New Regulations for the Admission of Shares of Knowledge-Based Companies on the Stock Exchange Approved. Unlike the previous resolution which only included players in the digital economy sector, knowledge-based companies are also subject to this resolution. A special admissions committee is tasked with reviewing the applications of knowledge-based companies to go public. Many of the previous requirements still apply to digital economy startups.

The Admission of Knowledge-Based Companies in the Digital Economy, Fanavar, and Creative Sector

According to IDEA, The Stock Exchange Organization has recently revoked the ‘Special Admission Regulations for the Shares of Startups and Companies Active in the Digital Economy’ and has approved new regulations. This resolution is titled ‘Special Admission Regulations for the Shares of Knowledge-Based Companies Active in the Digital, Technological, and Creative Economy,’ which encompasses a broader range of knowledge-based companies.

Article one of the resolutions defines the companies subject to the new admission law. For this purpose, the definitions used for knowledge-based companies in the ‘Support for Knowledge-Based Companies Act’ of 2010 and the ‘Knowledge-Based Production Leap Act’ of 2022 have been utilized.

Knowledge-based companies and institutions, aiming to synergize science and wealth, promote a knowledge-based economy, achieve scientific and economic goals, and commercialize research and development results in the field of advanced and high-value-added technologies, especially in software production, are included in the recent resolution by the Stock Exchange Organization.

The term ‘Fanavar’ refers to research, technology, and engineering units located in science and technology parks. The term ‘creative’ also includes natural and legal non-governmental persons who are active in the fields of cultural industries, humanities, and social sciences. However, the determination of the criteria for qualifying units for the above is the responsibility of the Deputy for Science and Technology of the President’s Office.

Companies active in the field of digital economy, mostly known as startups, have the same previous definition for the Stock Organization. They must have at least two of the mentioned criteria: ‘Data-centric business on the Internet,’ ‘Business with more than 30% of their assets undisclosed,’ and ‘Applicants whose business is user-based.’

Formation of a Special Acceptance Committee for Knowledge-Based Companies

According to Article Two of the Regulations for the Admission of Shares of Knowledge-Based Companies, for the examination of the conditions of knowledge-based companies applying for admission or cancellation of admission of knowledge-based companies on the Stock Exchange, a special acceptance committee consisting of 5 members is formed.

The CEO of Farabourse, a person with expertise in knowledge-based products and services, is proposed by the Office of Science and Technology of the Presidency and approved by the Board of Directors of Farabourse. A person with expertise in finance or accounting familiar with knowledge-based companies is selected by the Board of Directors of Farabourse. A natural person with legal expertise and familiarity with knowledge-based companies is selected by the Board of Directors of Farabourse. A natural person with expertise in knowledge-based business is selected by the CEO of Farabourse. These individuals constitute the members of the acceptance committee.

The CEO of Farabourse will be the head of this acceptance committee. The membership period for the mentioned individuals is also three years, and their re-election for one more term is not a problem.

Furthermore, decisions of the acceptance committee require a minimum of four valid votes in favor.

The Necessity of Qualification Inquiry for Startup Managers

Article 5 of this regulation obliges Farabourse to inquire about the qualifications of the members of the board of directors, the CEO, and major shareholders of companies active in the field of the digital economy. This pertains to the issue of money laundering. According to the note of this article, if within two months of receiving the inquiry, no response is provided by the relevant authorities, it is considered as not preventing the continuation of the acceptance process.

The fact that only startups are subject to such an inquiry is a matter of consideration. However, this issue was also mentioned in the previous regulations for the admission of startups to the stock exchange.

According to the decision of the Stock Organization, a knowledge-based company applying for admission is obliged to contract with one of the acceptance consultants who is ranked among the top ten in the latest qualitative ranking of Farabourse for admission and listing in the Farabourse rate list.

In this regard, the Stock Organization has imposed restrictions on knowledge-based companies. Changing the acceptance consultant is only possible upon the request of the applicant and the acceptance of Farabourse. Otherwise, the company cannot submit an admission request to Farabourse for at least one year.

The admission applicant is also required to submit, along with introducing the company’s key managers and staff, the documents outlining the necessary mechanisms to retain them and prevent disruption to the company’s operations in case of their departure or misuse, to the acceptance committee and disclose them in the application letter.

Commitments of Companies Active in the Digital Economy

The Stock Organization has considered commitments only for companies active in the digital economy that are applying for admission, including:

• A written commitment not to transfer or assign shares under any title by the holders of at least two-thirds of the shares of the company, including all major shareholders, for a minimum of three years.
• A written commitment not to grant or receive powers of attorney, such as legal representation, to or from others concerning shares held by at least two-thirds of the shares of the company, including all major shareholders.
• A written commitment by holders of at least two-thirds of the shares of the company, including all major shareholders, not to establish a company with a similar scope of activities simultaneously and for up to three years after transferring their shares in the applicant company.
• A written commitment by holders of at least two-thirds of the shares of the company, including all major shareholders, to comply with the requirements for the protection of data and user information of the company’s operational systems.
• Quality certificate for the software used by the company issued by strategic management-approved centers of Information and Communication Technology (ICT).
• Technical approval of the software by the Iran Information Technology Organization.
• Health and authenticity certificate for the software, issued by the Iran Information Technology Organization.
• Copyright, distribution, execution, and tangible and intellectual property rights certificates for the software from the Ministry of Culture and Islamic Guidance.

A note to this article defines a major shareholder as follows: ‘A major shareholder is a shareholder who, directly or indirectly, along with subsidiary and affiliated companies, has the ability to select at least one member of the company’s board of directors.’

Deposit of Shares by the Company Prior to the Initial Offering

Article 7 states that a company active in the digital economy, as an applicant for admission, is obligated to, if determined by the acceptance committee, deposit a portion of the shares of the company belonging to all major shareholders, and if necessary, other shareholders, before the initial offering.

This collateral is held with the Central Securities Depository and Settlement Company and includes a sales agency to the benefit of the Stock Organization. The sale of securities secured by collateral can only occur with the presentation of an official power of attorney confirming the right to sell or a decree from a competent legal authority.

The acceptance committee must determine the maximum duration of collateral, and in the presence of risks or changing circumstances, they can continue the collateral with the approval of the organization after the end of the initial period, provided that the reasons are clearly stated.

The final article grants companies active in the digital economy the discretion to have their initial offering performed through the method of capital increase from the proceeds of relinquishing the preemptive right, as determined by the acceptance committee.

What elements from the previous Stock Organization resolution were removed?

The previous resolution required applicants for admission to provide a letter of commitment and a valuation report, but the new resolution made no mention of it. However, in Article 8, the term “letter of commitment” is mentioned, but it is not clear whether it is mandatory or not.

Under the previous Stock Organization resolution, startups were required to pledge more than half of the company’s shares, but now the phrase “a portion of the shares” has replaced it.

Furthermore, companies in the digital economy no longer require permission to be classified as knowledge-based companies through the system for evaluating and determining the qualifications of companies and knowledge-based institutions.

Previously, there were provisions for companies with more than 50% intangible assets in relation to total assets, but there is no mention of them in the new resolution.