Debt Collection in Iran

The debt collection process in Iran begins with an assessment of the debtor’s solvency, their business area, the history of the business, the availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments on debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on the payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt collection.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the statute of limitations. There is no statute of limitations for debt collection claims in Iranian civil law. However, there are exceptions: 1) Article 318 of the Iranian Commercial Code: sets a statute of limitations of 5 years for the collection of commercial debts arising from bills of exchange and cheques; 2) Article 36 of the Iranian Insurance Law: sets a 2-year period for claims under insurance contracts. The statute of limitations is interrupted if the debtor officially acknowledges the debt. After the interruption, the limitation period starts counting again.

Iranian law provides for judicial collection of debt in the ordinary court procedure.

The ordinary court procedure is carried out by filing a statement of claim with the court, after which the court checks the claim for compliance with the requirements of the law. If the claim is subject to acceptance, the court registers it and issues a receipt to the plaintiff, which contains the details of the parties to the case, the date of filing the claim and the registration number of the case.

After registering the case, the court sets a date for the hearing and sends the defendant a corresponding notice with copies of the procedural documents. At the court hearing, the plaintiff must present the original documents, copies of which the plaintiff attached to the statement of claim. The same obligation is imposed on the defendant, the defendant must also provide the originals and copies of the documents to which he wants to refer at the hearing.

If the creditor is a non-resident of Iran, the defendant has the right to ask the court to oblige the plaintiff to provide adequate security for the reimbursement of legal costs, to which the plaintiff may be sentenced. The defendant’s motion is accepted only after the first hearing. The amount of security and the period for its payment are determined by the court, and until the security is provided, the consideration of the case is suspended. In this case, a foreign creditor may be exempted from providing security in the following cases: 1) residents of Iran are exempt from such security in the creditor’s country; 2) the claim arose on bills of exchange and checks; 3) the creditor’s claims are confirmed by official documents.

During the court hearing, in order to establish the truth, the court evaluates the evidence of the parties, their arguments, as well as the disputed legal issues and reasons stated by the parties in their procedural documents. After establishing the truth in the case, the court completes the proceedings and, if possible, makes a decision at the same hearing, otherwise the decision must be drawn up and announced within a week.

The decision of the court of first instance may be appealed to the appellate court, provided that the amount of the claim exceeds 3,000,000.00 Iranian rials. The appeal period is 20 days for applicants who are in Iran and two months for applicants who are abroad. The decision of the appellate court can be appealed to the Supreme Court of Iran, provided that the amount of the claim exceeds 20,000,000.00 Iranian rials. The appeal periods are the same as for appealing the decision of the court of first instance. The decision of the Supreme Court is final and cannot be further appealed.

After the court decision comes into legal force, the creditor should initiate the enforcement procedure. As part of the enforcement of the court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating company shares.

An alternative option for debt collection is the bankruptcy procedure of the debtor. According to the law, the bankruptcy of the debtor occurs as a result of the termination of the payment of debts that he is obliged to fulfill. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intent to cause damage to creditors. Among such transactions, the following should be highlighted in particular: 1) any transaction on the gratuitous transfer or donation of movable or immovable property; 2) any transaction that encumbers the movable or immovable property of the debtor and causes damage to creditors; 3) any transaction concluded by collusion with the purpose of causing damage to creditors. As a result of the cancellation of the above transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Iran, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY IRAN

23.10.2024

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