Kazakhstan’s legislation allows for a diverse range of corporate entity organizational structures. However, limited liability partnerships (LLP), joint-stock companies (JSC), and foreign legal entity branches continue to be the most popular.
Foreign companies typically begin their operations in Kazakhstan by establishing a representative office or a branch, which they thereafter convert to an LLP or JSC. The legal regime of a given corporation and the specific demands of individual enterprises govern the choice of a company structure.
Foreign persons and legal entities can establish business organizations in Kazakhstan under the following organizational and legal forms, according to the Civil Code of the Republic of Kazakhstan:
- joint-stock company
- open type joint-stock company
- production co-operative
- a business partnership
Joint Stock Company (JSC)
A joint-stock corporation is a legal body that issues shares to raise money for its operations.
The risk to shareholders is confined to the value of their shares. Only in extraordinary circumstances, such as when it is shown that the shareholders’ conduct caused the JSC’s insolvency, are shareholders liable for the JSC’s debts.
A JSC’s shareholders have the right to freely sell their shares without the approval of other shareholders.
A joint-stock company’s minimum charter capital requirement is around 350,000 US dollars.
Unless the JSC Law provides differently, voting in general shareholders’ meetings is conducted according to the “one share – one vote” rule.
Kazakhstan’s main and secondary legislation imposes many rules and regulations on the formation and operation of a joint-stock company. A JSC is required to file a variety of reports and notices regarding important acts and/or events (financial statements, shares placement reports, corporate event notices, etc.). The financial statements of JSC are subject to an external audit, which is required before dividends are paid to shareholders.
Limited Liability Partnership (LLP)
In Kazakhstan, the most frequent legal form of a legal entity is a limited liability partnership (LLP), which accounts for over 95% of all legal entities. The requirements of LLP registration, corporate concerns, and transaction approval procedures are far less complicated than those of JSC.
This type of corporate structure is very adaptable and does not require complex controls and monitoring methods. When Kazakhstan legislation does not necessitate the formation of a JSC (as with banks, insurance companies, and other financial institutions) or when there is no need to acquire capital through the sale of shares, we recommend forming an LLP.
An LLP is a limited liability partnership (LLP) formed by one or more private people (natural persons) or legal organizations (corporations) with a charter capital divided into participation interests (shares).
Unless the LLP’s constituent agreements stipulate otherwise, all members’ interests in the charter capital and, as a result, their interests in the LLP’s asset value (interests in assets) are proportionate to their contributions to the charter capital.
Sole Trader
Citizens of Kazakhstan and qandases (returnees) may operate as sole traders who are not incorporated as legal organizations or otherwise registered.
However, a Kazakhstan citizen or qandas must register as a sole trader if they hire permanent employees or if their business income surpasses 12 times the minimum salary. This type of registration is a straightforward notification procedure. A lone trader’s registration does not create a legal entity.
Individuals who are not Kazakhstan nationals or qandases are not permitted to engage in economic activity.
Representative Offices and Branches of Foreign Legal Entities
Kazakhstan’s Civil Code establishes a legal framework and specifies the legal status of representative offices and branches. The Law on Foreign Investments, enacted on December 27, 1994, reiterates articles of the Civil Code and extends their application to foreign legal companies’ representative offices and branches.
A branch of a foreign legal entity, according to the law, is a separate subdivision situated and registered in the Republic of Kazakhstan that conducts all or part of the operations of the legal entity that established the branch. A branch is not a separate legal entity and functions under the Branch Regulations. The provisions of the Branch’s Regulations are similar to those of a legal entity’s charter. It provides the branch’s name and location, as well as the name and location of the founding entity, the branch’s term and purpose of existence, and management. The Branch’s Regulations are not a commercial secret and should be open to the public.
Branch offices, unlike representative offices, are permitted to participate in entrepreneurial activity. The only important distinction between the legal regimes of representative offices and branches is this. The legislation restricts the activity of a representative office to representation exclusively.
