On 11 March 2017, the Law of the Republic of Kazakhstan ('the RK') No. 49-VI 'On Amending Certain Legislative Acts of the Republic of Kazakhstan on Improvement of Civil and Bank Laws and Business Conditions' ('the Law') came into legal force1.
The Law introduced significant changes to Kazakhstan civil laws, which we would like to draw your attention to.
Voidable and Null Transactions
The law distinguishes voidable and null transactions. A null transaction is invalid irrespective of the court ruling, if any, while a voidable transaction must be invalidated by the court. A transaction is voidable if it cannot be deemed as null pursuant to the laws.
Below are a few examples of the null transactions:
Full or partial waiver by a citizen of its legal status and capacity, and other transactions aimed at limiting legal status or capacity, unless specifically allowed by the laws;
- The terms of the foundation documents removing one or more participants from the net profit distribution;
- A verbally-made foreign trade transaction;
- A transaction made absent the required permission or after the expiration of the permission;
- Earlier agreed release or limitation of liability for intentional breach of contract;
- The terms of the agreement on assignment of exclusive rights which restrict the exercise of the copyright and other non-proprietary rights;
- Transactions and other actions contemplating assignments of subsoil use rights or objects thereof absent the respective permission of the relevant competent authorities as well as absent the prior consent of the competent authorities for the study and use of mineral resources; and other cases.
If a transaction concluded on the organized securities market is found invalid, the parties are not required to return all the proceeds received thereunder. The party at fault must only reimburse the incurred losses to the other party or to the person whose rights and interests are violated.
In order to protect the rights of holders of the participating interests in business partnerships and the rights of their spouses to the jointly owned property, a transaction for the alienation of a participating interest in a business partnership is subject to mandatory public notary.2
- All companies are entitled to set up other stand-alone local business units3 without registering branch and representative offices.4
- As from 1 January 2018, an e-application for the opening of a bank account and mandatory employee insurance must be filed via electronic government web portal when registering small or medium size businesses.
- The exclusive competence of the general meeting of the participants of the LLP5 includes termination of the authorities of both the entire executive body and each of its members.
Joint Stock Companies
- The dividend payment for the preferred shares is made within 90 days from the moment of finalization of the shareholders' list provided that the current details of a shareholder are specified in the shareholders' register system, otherwise within 90 days once the respective details are entered.
- A company that purchased more than 20% of the voting shares in the JSC6 must within 30 days announce about the same in the mass media set forth in the JSC charter.
- The decision with respect to a major transaction that entails alienation of the property, worth of 50% and more of the aggregate size of the JSC balance sheet lies within the exclusive competence of the general meeting of the shareholders, not the Board of Directors as was the case before.
- A JSC or a shareholder, who owns 5% and more of the voting shares, is entitled to file a lawsuit with the court to hold the respective officer liable for the damage resulted from the execution of a transaction involving purchase/alienation of the property, which amounts to 10% or more of the aggregate size of the JSC balance sheet provided that the following criteria are simultaneously met:
- As of the moment of the decision on entering into the transaction, the value of the property was estimated as clearly disproportionate to its market value;
- The fact that the JSC officers deliberately misled the shareholders in order to gain profit.
- The transaction that amounts to 10% and more of the JSC assets does not require any valuation, if the deal target is an asset and/or claim of the company, which was previously a bank.
- The JSC must inform the shareholders and investors on transactions, in which the JSC is interested and which involve the purchase/alienation of the property, which amounts to 10% or more of the JSC aggregate asset balance sheet value.
The parties in a corporate dispute are entitled to request witnesses to provide the documents, which are relevant to the case.8
When filing a claim/statement of defence to the court, copies of the statement of claim/statement of defence must be attached as per the number of defendants/claimants and third parties. The court must send copies of the statement of claim/statement of defence to all defendants/claimants and third parties within 3 working days. The parties are no longer required to forward the claim/statement of defence to all parties in the dispute, but the courts;
The statement of defence must be provided not later than 10 working days from the receipt of the copy of the statement of claim.9
The litigation must be commenced no later than 10 working days once the preparation is completed. Previously, the laws did not set any timeline, and this allowed the courts to independently determine the date for the commencement of the proceedings.
1 Save for certain provisions of the Law
2 Previously, the notary only certified the authenticity of the individuals' signature
3 A stand-alone local business unit of a company is a separately located subdivision, which have stationary workplaces for performing company's certain functions. A workplace is considered stationary if it has been set up for more than 1 month
4Previously this right applied only to the public institutions
5Limited Liability Partnership
6 Joint Stock Company
7 The Civil Procedure Code of the Republic of Kazakhstan No. 377-V dated 31 October 2015
8 Previously the parties could only request the documents from each other
9 Previously the deadlines for statement of defence were set by the court
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.