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Forms of business

 

Branches and Representative Offices of Foreign Legal Entities 

Branches and representative offices of foreign companies are  not considered  to be Kyrgyz legal entities. They are endowed with the property of their foreign founders, and act on the basis of the approved bylaws. The legislation of the Kyrgyz Republic distinguishes between branches and representative offices. The functions of representative offices are limited to representing a foreign legal entity and protecting its interests, performing transactions and other legal actions on  behalf of the same. Branches, on the other hand, fulfil all or part of the functions of the foreign founder , including  representation. The chiefs of the branch / representative office act under a power of attorney issued by the main / head office.

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Registration of Branches and Representative Offices

Branches and representative offices located within the Kyrgyz Republic, with the exception of branches and representative offices established within free economic zones, are subject to mandatory registration

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Liquidation of Branches and Representative Offices

To liquidate a branch or representative office, the following documents need to be submitted to the registering authority:[1] 

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Legal Entities

A variety of organizational legal forms of legal entities exist in the Kyrgyz Republic, the most common being:

  • Limited liability companies; and
  • Joint stock companies (open or closed).

 

The key legal acts regulating activities of legal entities are the Civil Code of the Kyrgyz Republic,[2] the Law of the Kyrgyz Republic “On Business Partnerships and Companies”, and the Law of the Kyrgyz Republic “On Joint Stock Companies”.[3]

 

Limited Liability Companies

A limited liability company (LLC) is one of the most widespread types of legal entities in the Kyrgyz Republic, having a number of advantages: 

  • The participants in a LLC are not liable for its obligations, and their risk of losses that may be incurred as a result of the company performance is limited to the amount of their respective contributions; and 
  • The structure and powers of management bodies of a LLC are not subject to detailed legislative regulation, therefore, management and decision making in a LLC are more flexible. 

The minimum charter capital of a LLC is KGS 1 (approximately USD 0.02 as of July 2013).

It must be noted that, subject to legislation of the Kyrgyz Republic,[4] a LLC may not have as its sole participant another business entity consisting of a single person.

The number of participants in a LLC may not exceed 30; otherwise the LLC must be reorganized into a joint stock company within 1 year. Should a LLC fail to comply with this requirement, it will be subject to liquidation by court order.

 

Joint Stock Companies

A joint stock company is another popular form of a legal entity as shareholders are not liable for the obligations of the company. Also, the risk of losses that they may incur as a result of the company performance is limited to the value of shares owned by the shareholders.

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Registration of Legal Entities

According to the World Bank’s Report; ‘Doing Business’, 2013, the Kyrgyz Republic ranks 15th out of 183 countries in terms of the challenges of launching a business.[6] This ranking was improved by the Kyrgyz Government after introducing a “one-stop-shop” mechanism facilitating the procedure for the registration of business entities.[7]

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Business Reorganization and Restructuring

Reorganization of a legal entity (merger, acquisition, split-up , spin-off , and conversion ) may be carried out  by the decision of its founders/participants or the body of the legal entity  authorized by its founding documents, or, the regulatory authority for banks, financial institutions or other entities licensed to perform operations being their only permitted activity.

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Business Closure

Liquidation of a legal entity entails its termination  without transferring  its rights and obligations to any other persons.

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Business Activity  without Creating  a Legal Entity

Under Kyrgyz law[8], a business can be organized as a legal entity or its branch, or as a sole proprietorship, which is a non-corporate form of doing business. Nationals of the Kyrgyz Republic, foreign nationals, and stateless persons permanently or temporarily residing within the territory of the Kyrgyz Republic may do business as sole proprietors.

 

Free Economic Zones

Free economic zones (the FEZ) are the zones where foreign economic and business activities[9] are subject to preferential legal treatment.

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© «Kalikova & Associates Law Firm LLC, 2014. All rights reserved»


 

[1] Article 17 of the Law: “On State Registration of Legal Entities, Branches (Representative Offices)” dated February 20, 2009 (with latest amendments as of December 13, 2012).

[2] Part I of the Civil Code of the Kyrgyz Republic dated 8th May, 1996 (with the latest amendments as of 30th May, 2013).

[3] The Law of the Kyrgyz Republic “On Joint Stock Companies” dated 27th March 2003 (with the latest amendments as of 29th May, 2012).  


[4] Article 128 of the Civil Code of the Kyrgyz Republic.

[6] http://www.doingbusiness.org/data/exploreeconomies/kyrgyz-republic/

[7] Resolution No. 182 of the Government of the Kyrgyz Republic dated 23rd April 2008 (last amended 19th May, 2009).

[8] Regulation on procedure of state registration of sole proprietors in the Kyrgyz Republic; approved by Government Resolution No. 404 of 2nd July, 1998 (with latest amendments as of November 13th, 2008).

[9] The Law of the Kyrgyz Republic “On Free Economic Zones in the Kyrgyz Republic” dated 16th December 1992 (with the latest amendments as of 7th July, 2011).