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

24 Maio 2023

Québec

Conformidade
Investimentos

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 13^th 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 13^th 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 (13^th September 2018): this shall mean that all contracts based on foreign currencies must be amended within 14^th 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 19^th, 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:

Virtual Business;
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:

Establishment of the virtual business conforming to the checklists provided by the CDEC.
Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
Upload of the required documents, which we will list below.
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.
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:

Office or legal domicile address of the applicant;
Negative criminal record from the Police;
Certificate of the relevant Tax Organization regarding tax compliance;
Certificate for attendance in educational courses of commerce and business;
Confirmation of specialized features regarding virtual business issued by the CDED;
Photocopy of ID-card/Company-Registration number, plus passport/work-permit for foreigners;
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.

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.

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.

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.

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.

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:

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.
Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
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.
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 is emerging as a new investment fund centre in Europe following the efforts for evolving and upgrading the regulatory and compliance framework which was initiated in the late 1990s. The enactment of the Alternative Investment Funds Law, No. 131(I)/2014 (AIF Law) is the latest development which aimed at the creation of an attractive and competitive environment for further enhancement and development of the alternative funds industry in Cyprus. The AIF Law replaced the previous regime under which Cyprus managed to develop into a regional domicile for investment funds and their managers.

The following possibilities for alternative investment funds (AIFs) were introduced by the AIF Law:

Umbrella funds with multiple investment compartments/sub-funds which may adopt different investment policies and manage different pools of assets
Transferability of shares
Public offerings of AIF’s shares or units
Listing of securities issued by AIFs

AIFs may be open-ended or closed-ended and may take one of the following legal forms:

Fixed Capital Company
Variable Capital Company
Limited Partnership
Common Fund (contractual)

The relevant rules applicable to the respective legal form are based on Anglo-Saxon common law principles which are incorporated in Cyprus law (company law, partnerships law and contract law etc.).

AIFs may have a limited or unlimited duration.

Investor Classification

AIFs may be established either to be marketed to retail investors or to professional and/or well informed investors (see below for the exception applicable to AIFs with limited number of persons). Investor classification is to be made on the following basis:

Professional Investor: For an investor to be considered as professional investor the requirements for professional clients under Markets in Financial Instruments Directive 2004/39/EC (MIFID) must be satisfied. A basic characteristic of professional investors is the fact that they possess the experience, knowledge and expertise to make their own investment decisions and to properly assess the risks they incur.

Well-Informed Investor: A well-informed investor is not a professional investor within the above meaning but one who:
- confirms in writing the well-informed investor status and awareness of the risks related with the proposed investment; and
- makes an investment of at least €125.000 or has been assessed as having the expertise, experience and knowledge in evaluating the suitability of the investment opportunity in the AIF by a credit institution, investment firm or a management company for Undertakings for the collective Investment in Transferable Securities (UCITS Management Company)
Retail Investor: A retail investor is an investor who does not fulfil the above requirements so as to be classified as a professional or well-informed investor.

Types of AIFs

The AIF Law allows for the establishment of AIFs to be addressed to an unlimited number of investors as well as for funds addressed to a limited number of persons (maximum 75) who may only be professional and/or well-informed investors.

AIFs to be addressed to an unlimited number of investors must to comply with minimum initial capital requirements i.e. €125.000 if externally managed and €300.000 if self-managed.

AIFs may be subject to investment restrictions depending on the investor type, the category of the assets to be held in their portfolio and the overall investment policy to be adopted. On the other hand, AIFs with limited number of investors are subject to a lighter legal and regulatory framework and are not subject to investment restrictions or investment limits.

Management of AIFs

AIFs may be managed externally by a manager appointed to perform the management of the portfolio of assets and related services. Different entities may undertake this role depending on the type of AIF:

For AIFs with unlimited number of investors the external manager may be:
- An Alternative Investment Fund Manager (AIFM) established under local law or under the Alternative Investment Fund Managers Directive
- A UCITS Management Company established under local law or under the Undertakings for the collective Investment in Transferable Securities Directive
- A MIFID Investment Firm established under local law
- An AIFM established in a third country but complying with the relevant provisions of the local legislation
For AIFs with limited number of investors the external manager may be:
- A MIFID Investment Firm established under local law or the MIFID
- A UCITs Management Company established under local law
- An entity established under local law solely for the purpose of managing a specific AIF with limited number of investors
- An entity established in a third country and licensed to provide asset management services and subject to prudential supervision

In the case of AIFs which are companies, the AIF Law provides the option of self-management whereby the management of the portfolio of assets is performed by the board of directors subject to certain restrictions (cap on value of the assets under management, restrictions on leverage, lock-up periods).

Depositary

The depositary of an AIF may be a credit institution or a MIFID Investment Firm or other entity which is subject to prudential regulation and ongoing supervision and which is eligible to act as depositary under its home state legislation.

The depositary must have its registered office in Cyprus or in another member state of the European Union or in a third country, provided that the Cyprus Securities Exchange Commission has signed with the competent authorities of the third country a Memorandum of Understanding for Cooperation and Exchange of Information.

Under certain circumstances it is possible for small AIFs with limited number of persons not to appoint a depositary.

Utilisation of the AIFs

AIFs may be utilised for investments in a wide range of asset classes. Such funds have been established for investments in debt and equity securities as well as real estate and private equity. In a structure with multiple investment compartments/sub-funds, different compartments/sub-funds may invest in diverse asset classes.

Key benefits

Cost-efficient and simple set-up process with fees being significantly lower than in the more mature fund centres e.g. Ireland and Luxembourg
A single and accessible regulator for the alternative funds and their managers
Flexibility as to the asset classes that may be included in the AIF portfolio
Transparency, reporting and risk management aiming at investor protection
Regulated environment in line with the European Union regulatory framework for Alternative Investment Fund Managers, MIFID Investment Firms and UCITSs
Passporting of the marketing of funds in the European Union where the manager is an AIFM
Redomiciliation in and out of Cyprus is possible

Taxation

Cyprus’ growth in this sector has been driven by the country’s tax treaty network, originally rendering it a jurisdiction for launching investments funds with investments primarily into Russia, the former Soviet republics and Eastern Europe but recently also in Asian countries.

Main aspects of tax treatment in Cyprus:

Subject to 12.5% flat corporation tax
Exemption from tax on dividends received by the AIF
Exemption from tax on profits from sale of securities or other instruments (except where the securities are in companies owning immovable property in Cyprus)
No subscription tax on assets of funds
Exemption on capital gains tax from the sale of immovable property located outside Cyprus
No capital gains tax on disposal of shares/units by the holders
Benefiting from an extensive network of more than 50 double tax treaties offering interesting tax planning opportunities

In a rapidly changing funds industry, the options and opportunities available for the setting up and operation of alternative investment funds under the Cyprus regulatory regime are worth exploring by fund managers, investors and their advisors.

Martin Aquilina

Áreas de prática

Arte
Contratos
Comércio eletrónico
M&A
Privacidade e segurança dos dados

Contato Martin

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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.

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.

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.

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.

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 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

There is no limitation in bringing foreign currency into country.

Sanctions

Conclusion

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

New Policy

Import and Export of Goods and Services

Foreign Currency for Abroad Travels

Allocation of Foreign Currency to Finance Contracts

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

Currency Exchanges

Conclusion

Convertible Note and SFP

SAFE Agreement

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.

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.

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

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.

Virtual Business;
Network Marketing.

Requirements for the Online Business License

Establishment of the virtual business conforming to the checklists provided by the CDEC.
Registration of application in E-Namad website (then the CDEC automatically submits the application to the unions’ website).
Upload of the required documents, which we will list below.
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.
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:

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

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.

Snapp

Digikala

Pintapin

Bamilo

Eskano

The author of this post is Mohammad Rahmani.

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:

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.
Number of partners cannot be more than 50 in the SRL, while in the SA there is only the minimum number of 2.
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.
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.

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.

The author of this post is Tomás García Navarro.

The following possibilities for alternative investment funds (AIFs) were introduced by the AIF Law:

Umbrella funds with multiple investment compartments/sub-funds which may adopt different investment policies and manage different pools of assets
Transferability of shares
Public offerings of AIF’s shares or units
Listing of securities issued by AIFs

AIFs may be open-ended or closed-ended and may take one of the following legal forms:

Fixed Capital Company
Variable Capital Company
Limited Partnership
Common Fund (contractual)

The relevant rules applicable to the respective legal form are based on Anglo-Saxon common law principles which are incorporated in Cyprus law (company law, partnerships law and contract law etc.).

AIFs may have a limited or unlimited duration.

Investor Classification

Professional Investor: For an investor to be considered as professional investor the requirements for professional clients under Markets in Financial Instruments Directive 2004/39/EC (MIFID) must be satisfied. A basic characteristic of professional investors is the fact that they possess the experience, knowledge and expertise to make their own investment decisions and to properly assess the risks they incur.

Well-Informed Investor: A well-informed investor is not a professional investor within the above meaning but one who:
- confirms in writing the well-informed investor status and awareness of the risks related with the proposed investment; and
- makes an investment of at least €125.000 or has been assessed as having the expertise, experience and knowledge in evaluating the suitability of the investment opportunity in the AIF by a credit institution, investment firm or a management company for Undertakings for the collective Investment in Transferable Securities (UCITS Management Company)
Retail Investor: A retail investor is an investor who does not fulfil the above requirements so as to be classified as a professional or well-informed investor.

Types of AIFs

AIFs to be addressed to an unlimited number of investors must to comply with minimum initial capital requirements i.e. €125.000 if externally managed and €300.000 if self-managed.

Management of AIFs

For AIFs with unlimited number of investors the external manager may be:
- An Alternative Investment Fund Manager (AIFM) established under local law or under the Alternative Investment Fund Managers Directive
- A UCITS Management Company established under local law or under the Undertakings for the collective Investment in Transferable Securities Directive
- A MIFID Investment Firm established under local law
- An AIFM established in a third country but complying with the relevant provisions of the local legislation
For AIFs with limited number of investors the external manager may be:
- A MIFID Investment Firm established under local law or the MIFID
- A UCITs Management Company established under local law
- An entity established under local law solely for the purpose of managing a specific AIF with limited number of investors
- An entity established in a third country and licensed to provide asset management services and subject to prudential supervision

Depositary

Under certain circumstances it is possible for small AIFs with limited number of persons not to appoint a depositary.

Utilisation of the AIFs

Key benefits

Cost-efficient and simple set-up process with fees being significantly lower than in the more mature fund centres e.g. Ireland and Luxembourg
A single and accessible regulator for the alternative funds and their managers
Flexibility as to the asset classes that may be included in the AIF portfolio
Transparency, reporting and risk management aiming at investor protection
Regulated environment in line with the European Union regulatory framework for Alternative Investment Fund Managers, MIFID Investment Firms and UCITSs
Passporting of the marketing of funds in the European Union where the manager is an AIFM
Redomiciliation in and out of Cyprus is possible

Taxation

Main aspects of tax treatment in Cyprus:

Subject to 12.5% flat corporation tax
Exemption from tax on dividends received by the AIF
Exemption from tax on profits from sale of securities or other instruments (except where the securities are in companies owning immovable property in Cyprus)
No subscription tax on assets of funds
Exemption on capital gains tax from the sale of immovable property located outside Cyprus
No capital gains tax on disposal of shares/units by the holders
Benefiting from an extensive network of more than 50 double tax treaties offering interesting tax planning opportunities

Federico Vasoli

Áreas de prática

Empresa
Investimentos estrangeiros
M&A

Contato Federico