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New Joint Stock Company Law in Kazakhstan: Main Distinctions and Legal Effect

By Vsevolod V. Markov, Associate (Michael Wilson & Partners, Ltd)

 

The new Law of the Republic of Kazakhstan "On Joint-Stock Companies" of 13 May 2003 was adopted and officially published on 16 May 2003.

This law replaced the old Law "On Joint-Stock Companies" of 10 July 1998 effective from 16 May 2003, being the date of its official publication. The adoption of the new law will have certain legal effects on most of the existing joint stock companies in Kazakhstan, in particular they will be required to amend their foundation documents to bring them into conformity with the new law.

There are a number of main provisions in the new law which differ from the provisions of the old law, a summary of which, together with a summary of the main consequences of the new law is given below:

One of the main changes is that the new law completely eliminates the term an "open joint stock company" and leaves only two (2) types of joint stock companies: a joint stock company and a public joint stock company. This will, of course, oblige all existing open and closed-type joint stock companies to reorganise into joint stock companies, amend their foundation documents and reregister with the Ministry of Justice. Under the new JSC Law, such actions should be carried out within two (2) years from the date of the new law. If after two (2) years the necessary amendments have not been introduced in the foundation documents, then such companies should be either reorganised or liquidated within one (1) year after the expiry of the two (2) year period.

The qualified majority is now not less than three quarters of the total number of voting shares in a joint stock company or 75%. This used to be two thirds or 66.7%. Most joint stock companies will have to amend their foundation documents accordingly.

The minimum charter capital of a joint stock company has been increased 10 times and is now 50,000 monthly calculation indexes or approximately US$291,667. All companies, the charter capital of which is less than the above sum, will have either to increase their charter capital or to reorganize into a limited liability partnership or otherwise restructure themselves according to the legislation of Kazakhstan.

The minimum charter capital for public joint stock companies was also increased to 1,000,000 monthly calculation indexes or approximately US$5,833,333. Moreover, shares in a public joint stock company should be sold and purchased only on the organised securities market with some exceptions provided in the new JSC Law. Therefore, public joint stock companies will be obliged to amend their foundation documents as well.

The new law provides that the founders of a joint stock company should pay the charter capital in full during thirty (30) days from the date when a joint stock company is registered as a legal entity. The old law required that only 25% of the minimum authorised capital should be paid by the date of the State registration of a joint stock company. Accordingly, appropriate amendments should be made into the foundation documents of joint stock companies operating on the Kazakhstani market.

The procedure for calling and holding general or extraordinary general meetings of shareholders has been slightly changed and this will again cause many joint stock companies to amend their foundation documents accordingly.

The Shareholders Register now can be arranged and kept only by a registrar, which should not be affiliated to the joint stock company or its subsidiaries. Joint stock companies are no longer allowed to keep their register themselves. Those joint stock companies, which keep registers themselves, are obliged to select a registrar and transfer its relevant documents to the selected registrar within three (3) months from 16 May 2003 i.e. by no later than 16 August 2003.

These are only a few major provisions which differ from the old joint stock company law but it is already clear that most joint stock companies will be obliged to take certain steps in order to comply with the current legislation, as shown above.

 

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Foreign Investment in Kazakhstan Energy Sector

 

 

 

 

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