amended and the payments must be converted into Turkish liras from any foreign currency within 30 days from the publish date of The Decree (13th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14th October 2018.

            There is no reference to a currency exchange rate when amending contracts into Turkish Liras. The parties are free to agree on any currency rate when amending however this cannot be stipulated in the contract but only for negotiation purposed when drafting the amendment.

            The governmental projects which have been signed earlier should be coordinated with the related authority and adaption should be made in line with the new currency regime.

            Import and Export of Goods and Services

            The new decree does not impact an export or import relation, as long as one of the parties is not Turkish resident. However one must note that The Decree may have an impact on Turkish based subsidiaries of multinational companies trading with foreign currency.

            There is no limitation in bringing foreign currency into country.

            Sanctions

            New foreign currency policy does not address any criminal or administrative sanctions. New regulations should be expected to implement the practice of The Decree. Needless to say, if one of the parties of an existing contract based on foreign currency will be eager to take the matter to the civil courts if no amendment is made within 30 days and easily obtain a court decision for amendment.

            Conclusion

            This move is considered as one of the steps of measure step to support the ailing local currency.

            Slipping Turkish Liras has been an on-going concern for Turkey in last 6 months. The sudden drop of Turkish Liras exchange rate urged the government to find a quick cure to increase the value of Turkish liras or at least to maintain the status.

            Those days, some rough policies have been adopted by governments to safeguard the fragile Turkish Lira. The measures taken indeed prevented Turkish economy to accelerate and take off. With the new liberal look after 1983 elections many of these hard measures were lifted and the law on Protection of Turkish Liras was eased. The era before 1980s when there were hard policies applied to protect Turkish Lira was in a different world than today.

            The latest measure may or may not address an improvement but it is a fact that many foreign investors or local investors funded by foreign institutions will have to struggle due to the new regulations pushing them to amend their contracts into Turkish Liras from foreign currencies.

            Currency rate has always been a significant issue in the oil dependent economy of Iran. Therefore, through the last few decades different policies have been adopted by the authorities in order to manage and alleviate the impacts caused by the change of currency rate on growth of the Iranian economy.

            The situation regarding the currency market, regardless of conclusion of JCPOA and lifting of economic sanctions against Iran, did not experience much improvement. In fact, during the last few months Iranian currency market has experienced a sudden increase in demand of popular foreign currencies such as United States Dollar (“USD”) and Euro. This chaotic development, also known as foreign currency rate jump crisis, eventually leaded to adoption of a new policy by the Iranian authorities in light of unifying the rate of hard currencies.

            New Policy

            In light of the above-said developments, on April 11, 2018 the Cabinet of Ministers adopted a new policy in form of a By-law in order to regulate the Iranian currency market and bring order to it. The most important subject within the By-law is paragraph No. 5, establishing a fixed exchange rate – the “Nerkh Mobadelee” – for foreign currencies from April 10, 2018. This fixed exchange rate amounts to  IRR 42,000 for each USD and is opposed to the free market rate, which fluctuates according to the rules of supply and demand. Iranian Government recently removed Nerkhe Mobadelee from banking system and forced the market to implement the unified rate, but the enforcement of this unified rate does not meet with the economic conditions of the country and value of IRR and this is causing a paralysis of the economic system.

            Import and Export of Goods and Services

            According to para. 1 of the By-law, import of all type of goods to Iran weather through Free Industry-Commercial Zones and Special Economic Zones or other entrances is only allowed after order-register. In this respect the Notice No. 9 issued by CBI dated April 14, 2018 states that supply of any currency for the purpose of import of goods to Iran is only possible after the completion of order-register process.

            The currency needed for all order-registered goods and services will be supplied through the banking system and authorized exchanges in accordance with the CBI’s regulations. For the implementation of this process a unified platform for exchange of hard currency has been created that is called  “NIMA”.  Within NIMA four major actors are interacting: goods and services importers as currency applicants, goods and services exporters as currency supplier, banks and exchange offices as intermediaries that direct hard currency from suppliers to applicants and finally the policy maker that determines, among others, currency rate and preference uses of hard currency. In other words, all importers and exporters must supply their needed currency from NIMA or sell their currency through it.

            Additionally, if the relevant hard currency is supplied by CBI on the basis of Nerkh Mobadelee, (i.e.: the government fixed exchange rate) but the bill has not been issued yet, the shipping documents must be submitted to the issuing bank within at most six months from the date of supply of the currency; if so, rate of the supplied currency is the basic for the settlement. Moreover, in case of receiving the shipping documents after the prescribed period, admission of the submitted documents is subject to the acceptance of CBI and payment of the difference between the hard currency rate at the time of the issuance of the bill and the date of submission of the shipping documents to the issuing bank (in case of an increase in the rate).

            Foreign Currency for Abroad Travels

            In accordance with the Notice No. 2 Issued by CBI it is stated that foreign currency for abroad travel is only provided once a year for the amount of EUR 1,000 or its equivalent of other foreign currencies to the passengers at the air outlet boundaries. The amount of foreign currencies provided to passengers to the neighbouring countries and Common-Wealth countries with the exception of Iraq is EUR 500 or its equivalent of other foreign currencies. This foreign currency is only available to the passengers holding an Iranian passport.

            Also, entrance of foreign currency to Iran through passengers is only allowed up to the amount of EUR 10,000 or its equivalent of other foreign currencies; entrance of any sums more than that is only permissible in case of declaration in accordance with the conditions sets by CBI.

            Allocation of Foreign Currency to Finance Contracts

            After adoption of equalisation of foreign currency rate, as explained above, Notice No. 4 issued on April 12, 2018 by CBI provides conditions in respect to the finance contracts in light of the new policy. It states that all payments related to finance contracts including advance payments, repayment of costs etc. from this date is conducted in accordance with the new rate i.e. IRR 42,000 for each USD or its equivalent of other foreign currencies. Also, as to the governmental projects, necessary coordination should be made by the relevant authorities for the purpose of payment based on the new rate.

            In addition, regarding those projects that bring foreign currency into country, the project executor must supply relevant foreign currency for the payments.

            Currency Exchanges

            In light of the new foreign currency polices, para. 13 of the By-law provides for some restrictions on activities conducted by currency exchanges. In this respect, any exchange operation and foreign currency trade outside the conditions provided by CBI is considered as smuggling and will be dealt with in accordance with relevant regulations.

            Conclusion

            By considering the above it is understood that payment for all import and export transactions related to Iran should be conducted through a governmental controlling channel, imposed by the Central Bank of Iran. Allocation of hard currencies shall also be subject to ratification of the order-register and acceptance of the CBI.

            Hence, any Company that is willing to conduct transaction in Iran is advised to remain flexible and adjust itself with these procedures, until further notification and instructions are released in this respect.

            Convertible notes, SAFE Agreements, participative financial instruments: the growing interest in start-up investing has led to a progressive differentiation both in investment strategies and, as a consequence, in legal/contractual instruments so to best suit the investors’ needs.

            The introduction of these tools, specific to foreign ecosystems such as the Silicon Valley, and the difficulties in sourcing sufficient capitals to back the development of start-up companies, in particular with regard to the early/seed stage, has encouraged several players to opt for instruments alternative to equity investment, either developed “nationally” or under common law systems.

            This mind-set has many positive side effects since it opened up the capital raising landscape that now includes venture capital funds, business angels networks, family offices and even club deals composed of small investors willing to buy into start-ups (mostly over the incubation/acceleration stage) with an injection of capital for a relatively small amount of shares.

            In Italy, this trend towards non-equity or demi-equity instruments had two major results: it contributed to dust off legal instruments first introduced by the latest comprehensive reform of the Italian company law in 2004 (e.g. participative financial instruments – in Italian: Strumenti Finanziari di Partecipazione or SFP – art. 2346, par. 6 of the Italian Civil Code); and it fostered the creation of new contractual models plainly inspired by well-known instruments used in the Silicon Valley. That is the case of Convertible Notes and SAFE Agreements (Simple Agreement for Future Equity).

            These instruments, together with the SFPs, have a trait in common: they all require a cash investment which is meant to be converted to equity at a specific milestone or on a pre-set date. On the other hand, none of them entails the possibility for an investor to hold a participation as a shareholder (at least not straightaway). Investors become stakeholders instead and they may hold as many administrative/patrimonial rights as they manage to negotiate with the company or with the founders themselves as well as depending on the specific contractual instrument they selected. It is important to point out that profits distribution rights are not included among those subject to negotiation since innovative start-ups (namely early-stage companies that meet certain criteria set by the law: i.e. high level technology of the company’s scope, R&D expenditure or number of graduates employed, etc.) are prevented from distributing profits for the first five years according the pertaining Italian regulation (see art. 25, par. 2 of the D.L. 179/2012).

            Convertible Note and SFP

            Starting off with convertible notes: these instruments are extremely flexible and mainly used by club deals and family offices. They are structured as a hybrid between convertible obligations and traditional loans. Investors in facts lend money to a start-up on a specific interest rate and according to a contract where the parties have previously set out terms and conditions that would preside over their relationship. The investment is classified as a liability of the company to third parties and, more specifically, as a long term liability.

            The parties set two different dates, one for the conversion of the credit to equity and another one for the possible payback (in case the conversion has not been exercised). Sometimes the parties decide to leave the payback aside and set directly the date of the conversion to equity thus transforming the instrument from a demi-loan to an option on a prospective capital increase, where the money invested in the company would be considered as the price of the option; or even an obligation that can be converted to shares, an hypothesis admitted by eminent scholars not only for corporations, but also for limited liability companies.

            The conversion date is usually set before the reimbursements, for the latter is meant as the last resort in the event the capital increase has not been approved by the company and provided that the parties had previously agreed upon such possibility. Furthermore, the reimbursement might be considered as a consequence of certain events, in particular when there is a payback request for cause or when a party violates any of the representations and warranties set out in the contract. In order to avoid unpleasant surprises, it is “customary” to provide for a future capital increase specifically dedicated to the investor – as well as an obligation for the investor to convert his loan – directly in the contract. The parties are free to determine whether the conversion should take place on a certain date or subject to the company meeting specific milestones such as: turnover goals, the achievement of specific results both economically and with reference to the development of its tangible/intangible technological assets (for instance, the development of software or the patenting of an invention). The actual conversion may take place at once or in instalments through a resolution of the shareholders to schedule the capital increase in two or more tranches. The convertible note must provide for a price per share for the conversion based on the so-called pre-money valuation; it is quite usual to set also a conversion discount, that is a price per share lower than the per share price paid by other investors in that round.

            SAFE Agreement

            The SAFE Agreement – developed and used by the world-renowned California-based incubator “Y Combinator” – is neither a debt instrument, unlike convertible notes, nor an equity one since it does not give its holder the right to profit sharing or the right to vote as a shareholder. It is rather a financial instrument that incorporates a prospective right to buy out preferred shares.

            Although SAFE Agreements do not have an Italian counterpart, SFPs may look alike when they are “designed” as semi-equity participative instrument (without payback) and used to collect capitals to be allocated in a specific equity reserve, which should be used only to cover the company’s operating losses and be considered otherwise unavailable. However, the extent of this unavailability is still a matter of debate among scholars and the possibility for the parties to a SFP agreement to determine that the reserve at issue might only be used upon depletion of the others (legal reserve fund included) is not undisputed as well. In one of the latest ruling on the matter, the judge has indeed opted for the availability of the reserve created upon issuance of the SFPs on account of its statutory nature, stating that it can therefore be depleted before legal reserve fund and equity (Court of Naples, 25/2/2016). This is basically the main reason why SAFE agreements cannot be implemented tout court in Italy.

            In any case, the Italian Civil Code allows the possibility to design the SFPs so as to meet specific requirements since they are essentially “empty boxes” that can be filled by the parties based on the needs of either the issuing start-up company and/or the investors willing to fund it. In fact, the law only sets two guidelines: i) it excludes that the SFP could grant its holder the right to vote as a shareholder; ii) it establishes that these instruments can be endowed with patrimonial or even administrative rights. The possibility for a company to issue SFPs must be specified in the articles of association/bylaws, which refers to a future extraordinary meeting of the shareholders for the adoption of the pertaining regulation, which will also set out the functioning rules of the special assembly dedicated to the holders of SFPs.

            Turning to the SAFE Agreement, the American model sets a conversion price that cannot exceed a certain cap, according to which the company assigns shares on a capital increase (i.e. SAFE preferred) with privileged rights and with restrictions closely similar to those typical of standard “preferred shares”. Furthermore, it also sets a discounted conversation price which, in the US experience, is in the range of 15-20%, while there no provision as to a future deadline for paying the investment back.

            Nothing prohibits to adapt the regulation of the SFPs to the best practice resulted from the implementation of the SAFE Agreement in the US. That is the case of the “acceleration” clauses that allow the investor to convert its investment before the original date set out in the agreement in case of equity-financing/liquidity events, namely the acquisition of the start-up or a capital increase that brings new investors in. This type of clauses is also often used in convertible notes. Some clauses, on the contrary, cannot be transferred into a SFP. That is the case of the clauses that regard the payback in relation to dissolution events such as: (i) the voluntary suspension of the business activity of the company; (ii) the transfer of the company’s assets to benefit the creditors or (iii) the company’s winding-up process both voluntary and not. According to Italian law, the winding-up due to a total loss of equity implies the possibility to use the reserve destined to SFPs with the consequent loss of the money invested by the SFP holders. Hence the common practice – still debated among scholars – that sees the possibility to use the reserves created upon issuance of the SFPs subordinated to the complete depletion of the other reserves, legal reserve fund included.

            Eventually, these practices have taken hold over the last few years since they are meant to provide the investors with more and more flexibility when dealing with financial/investment instruments as those described above. They represent in fact an opportunity for both start-ups, that can obtain capital on the short period, and investors, who can grade their entrepreneurial risk allocating their investment as a debt or not – depending on the chosen instruments – with a view to a conversion to equity that will eventually depend on several factors, not least the company’s business metrics and economical standing.

            In conclusion, the dynamism of this sector and the recent intervention of the Italian legislator show that there is plenty of room for growth in the Italian start-up ecosystem.

            The author of this post is Milena Prisco.

            In this post we will briefly outline some legal aspects related to e-commerce in Iran, starting from the definition of the average Iranian user and main characteristics and advantages of e-commerce in the Islamic Republic, which is attracting several foreign investors.

            We will then analyze the requirements for the issuance of online business licenses in Iran, which is mandatory in order to open an e-shop. Finally we will take a look at some successful examples of online business in Iran.

            The average Iranian user

            Some statistics regarding Iranian users active in the virtual space are useful for understanding the size of the Iranian market, and why it is attracting several investors.

            According to the “Internet Data and Statistics”, Iran is the thirteenth country for number of internet users, as 57 million of Iranian (on 83 million of Iran’s population) have access to internet (approximately the 68% of the population), but Government sources believe these numbers are  underestimated.

            What matters for the purpose of this analysis, however, is that approximatively the 58% of the internet users search on the Internet is about information on goods and services and that – until the end of Azar 1394 (December 2015) – the average internet users are male (58%) and young (47% between 20 and 29 years old).

            In addition, the 42% of the Iranian internet users are involved in electronic commerce and the 13% use the e-banking services.

            Online Business Licenses in Iran

            Whether carried out in the traditional way or electronically, all the businesses need a business-license to operate on the Iranian market. The most important law governing  is the Union System Act 1971, amended in 1980, 2003 and in 2013, which provides that the business license is issued by the competent union or legal authority.

            E-commerce is no exception, therefore all those who intend to sell goods or provide services using the virtual space must acquire a business license.

            On February 19th, 2017 the Iranian Government issued an Executive Regulation in regard to the Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, dividing the activities in virtual space into two categories:

            1. Virtual Business;
            2. Network Marketing.

            According to Paragraph 1 in Article 1, Virtual Business is a business established by any natural or legal person in order to provide products (goods or services) directly or indirectly on a wholesale or retail basis, to wholesalers, retailers and consumers through telecommunication means such as websites and digital software (applications).

            According to Paragraph 2 of Article 1, Network Marketing is a method for selling products based on which the Network Marketing company uses its website to organize the sellers in order to sell their products directly to consumers in a place far from the regular business location. Through this method, each seller can introduce another marketer as it subset and create a multi-product sales group in order to increase sales.

            The competent authority for issuance of licenses in this regard is the National Union. Therefore, any person who intends to acquire a license in order to have its activities carried out online, must apply on the website of Center for Development of Electronic Commerce (an organ of the Ministry of Industry, Mine and Commerce, hereinafter: “CDEC” – www.enamad.ir) in order to acquire the Reliance Symbol, which is a symbol necessary to certify the identity and competence of online activities.

            Requirements for the Online Business License

            Article 3  of the Executive Regulation on Issuance of License and Supervision on Businesses in Virtual Space and Network Marketing, which governs the Issuance of Online Business Licenses in Iran, provides that business licenses shall be issued according to the following procedure:

            1. Establishment of the virtual business conforming to the checklists provided by the CDEC.
            2. Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
            3. Upload of the required documents, which we will list below.
            4. Issuance and submission of the license (after verifying the uploaded documents and the original copies thereof) to the applicant within 15 days and submission of the license information to E-Namad website.
            5. Grant of Electronic Reliance Symbol concurrent with issuance of the license.

            Furthermore, the said Regulation specifies the required documents for issuance of business license, as follows:

            1. Office or legal domicile address of the applicant;
            2. Negative criminal record from the Police;
            3. Certificate of the relevant Tax Organization regarding tax compliance;
            4. Certificate for attendance in educational courses of commerce and business;
            5. Confirmation of specialized features regarding virtual business issued by the CDED;
            6. Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
            7. Photocopy of Military Service Termination Card or Permanent or Medical Exemption Card for men under 50 or a Student Certificate.

            In addition to those, the Regulation provides some other documents for particular sectors, so it is advisable to contact an Iranian expert in the matter to verify the compliance with all applicable regulations. For instance, the Cultural Heritage, Handicrafts and Tourism Organization of Iran has set out some specific criteria for travel and tourism activities in the virtual space, so travel agency services, accommodation centers, private entities and other tourism services must follow a special procedure to render their services on virtual space.

            Successful Examples of Iranian Start-ups

            In order to become familiar with this sector, hereinafter we would like to report some inspirational examples of investments.

            1. Snapp

            Snapp is an Iranian ride hailing company which renders its services online. The Snapp application automatically connects the users to the nearest driver and shows the driver the user’s location. Afterwards, the nearest ready driver will pick up the users from their location, and Snapp calculates the price beforehand. This price is normally lower than the Taxi Agency Unions prices and can be received either in cash or via online payment or credit card.

            1. Digikala

            Digikala is the name of one of the biggest e-marketplaces in Iran. Cellphones, laptops and computers, digital cameras, office appliances, automobiles, watches, home appliances, instruments, jewelry, toys, clothes and books are some of the items sold on this website. One of the features of this website is the detailed and comprehensive reviews of different types of digital goods which can be a reliable source for purchasers.

            1. Pintapin

            Pintapin is a comprehensive tool for rendering travel services online. Accommodation services are listed in Pintapin and users can book online their desired location. It is also possible to submit the information regarding your destination, duration of stay and number of companions in order to receive suitable suggestions from Pintapin.

            1. Bamilo

            Bamilo is probably the most important Marketplace businesses in Iran. It started its activity in 2014 and is now among the most viewed websites in Iran. Based on the Amazon-model, the online store is considered as the main Iranian middleman between suppliers and consumers.

            1. Eskano

            Eskano is a smart system for searching real estate in Iran which is performed under international standards. With its huge database of transferable real estates divided between several Iranian cities, Eskano facilitates the sale and lease process, also with the possibility of setting up appointments directly through the website.

            The author of this post is Mohammad Rahmani.

            In a previous post we outlined how a foreign investor may conduct a business in Argentina and, specifically, we analysed the main characteristics of the Limited Liability Companies (Sociedades de Responsabilidad Limitada “SRL”).

            In this post we are going to focus the attention on another type of company: the Joint Stock Corporation – Sociedades Anónimas  (“SA”).

            The main differences between Sociedades de Responsabilidad Limitada and Sociedades Anónimas are the following:

            1. The transfer of SRL quotas shall be registered in the Registry of Commerce. On the contrary, the transfer of shares shall only be registered in the Shareholders’ Register of the SA.
            2. Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
            3. Board of Directors of a SA has the obligation of meeting at least every 3 months, while in the SRL the management does not have such obligation.
            4. In a SRL, the partner who has the majority vote does not need the vote of another partner to approve decisions. On the other hand, one shareholder with the majority vote can manage a SA without the favorable vote of any other shareholder.

            Main characteristics of the Argentinian Stock Corporations: las Sociedades Anónimas (“SA”)

            Shareholders: A minimum of two shareholders is required, and they may be resident or non-resident in Argentina.

            Corporate capital: The minimum capital currently required by law is equal to Argentina Pesos (ARS) 100.000 (approximately USD 6.250), of which only 25% must be paid in at the time of the corporate organization. The balance shall be paid within a maximum term of two years from the incorporation. However, the Public Registry of Commerce may require an initial corporate capital amount higher than ARS 100,000 in case – having regards to the nature and characteristics of the businesses involved by the corporate purpose – the corporate capital is considered overtly inappropriate.

            Liability SA: Shareholders liability is limited to the amount of capital invested. The sole limitation to this rule is the “lifting of the corporate veil” doctrine, applicable only when a company has been organized or used for fraudulent purposes, in order to abuse the liability limitation.

            Legal Books and Records SA: There are 4 company books and records provided by the law: 1) Shareholders’ Register; 2) Register of attendance at General Meetings; 3) Minutes of General Meetings; and 4) Minutes of Directors’ Meetings.

            Administration: The Board of Directors is the body in charge of the company administration. Its members do not need to be shareholders or residents in Argentina. However, the law requires that the Board of Directors meets at least four times a year with the physical presence of the majority of its members. The law also requires that the majority of the Directors are domiciled in Argentina.

            If the corporate capital amounts to ARS 10.000.000 (approximately USD 625.000) or more, the minimum number of Directors is three; otherwise, the law does not impose any minimum number of directors.

            The President of the Board of Directors has the power of legal representation of the company and, in case of his/her absence, the Vice President may act as the company’s legal representative.

            In addition to and notwithstanding the above, the company’s representation may be conferred through powers of attorney issued by the Board of Directors for specific purposes (banking, administrative affairs, judicial, etc.).

            Supervision SA: If the SA’s corporate capital is lower than ARS 10.000.000 no Syndic (a kind of internal auditor, with the duty to ensure that the company formally complies with the law) need to be appointed. If the capital is above said amount, the S.A. must organize a supervisory body composed of Syndics.

            The SA that does not make public offer of its stock capital may appoint only one principal Syndic and one alternate Syndic. The principal Syndic and the alternate Syndic are elected by the Shareholders. To be elected Syndic it is necessary to be a lawyer or a public accountant domiciled in Argentina. Employees, directors or managers of the company or its parent or subsidiary companies may not be syndics. Shareholders may remove Syndics at their own discretion.

            Governing body: The corporate authority governing the SA and adopting resolutions is the Shareholders’ Meeting, competent – among other issues – to approve the Annual Balance Sheet of the company, to appoint and/or remove its Directors and Syndics and to deal with any other item related to the company’s ordinary course of business.

            Financial statements, Balance Sheets and Accounts SA: Annual financial statements must be submitted for the consideration of the Stakeholders’ Meeting. Argentine law provides that the Annual financial statements must be filed also with the Public Registry of Commerce.

            The author of this post is Tomás García Navarro.

            Christi Kythreotou

            Practice areas

            • Corporate
            • Tax
            • Private Equity
            Contact Christi

            Contact Christi





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