A Comparative Analysis of the Principles and Rules Governing Bankruptcy Proceedings in Iranian and English Law, with Emphasis on the Effectiveness of Creditor-Protection Mechanisms

Abstract

Bankruptcy, as one of the most important institutions of commercial law, plays a fundamental role in managing merchants’ financial crises and regulating legal relations between debtors and creditors. The main purpose of this institution is to establish a balance between maintaining economic order, protecting creditors’ rights, and, at the same time, providing the possibility of reorganizing the debtor’s financial situation. The present study, entitled “A Comparative Analysis of the Principles and Rules Governing Bankruptcy Proceedings in Iranian and English Law, with Emphasis on the Effectiveness of Creditor-Protection Mechanisms,” examines and analyzes the rules and regulations governing the initiation of bankruptcy proceedings in the two legal systems of Iran and England. This research seeks, through an explanation of the theoretical and legal foundations of bankruptcy, the substantive and formal conditions for bringing an action, the jurisdiction of competent authorities, the process of judicial proceedings, and the effects of issuing a bankruptcy judgment, to assess the effectiveness of creditor-protection mechanisms in each of these two legal systems. In this regard, concepts such as merchant, cessation of payment of debts, criteria for determining financial incapacity, the role of the court and liquidators, the method of collecting and distributing assets, and the position of creditors in the liquidation process are analyzed comparatively. The findings of the study indicate that although the Iranian legal system, in the field of bankruptcy regulations, has been considerably influenced by European legal systems, some creditor-protection mechanisms in Iranian law are less efficient and less flexible than those in English law. By contrast, English law, through the use of advanced institutional structures, has envisaged a more active role for creditors, liquidators, and supervisory authorities in the bankruptcy process. Accordingly, a comparative study of these two systems can provide a basis for identifying the strengths and weaknesses of existing regulations and for proposing reforms to improve creditor-protection mechanisms in the Iranian legal system. Ultimately, this research seeks, by presenting legal analyses and practical recommendations, to take a step toward enhancing the efficiency of the bankruptcy system and ensuring more effective protection of creditors’ rights under Iranian law.