Antimonopoly Legislation and Antitrust Laws in Kazakhstan: Navigating Economic Concentrations and Regulatory Compliance
In Kazakhstan, business transactions such as mergers, acquisitions, and the purchase of company shares often fall under antimonopoly regulations, particularly when they involve the creation of economic concentrations. Economic concentration refers to the consolidation of market power through these transactions, which can significantly impact competition. To prevent monopolistic practices and ensure fair competition, the Republic of Kazakhstan has established a regulatory framework that requires businesses to obtain approval from the antimonopoly authority before proceeding with certain transactions.
Understanding Economic Concentration and Its Regulatory Requirements
Under Article 201 of the Entrepreneurial Code of the Republic of Kazakhstan, economic concentration is defined by actions that may include:
The merger or acquisition of companies
The acquisition of voting shares that give control over more than 50% of a company
The purchase of key production assets or intangible assets exceeding 10% of the selling company’s balance sheet value
Gaining control over another entity’s activities through rights acquisition
The involvement of the same individuals in the governing bodies of multiple companies where they can influence business activities
Market entities that plan to engage in such actions must submit a petition to the antimonopoly authority to seek prior consent for economic concentration. Failure to obtain this consent may lead to significant legal consequences, including the invalidation of transactions by a court and the imposition of fines. Specifically, an economic concentration without the required consent that results in a monopoly or restricts competition may incur an administrative fine of up to 1,600 MCI (approximately €12,300).
Petition Requirements for Economic Concentration Approval
The petition to the antimonopoly authority should include:
The transaction agreement as proof of the intended deal
Information on the acquiring party and any companies or individuals within the same “group of persons”
Details on the market entity’s shareholding structure, production, and sales data in Kazakhstan
Information on management and board interlocks between the acquirer and the target company
Additional data on the target entity’s production, trade, and affiliated entities
Article 165 of the Entrepreneurial Code defines a “group of persons” based on factors such as ownership, control, executive leadership, and familial relationships. This includes:
Individuals or entities controlling more than 50% of voting shares
Sole executive bodies of market entities
Those with the authority to issue binding instructions based on founding documents or contracts
Legal entities with overlapping executive board members or directors
Entities influencing appointments to executive or board positions
Individuals with family ties to key decision-makers
Practical Challenges in Antimonopoly Approvals
In practice, the antimonopoly authority often denies consent for economic concentrations due to incomplete or insufficient information, particularly regarding the “group of persons” related to the acquirer. This often includes requests for additional documentation on associated companies (e.g., sister or daughter companies) that may not be clearly defined in Article 165.
Failure to provide comprehensive details on all entities within the “group of persons” can result in the rejection of the petition, leading to delays and complications in the approval process. As a result, companies must ensure they gather and submit all relevant data to avoid potential setbacks.
Conclusion
Navigating Kazakhstan’s antimonopoly legislation, particularly in the context of economic concentrations, requires a thorough understanding of the legal framework and the careful preparation of required documentation. Companies must be diligent in identifying all market entities within their “group of persons” to ensure compliance and avoid legal challenges. Given the complexities of this process, consulting legal experts with in-depth knowledge of antimonopoly regulations is highly recommended to streamline the approval process and safeguard transactions.
This article aims to provide an overview of the legal requirements surrounding economic concentration in Kazakhstan. For further assistance with antitrust matters or economic concentration approvals, contact our legal team for expert guidance.
