Director’s duties to companies in Iran: what imperfections exist and what could be done by way of improvement?

This thesis comprises a study about directors’ duties in Iran, and examines whether they are in an acceptable state, whether there is any potential need to modify them and if so how could they be improved. After providing an introduction to the study in Chapter 1, Chapter 2 provides a background to directors and their duties. There is an explanation of the different types of directors and an analysis of the nature of duties that can govern them and this is considered in relation to various jurisdictions. Chapter 3 focuses on Iran, explaining the types of directors’ duties, the legislation in place for companies and apparent weaknesses of the current law on duties. The thesis includes an extensive empirical study, which is documented in Chapters 4 and 5. In Chapter 4 the process of the empirical research is set out, detailing the selection of semi-structured interviews, the process of selecting the interviewees, the development of the questions, the ethical review and the data collection process. Chapter 5 presents the core points of discussion from the interviews. Each point of discussion contains the various views of the interviewees to provide a complete sample of what the different groups of interviewees think about each subject matter. Chapter 6 considers the shortcomings of the law on duties in Iran and it does so by drawing on the doctrinal analysis in Chapter 3 and the empirical research data from Chapter 5. One of the aims of the chapter is to see whether any of the alternative practices from other countries researched could resolve Iran’s problems. Recommendations are then suggested for potential reforms of Iranian company law that could improve directors’ duties. Chapter 7 completes the thesis with a series of concluding remarks. The study concludes that the law on directors’ duties in Iran has many flaws and that in order to ameliorate the state of the law there needs to be reforms to the legislation so that there is a comprehensive set of directors’ duties, an introduction of the Business Judgment Rule and greater ease for minority shareholders to enforce breaches of duty. Directors’ duties are required, as duties are currently not adequately provided for in either or both of statutory law and Islamic sources. This has led to companies being expected to make up for this shortfall in law by including their own set of duties in their articles of association. The inclusion of a duty of care is also advocated and to be accompanied by the introduction of a Business Judgment Rule. The introduction of the duty of care alone would be a substantial improvement, as it would allow for a greatly needed subjective and objective approach for assessing breaches. The utility of the Business Judgment Rule comes in to effect when directors need to defend themselves in circumstances where the company has suffered damage due to a decision they made with good intentions. Developments to permit greater enforcement of breaches of duty are equally necessary as duties are only effective if there is suitable enforcement in place. Currently there are substantial barriers that prevent many actions being brought. These barriers, when removed would greatly enhance the ability of minority shareholders to bring actions against directors.