A Comparative Study on the Role of Willpower in the Liquidation of Companies from the Perspective of the Legal Systems of Iran, England, and Islamic Jurisprudence (Imamiyyah)

Abstract

The dissolution of a company can result in its liquidation, or it may occur without liquidation. The relationship between dissolution and liquidation is one of general and specific absoluteness. On the other hand, the ruling of suspension can be due to liquidation, but not all liquidations arise from bankruptcy; hence, the relationship between bankruptcy and the liquidation of commercial companies is also one of general and specific absoluteness. Liquidation holds significant importance in legal systems. The method of liquidation plays a critical role in safeguarding the rights of creditors and commercial companies. When multiple creditors are involved, and the debtor's assets are insufficient to cover their debts, issues arise regarding the method of claim settlement. Under such circumstances, each creditor will strive to recover their claim before others. This competition among creditors can lead to the fragmentation of the company's assets, reducing their value for all creditors. Therefore, the collective interests of creditors require that the acquisition of the debtor's assets be conducted systematically through bankruptcy proceedings. In principle, individuals can organize their own bankruptcy systems; for instance, a debtor may stipulate the consequences of non-payment of debt within a loan agreement. However, drafting such contracts can be challenging, particularly as the debtor’s assets and creditors may increase over time. Furthermore, empirical evidence, such as the fact that companies rarely draft such agreements and that nearly all countries have at least a basic statutory bankruptcy framework, suggests that reliance on a "private" solution is practically infeasible. In other words, governments universally recognize the necessity of establishing a "functional" bankruptcy system that parties can resort to in the absence of specific arrangements.