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Drafting the Articles of association and shareholders agreement for legal entities and Regulations for branch (representative) offices.

Home Drafting the Articles of association and shareholders agreement for legal entities and Regulations for branch (representative) offices.

Company formation in Kazakhstan by two or more shareholders assumes presence of largest shareholder aka majority shareholder whose shares dominates over second, minority shareholder. As we stated in our previous legal insights and publications, most demanded form of business organizations in Kazakhstan is a Limited Liability Partnership which is registered in the form of legal entity that bears all corporate responsibility to company’s debtors and third parties. Shareholders of a LLP carries responsibility only within the limits of their shares and contributions made to authorized share capital. In this regard, Kazakstan LLP in some way is an analogy of UK Ltd’s and US LLC. More about differences and commons between UK Ltd. and US LLC please read in our next legal insight:“Kazakhstan LLP vs. UK Ltd. and US LLC”.  

When it comes to shares and their physical contributions, it is allowable by Laws on “Limited and Added Liability Partnership” to contribute the authorized part of share capital through the means other than financial, i.e. intellectual property, patended business concept and ideas, equipment, providing technical solutions, which are essential and pre-requisite part of partnership’s prospect entrepreneurial activity. Of course, share contribution agreement is an important corporate document between shareholders to determine how and when contribution should be made, proceeds shall be distributed and etc. Generally, share contribution allocation is determined and approved by shareholder agreement. Shares contribution default within one year from the date of company formation in Kazakhstan shall cause shareholder withdrawal.

LLP formation in Kazakhstan by several shareholders assumes business collobaration between partners which may simply turn into hostile relations. Founding documents rebalancing each parties interests will be a key factor in defending minority shareholder’s rights. By and large, minority shareholders needs more protection to prevent abuses by majority shareholder. Adhering to standard form of founding documents is losing strategy, as a rule, ready-made or DIY documents do not take into account the interests and rights of a minority participant. All shareholders meeting decision are made on a one-share-one-vote basis.