The Status of Concession Theory in Common ‎Law and Iran's Company Law

Limited companies by shares in "concession theory" are nothing but an artificial being that is widely influenced by government regulations and possesses only those properties which the charter of its creation confers upon it. Except for some references, in Iranian legal doctrine, not enough attention has been paid to this theory. The main elements and features of the concession theory in common law are: principle of no capacity to act as a body corporate without positive authorization, stakeholder primacy, serve to public interest, extensive government intervention in corporate law, priority of mandatory rules in company law, and duality of company law and private law and its tendency to public law. Also in this theory, corporation’s legal power is derived from the state.In the article, by comparative study of common law system, the concept, effects and challenges of concession theory have been studied and according to the findings of this study, the place of this theory has been studied in the Iranian company law. Through this, development of effects of this theory has been criticized in the laws, regulations, bills and legal doctrine of Iran and the procedures of corporate registration authority.This article is looking for an answer to this question that what is the place of the concession theory in common law and Iran’s company law, and what are the advantages and disadvantages of this position for Iran’s company law?Looking at the effects of concession theory in the common law systems and comparing it with the Iranian legal system, the article proves that although this theory is not well known in the Iranian legal system, the prevailing logic and effects of this theory can be clearly seen in the existing laws and bills on joint stock companies. However, the common law systems have passed this theory except in exceptional cases.In Iran’s company law, the basis and logic of this theory can be seen in the Commercial Code and its amendments, Commercial Bill, legal doctrine and the procedures of the company registration authority. Some examples are: 1- As mentioned, the capacity of the company are deemed to originate from the (state) law; 2- providing public interest is more important than aims such as shareholder wealth maximization; 3- strictness is observed in company registration procedures; 4- several mandatory rules imposed on companies; 5- there is not enough desire to reduce the burden of regulations governing companies; 6- the scope of activities of the company is important, and going beyond the limits of the company's authority contained in the company's constitution is an inexorable taboo, etc.Therefore, the concession theory can be considered as one of the important theoretical foundations governing the company law in Iran, and by referring to the changes and developments of the common law in reducing the influence of this theory and replacing it with other theories, especially contract theory, It can be concluded that the existence of the basis and logic of concession theory in Iran's company law can be criticized.Furthermore, considering the existence of numerous reasons and indications that the Iran's company law follow other theoretical bases such as contractual and legal person theories, in the description of the current state of Iran's company law, it can be said that several, sometimes conflicting theoretical bases govern Iran's company law.As an efficient solution, this article suggests that company law forsakes the concession theory and moves towards the contract theory, because it is more compatible with our legal foundations, gives the company law an independent identity from public law, creates greater compliance with the general policies, is more consistent with common law experience, by emphasizing the efficiency and reducing transaction costs, helps companies in playing their main role in the economy, by reducing the role of mandatory rules and emphasizing the importance of default rules, defines an efficient role for the state in company law and increases creativity in company's constitution. Commercial Bill, which is in the process of approval by the Iranian Parliament, is the most important document and the best opportunity to adopt such approaches.