Protection of Third-Party Rights in Cases of Violations of Regulations on the Formation of Joint-Stock Companies in Iranian and English Law

Abstract

Ensuring the rights of third parties in joint-stock companies strengthens and stabilizes contracts, creates security and certainty in legal relationships, and facilitates better regulation of legal and social interactions among individuals. This study adopts a descriptive-analytical approach using library research to comparatively analyze the mechanisms for protecting third-party rights in cases of violations of regulations on the formation of joint-stock companies in Iranian and English law. Specifically, it examines how third-party rights are safeguarded when the regulations governing the formation of joint-stock companies in these legal systems are violated. In general, the legal consequences of violating the laws governing the formation of joint-stock companies in Iranian and English law include: (1) sanctions related to the non-formation or nullity of the company and (2) sanctions directed at individuals whose actions resulted in the failure to form the company or its nullity. In Iranian law, legal sanctions aimed at protecting third-party rights primarily involve the non-formation or nullity of the company. However, in English law, the primary mechanism involves the invalidation and nullification of the actions of individuals who have committed the violations. This difference in mechanisms is particularly significant following the extensive amendments introduced by the English legislator in the Companies Act 2006, which were implemented in response to contemporary economic needs and influenced by judicial precedent in that jurisdiction.