A foreign entrepreneur must make the best decision possible when it comes to forming a legal corporation. The limited liability corporation, the joint-stock company, and other options for joining the Kyrgyz market are listed below.
Limited Liability Companies
Limited liability companies (LLCs) are one of the most common types of legal entities in the Kyrgyz Republic, and they offer a variety of benefits:
- LLC members are not liable for the company’s commitments, and their risk of losses resulting from the company’s performance is limited to the number of their respective contributions
- Because the structure and powers of an LLC’s management bodies are not subject to strict legislative control, management and decision-making are more flexible in an LLC.
- An LLC’s minimum charter capital is KGS 1. (approximately USD 0.02 as of July 2013).
It should be mentioned that, under Kyrgyz Republic law, an LLC cannot have another business company consisting of a single person as to its only participant.
An LLC cannot have more than 30 members; otherwise, the LLC must be reformed into a joint-stock company within one year. If an LLC fails to meet this condition, it will be forced to dissolve by a court order.
Joint Stock Companies
A joint-stock corporation is another common legal entity since stockholders are not responsible for the firm’s obligations. Furthermore, the risk of losses incurred as a result of the company’s performance is limited to the value of the shareholders’ shares.
Regardless of the form of the original contribution, a joint-stock corporation must issue shares in the Kyrgyz Republic’s national currency. To raise working capital, joint-stock firms may issue various instruments (such as debenture bonds) in addition to shares.
A founding legal entity consisting of a single participant/shareholder may not operate as the only founder/shareholder of a joint-stock company under Kyrgyz law.
A joint-stock company’s minimum charter capital is 100,000 KGS (approximately USD 2,061 as of July 2013). The charter capital must be fully paid in and dispersed among the founders as of the day of formation.
Open or closed joint-stock companies can be founded in the Kyrgyz Republic.
Open Joint Stock Companies
An open joint-stock company is one in which shareholders can sell their shares without the
agreement of the other shareholders. An open joint-stock corporation can accept open subscriptions to its shares and sell them freely under certain legal circumstances. An open joint-stock company with 500 or more shareholders and at least one public/open placement of securities must publish an annual report on its financial and business performance in the media within two months of the last annual meeting of shareholders, but no later than June 1st of the year following the reporting year.
Closed Joint Stock Companies
A closed joint-stock company is one in which shares can only be allocated among the business’s founders or a predefined group. A closed joint-stock corporation cannot issue shares in a public/open placement or otherwise offer them to an unlimited number of people. A closed joint-stock company’s number of shareholders cannot exceed 50; if it does, the corporation must be restructured into an open joint-stock company within one year. The corporation will be subject to court-ordered liquidation when this period expires. A closed joint-stock company’s shareholders have a first right of refusal to purchase shares offered for sale by other shareholders.
Branches and Representative Office
Foreign corporations’ branches and representative offices are not recognized Kyrgyz legal entities. They are endowed with the property of their foreign founders and operate under bylaws that have been approved.
The Kyrgyz Republic’s legislation distinguishes between branches and representative offices. Representative offices’ responsibilities are limited to representing a foreign legal entity and preserving its interests, as well as conducting transactions and other legal activities on its behalf. Branches, on the other hand, perform all or part of the foreign founder’s functions, including representation. The branch / representative office leaders act under the authority of a power of attorney issued by the main / head office.
