Economics Law.
Aizhan Kadyrova
and Andrey Nimilostev
Companies in Republic of Kazakhstan
Since its independence in 1991 Kazakhstan has been
rapidly developing to become a country with a market economy establishing
and strengthening its economic and trade ties with foreign countries,
encouraging foreign investment, and liberalizing trade.
Key legislative acts that regulate establishment
of business structures in Kazakhstan are the Civil Code of Republic
of Kazakhstan and laws on Economic Partnerships, Partnerships with Limited
and Additional Liability, Joint Stock Companies. State Registration
of Legal Entities and Record Registration of Branch Offices and Representative
Offices, and on State Registration of Rights on Immovable Property and
Transactions.
Company registration in Kazakhstan: Main company registration legal acts:
Company registration in Kazakhstan is regulated by Civil Code of Kazakhstan
Republic (June 06, 2002), Law “On foreign investments” (May 19,
1992), Law “On investment activity” (May 19, 1992), Law “On
legal entities” (February 06, 1996).
Main forms of business presence:
Limited liability partnership; Joint stock company; Representative /Branch
offices; Individual entrepreneurship
Minimum charter capital: LLP - 110 000 Tenge (900 US Dollars); JSC - 51 500 000 Tenge (450
000 US Dollars). Services for company registration:
Preparation of constituent documents;
Company registration in registration and tax authorities;
Ordering and receipt of the seal (receipt of the permission from department
of internal activity);
Registration of company’s data in social funds;
Notarial authentication of bank cards;
Opening of bank accounts.
General term of company registration:
from 25 working days starting from time of translation
of documents. Also it is possible to purchase ready-made companies or
to order urgent registration.
Types of a business in Kazakhstan In accordance with the Civil Code dated 1 March, 1995, foreign and
local investors may establish their presence in Kazakhstan in a number
of organizational forms, including full partnerships, limited/mixed
partnerships, limited liability partnerships, (often referred to as
limited liability companies), joint stock companies, representative
offices, and branch offices. The most popular form of Kazakhstan legal
entity for foreign investment is the limited liability company.
Limited
Liability Partnerships A limited liability partnership is a legal entity that is distinct
from its founders. It may consist of one or more participants. A limited
liability partnership cannot be established and/or owned by a single
participant if the latter, in its turn, has only one participant. The
participant’s financial liability is limited to the amount of its
investment in the charter capital. This type of investment can be made
either in a monetary form or in kind. Contributions in kind must be
valued and are based on the agreement of all founders or on a decision
made by a general meeting of participants. Where the value of an in-kind
contribution exceeds 20.000 times the MCI (approximately £77.870),
the valuation should be verified by an independent expert. The initial
charter capital for a limited liability partnership amounts to 100 times
the MCI (approximately £400). Joint Stock Companies
On May 13, 2003 the President of the Republic of Kazakhstan signed the
new Law on Joint Stock Companies (the “JSC Law”), which came into
effect on May 16, 2003. The JSC Law treats many issues with regard to
joint stock companies differently. The JSC Law makes no distinction
between open and closed joint stock companies. In addition, the minimum
charter capital of a joint stock company was increased to 50,000 times
the MCI (approximately £195,000). The equity requirement for public
companies (those with at least 500 shareholders) was increased to 1,000,000
times the MCI (approximately £ 3,893,350). Under the JSC Law, shareholders
of a newly registered joint stock company must pay the initial charter
capital within 30 days from the date of legal registration of the company.
As with limited liability partnerships, contributions to charter capital
can be made either in the monetary form or in kind. However, for joint
stock companies the value of any contribution in kind must be determined
by a licensed appraiser. Shares of joint stock companies are subject
to state registration. The JSC Law requires that only an independent
licensed registrar may maintain a registry of shareholders. Representative Offices
Kazakhstan law permits a foreign company to establish a representative
office in Kazakhstan in order to represent the interests of that company
in the republic. Representative offices are not recognized as separate
legal entities. Representative offices may be established for the purpose
of gathering information, establishing business contracts etc. Therefore,
the authorities take the view that a representative office should not
take any commercial activities. “Commercial” representative offices
should, therefore, be re-registered as branch offices.
Branch
Offices
Branch offices, like representative offices, are not legal entities,
but are divisions of the foreign legal entities that they represent.
A branch office acts and assumes obligations on behalf of its head office
and may carry out commercial activities. Individual entrepreneurship
Individual entrepreneurship - is the most common form of business, including
a service industry, trade and craft. The undoubted pluses include the
simplicity of the organization itself and the activity. It should be
noted as well, and a strong motivation of the owner, which is a consequence
of declaring themselves a basic income and moral satisfaction, therefore
complete control and increased social status. Must be said about the
flexibility of such companies as well as individual entrepreneurs are
able to more quickly respond to market fluctuations. For example, doing
the production in small quantities, you can quickly switch to the production
of more popular products in a competitive market. Turning to the downside,
it is worth noting the full responsibility of the owner. Each entrepreneur
risks not only assets of the enterprise and its assets. Increased risk
of severely constrains innovative business development. As it is necessary
to take into account a lot of features that the owner has to do - it's
a marketing and human resources management, administration and finance.
This load is typically reduces the efficiency of management. The downside
is also the fact that the financial capacity of the owner of this company
is very limited. Here and minimal savings in the procurement of the
necessary resources and limited opportunities for organizing large-scale
production.
Management of companies:
Management
of Joint Stock Companies
1. The supreme body of the company is the general
meeting of its shareholders.
2. Exclusive competence of the general meeting of
shareholders shall be determined by legislative acts.
3. Issues referred to the exclusive competence of
the general meeting of shareholders, cannot be transferred to other
bodies of society.
4. In the joint-stock company a Board of Directors,
which is responsible for general management of the company, except for
the issues referred by this Code, laws and the Articles of Association
to the exclusive competence of the general meeting of shareholders.
The issues referred by this Code, laws and the Articles of Association
to the exclusive competence of the Board of Directors cannot be transferred
to the executive body of the company. In cases stipulated by legislative
acts of the Republic of Kazakhstan, a joint stock company with a single
shareholder in the company's charter may provide for management of the
company without a board of directors.
5. Executive body of the company may be collective
(board) or sole (Director, CEO, President). He carries out the current
management of the company and reports to the board of directors and
the general meeting of shareholders. The competence of the executive
body of the company is the solution to all the issues are not in the
exclusive competence of other organs of society, a law or statutory
documents.
6. In the joint-stock company may be created other
bodies in accordance with the legislation.
7. Competence of the company, as well as decision-making
rules and speak on behalf of the Company are determined in accordance
with this Code, laws and statutory documents.
Management
of LLP
Typical structure of management of LLP Company in
Kazakhstan
Management
of Individual entrepreneurship
The organization has a system of controls, and it
can be a very simple (1 founder, who himself performs the functions
of the CEO) and more complex (general meeting, the board of directors,
the board, CEO, audit committee). Parent may make decisions on all matters
in the organization with simple controls (one founder, who is also the
head of the organization).
Founder of the management and control of the activities
of the organization, for example, through participation in top management.
The current activity (contracting, hiring staff, etc.) exercises executive
body - the General Director.
Liquidation of a company:
Entity in connection with the termination of activity
can voluntarily liquidated.The general procedure for liquidation of
legal entities is provided by the Civil Code of the Republic of Kazakhstan,
in terms of tax liability - Tax Code
Liquidation shall be subject to the following steps: The decision on liquidation
First of all, the body authorized under the law or
the constituent documents (for example, general meeting of the LLP or
its sole member), in accordance with established procedures, to eliminate
it. This decision should also consider the appointment and composition
of the liquidation committee, determine the order and timing of liquidation.
Notification
to the justice of the decision Authority that ordered the liquidation of a legal person shall immediately
inform in writing the authority of justice in place of registration
The
notice of the tax authority of the decision Resident legal entity within 3 working days from the date of the decision
on the Elimination of writing informs the tax authority at the place
of residence (paragraph 1 of Article 37 of the Tax Code of the Republic
of Kazakhstan).
Publication
of the liquidation The liquidation committee publishes the liquidation of the legal entity,
as well as the procedure and terms of the claims of its creditors in
official publications of the central body of justice. The term of the
claims can not be less than two months from the date of publication
on the Elimination.
Preparation
of the interim liquidation balance sheet and liquidation tax reports
After the deadline for submission of claims by creditors liquidation
committee shall prepare an interim liquidation balance sheet, which
contains information about the structure of property of a legal entity,
a list of alleged claims by creditors, and their outcome. Interim liquidation
balance shall be approved by the owner of the legal entity or body that
made the decision to liquidate the entity.
Liquidation tax reports are prepared by type of tax
and other obligatory payments to the budget, mandatory pension contributions
and social contributions for which the liquidated legal person is the
payer and (or) tax agent since the beginning of the tax period, which
presented a statement of the documentary tax checks before the date
of the declaration. If the deadline for the next tax returns comes after
the submission of the liquidation of tax reporting, the provision of
such regular tax returns made up to the date of the liquidation tax
reports
Tax
audit Within 3 working days from the date of approval of the interim liquidation
balance of the liquidated legal person shall submit to the tax authority
at the place of its location at the same time: tax statement on documentary
checks; liquidation tax reports; certificate of registration with the
tax on value added tax (if any) or note on paper when loss or damage;
tax statement for the removal from the register by the value added tax
Documentary check should be initiated by the tax authority no later
than 20 working days after receipt of the liquidating entity.
Creditors'
claims Starting from the date of approval of the interim liquidation balance
liquidation committee shall pay the money to creditors of the liquidated
legal entity in order of priority established by Article 51 of the Civil
Code of the Republic of Kazakhstan in accordance with the interim liquidation
balance. If the money to meet the claims of creditors is not enough,
the liquidation committee shall sell the property of a legal entity
with a public auction in accordance with the procedure established for
the execution of judgments.
Legal person pays taxes and other obligatory payments to the budget,
as well as social security contributions and mandatory pension contributions
no later than 10 calendar days from the submission to the tax authorities
of the liquidation of the tax reporting.
If the deadline for the payment of taxes and other obligatory payments
to the budget, as well as social security contributions, transfer of
mandatory pension contributions, as reflected in the tax returns submitted
to the liquidation of the tax reporting, comes after the time specified
in the preceding paragraph, the payment (transfer) is done no later
than 10 calendar days from the date of submission to the tax authorities
of the liquidation of tax reporting. The transfer of the
remaining assets to the founders
Remaining after satisfaction of creditors' corporate property is transferred
to the owner or founders. Division of property
Remaining after satisfaction of the claims of creditors of the
liquidated company assets distributed by the liquidation commission,
first of all - the payment for shares to be redeemed from shareholders
secondly - the payment of accrued and unpaid dividends on the preferred
shares; In the third stage - the payment of accrued and unpaid dividends
on common shares.
The remaining assets distributed among all shareholders in proportion
to their shares. That is, the distribution is not on the principle of
"to each shareholder - an equal share," and the principle
of "to each shareholder - the share in the property equal to its
share in the total number of shares." Sale of property of
the legal entity
In some cases, the law allows the sale of property of the legal entity.
For example, pursuant to subparagraph 4) of paragraph 1 of Article 11
of the Law of the Republic of Kazakhstan "On Limited Liability
Company and the additional" participants LLP may receive in the
event of the liquidation value of the assets remaining after payments
to creditors, or by agreement of all of the partners, part of the property
in kind. Thus, it is assumed that the liquidation committee, after payments
to creditors should realize property in order to pay members of its
value only if all participants do not decide to take the property in
kind. Special requirements for the procedures for the property are not
set. In accordance with the common goal of creating commercial organizations
- the generation of income, it is assumed that the liquidation committee
is to do it with the maximum benefit for the legal entity. Compilation of the liquidation balance
After payments to creditors, the liquidation committee shall prepare
a liquidation balance sheet, which shall be approved by the owner of
the legal entity or body that made the decision on the liquidation of
the legal entity. Closing bank accounts
Closing a bank account is made by the bank on the customer at any time.
To close the account is governed by Chapter 7 of the Rules of opening,
maintaining and closing bank accounts of customers in the banks of the
Republic of Kazakhstan. Getting help on the
tax clearance
After completing the documentary check and repayment of debt, arrears
of pension contributions and social contributions in full liquidating
entity simultaneously submit to the tax authority at the place of business:
liquidation balance sheet; bank certificate and (or) organizations engaged
in certain types of banking operations, the closure of existing bank
accounts. In the absence of tax arrears, arrears of pension contributions
and social contributions of the liquidated legal person shall submit
the documents referred to in this paragraph, within three working days
of the completion of the documentary checks. The tax authority shall
issue a certificate to the taxpayer without tax debt arrears of pension
contributions and social contributions. Destruction Print
Destruction of seals made in companies that are engaged in their manufacture. Register elimination
in the judiciary
At the final stage of a legal person shall submit to the authority of
Justice (through the Citizen Service Center), the following documents:
statement on the termination of the prescribed form; decision of the
owner of the legal entity or authority or authorized by the owner of
the legal entity authorized by the constituent documents of the seal
of the legal person; constituent documents (charter and memorandum of
association);certificate of state registration (re-registration);statistical
card; proof of publication in the official publications of the Ministry
of Justice of Kazakhstan about liquidation of a legal person, the manner
and timing of the claims by creditors; interim liquidation balance sheet;
liquidation balance sheet; decision of the owner of the legal entity
or other authority, the approval of the interim and liquidation balance
sheets, by the seal of the legal person; Print the document on the destruction
of the legal entity; document confirming the cancellation of registration
of branches and representative offices of the liquidated legal entity
(if any);certificate of absence (presence) of tax debts; help customs
authorities that no arrears on tax payments; receipt or proof of payment
of the fee for state registration of legal entities and registration
of branches and representative offices. Documents submitted to the originals,
and if necessary, to keep the copies. If the process is not represented
by a set of documents revealed violations of the established order of
liquidation registering authority within 10 days of termination of the
records of the legal entity. Receive a copy of
the order to eliminate
The last step is to get to the center of public service copy of the
order of registration of the termination of the legal person. This document
certifies that the legal person is excluded from public registers and
ceased its activities.