GLS Resources

Series: Corporate Solutions

25 THINGS YOU SHOULD KNOW ABOUT KAZAKHSTAN COMPANIES

1. Any foreign individual or a foreign company may establish a Kazakhstan company with 100% or less participation. There are no restrictions on the nationality or tax residence of the shareholders of a company.

2. A Kazakhstan limited liability partnership is a body corporation, similar to the UK limited liability partnership and it is a company and tax resident in terms of any tax treaty. A key difference is that the Kazakhstan limited liability partnership ("partnership") is not "tax transparent". The partnerships pay corporate income tax, as well as the other taxes imposed to companies. Each member of the partnership pays income tax from dividends distributed by a partnership and capital gain tax upon disposal of its shares (interest units).

3. A company/partnership provides limited liability for its members/shareholders. A shareholder or participant of a company/partnership is not liable to creditors of a company/partnership, except for and only if it is convicted guilty in premediated bankruptcy. In latter case it will bear a subsidiary liability.

4. A joint stock company or partnership is permitted to set up by one shareholder or one member provided that a partnership may not be formed by another partnership with only one member.

5. Founders of a company/partnership shall form a charter capital before registration of a company/partnership. Shares of a joint stock company or interest units of a partnership constitutes a part or portion of the company's charter capital; any additional share issue is made upon increasing a charter capital. Charter capital is exhibited in the balance sheet as a part of a company's assets.

6. A joint stock company is more convenient as to operation with shares and other securities but it requires having a board and is harder to establish and maintain. Initial shareholders must inject cash or in-kind at least approximately $345,000 US Dollars into a company.

7. A joint stock company issues 2 classes of shares: ordinary voting shares and preemptive shares. In general, preemptive shares are not voting shares, they entitle owners to receive fixed dividends. There is option in the law to issue a golden share; golden share is in fact not type of shares, rather right of a member to veto decisions of any and all company's bodies.

8. Initial issue and each subsequent issue shares of a joint stock company shall be registered with the national security agency. Issue or provision of interest units to members of a partnership is not registrable process.

9. Share records are maintained by the authorized state agency (central depositary). Any share transfer transaction demands personal appearance before the state agency or submission of a valid apostilled power of attorney to the state agency.

10. Founders of a joint stock company may enter into a foundation agreement but this agreement terminates after registration of a company. Founders of a partnership are required to conclude a foundation agreement effective throughout life of a partnership. There are in the law obligatory terms and conditions to be agreed and present in the foundation agreement of a partnership.

11. Entering into shareholders' agreement in a joint stock company or a partnership is permissible but its terms and conditions shall not contradict to the statutory laws. In the event of contradiction some of the terms can be declared null and void. A shareholders' agreement in part of share transfer shall be governed by Kazakhstan laws.

12. Any foreign individual is allowed to be elected as a member of board of directors or any other governing bodies of a partnership or joint stock company, provided that any title which envisages entering into employment contract requires obtainment of a work permit, except for election of a single executive person or head of executive body. A company or other legal entity may not be elected as a member of a corporate body, only physical person.

13. Almost full control over the partnership could be obtained by acquiring at least 75% of all issued interest units, except for share dilution right.

14. Having 51% or more shares/interest units enables to control management of a company/partnership and distribution of income, though it does not allow to overcome votes against merger, changing main business activity and making some other important decisions.

15. A partnership may cancel its once issued interest units in part or in full, but this exercise is only possible after all creditors are repaid or their debts are settled. Decision for cancellation of interest units is subject to at least 3/4 votes of all members.

16. Certain statutory duties of a company senior managers set out in the laws; founders are free to specify their additional duties in a company's charter and in employment contract, if applicable.

17. A shareholder or participant provides funds to a company/partnership or finances its activity only by mean of a loan or making contributions into charter capital of a company/partnership. A contributing shareholder/member receives new shares/interest units in exchange for its funds and shareholdings/participation shall be recalculated pro rata to the contributions of all shareholders/members, i.e., based on initial and subsequent funding made by way of making contributions.

18. It is prohibited for member of a partnership exchanging its indebtedness to the partnership into interest units of a partnership, including converting loans to interest units. To arrange conversion of a loan to interest units, a partnership shall repay at first debt and issue new interest units to the lender/member in exchange for the lender/member making contribution by the same funds.

19. A member of a partnership does have a priority right to purchase shares of a selling member at the price offered by a seller. The offer of shares and share sale procedure is stipulated in the law. A shareholder of a joint stock company is free to sell its shares to any person.

20. There are rules applicable for acquisition of majority shares in a joint stock company, similar to the US tender offer rules:

  • If any person acquires at least 30% of all issued voting shares of the company, it is obliged within 30 days after completion of initial purchase to offer the other shareholders selling all their shares at stock exchange price for listed shares, or market price for non- listed shares;
  • If any person ended up owning at least 95% of all issued voting shares of the company, it may opt within 60 days after completion of initial purchase to offer the other shareholders selling all their shares at stock exchange price for listed shares, or at the price determined by an independent appraiser, in case of non-listed shares. It is mandatory to accept the offer and to sell indicated in the offer shares to this majority shareholder.

21. Interest units of a partnership may be redeemed only with the consent of majority members and at the price determined by majority members.

In general, share redemption in a joint stock company shall be made only with the consent of majority shareholders. In certain circumstances specified in the law, any shareholder may require purchasing its shares by a company. In any case of share redemption, purchase price of shares is determined according to a formula or method agreed by founders prior to registration of the company, or at the stock exchange price if acquired by the company via stock exchange.

22. Sale or transfer of shares and interest units must be governed by the Kazakhstan law.

23. Spin-off, split-off or any similar type of merger with creation of a new company demands prior repayment or settlement of all debts.

24. One may not merge a partnership into joint stock company and vice versa; the merger can only be achieved by making 2 steps, via conversion of a partnership into joint stock company and merging the joint stock companies afterwards.

25. De-registration of a company means going through a complex and lengthy liquidation procedure. Each type of establishment, including representative office, branch and a company shall pass through the liquidation process and elimination a company from registration records is the last phase of liquidation. Most of the liquidation time takes proving to the authorized tax authorities that a company resolved all indebtedness issues with its creditors and does not have any taxes unpaid.

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August, 2021

GLS