Jurisprudential feasibility of debt- equity swap contract in accordance with the capital market of Iran

A favorable financial system is one that can design tools enabling people who can make investments but lack the necessary capitals to aggregate small funds scattered among people using these tools. Economic activities usually involve risk, and measures should be taken for covering their risk. On the other hand, countries and organizations always suffer from problems with debts, and seeks to overcome the problem somehow. One of these tools is debt-equity swap. A debt-equity swap contract is a series of financial transactions whereby a company's creditor cancels some or all of a debtor company debt in exchange for stock. In this paper besides investigating the debt - equity swap from the perspective of definitions, types, features, Mechanisms, applications, advantages and disadvantages, the need to use this tool in Iran capital market, for the first time the Jurisprudential investigation of this transaction is conducted. In the current research conducted through descriptive - analytical- cross-sectional survey method, by asking experts we show that using debt reduction contracts, sale of debt for cash, exchange of two contracts, and using international sukuk (Islamic financial resources), the western model of the mentioned swap can be defined based on the Imamieh jurisprudence and used in Iran market. Finally, we answered to the mentioned swap doubt of being harmful in the international area.