Insolvency of Merchant in Iranian and American Legal Systems

The role of traders in the economy of any society requires the legislator to set rules and regulations regarding the actions and activities of a businessman. One of these requirements is the determination of bankruptcy standards. One of the conditions for issuing a bankruptcy order is a insolvency of merchant. Since the concept and conditions of a insolvency are not strictly defined by the legislator, there is disagreement in the legal doctrine and consequently in the precedent. In this regard, the present study is based on the question of the nature of the insolvency with a comparative approach and analyzes the laws of Iran and the American legal system to explain the concept of the insolvency, its causes and its various aspects. The findings indicate that there are differences between the two legal systems studied regarding the concept of insolvency and the conditions for its realization. The American legal system is more supportive of traders than creditors in terms of social justice views. In the US legal system, the concept of insolvency is more focused on the actual insolvency and on the balance sheet, but according to Iranian precedent, the notion of insolvency is based on an overview of the asset status of the merchant and in some cases, the actual insolvency has been considered as a criterion. In this study, after reviewing these cases, the appropriate solution is explained.