Investment law overview by  Law Firm

STATUTORY FUNDS ARE NO LONGER THE SAME AS THE OLD ONES

STATUTORY FUNDS ARE NO LONGER THE SAME AS THE OLD ONES

   
   

In connection with undertaken moves on the liberalization of the foreign currency policy of the Republic of Uzbekistan (Decree No.УП-5917 of the President of the Republic of Uzbekistan dated September 29, 2017 “On introduction of changes and amendments into certain acts of the President of the Republic of Uzbekistan”, which lost their force), as well as on measures on saturation of the market with goods and commodities and development of competitive environment (Decree№-5303 of the President of the Republic of Uzbekistan dated January 16, 2018 “On measures on further securing the country’s food safety”) changes have been introduced into a number of legal acts related to requirements as regards minimum amount of statutory fund of individual entrepreneurial entities.
   Having systematized those changes, as well as the earlier existing norms for certain categories, let us consider what are the requirements for statutory funds now the investor should know, while setting up a legal entity or starting out some types of activities.

1.On organizational and legal forms
  (sampling on the most common examples in the field of entrepreneurship)


Name of the organizational and legal form


Requirements to the minimum amount of Statutory Fund
(soums)


   
 
    Legal act



       
         Note

1

Joint Stock Company (Share Holding society)

1 600 mln.

-Law “On Joint Stock Companies and protection of the share-holders’ rights” №ЗРУ-370 dated May 6, 2014;

-Decree of the President of the Republic of Uzbekistan №УП-5197 dated September 29, 2017;

-Decree of the President of the Republic of Uzbekistan № УП-4053 dated November 18, 2008 “On measures on further raising the financial sustainability of enterprises of the real sector of economy”;

-Resolution of the President of the Republic of Uzbekistan №ПП-2454 dated December 21, 2015 “On additional measures on attracting foreign investors into Joint Stock Companies”

1.The share of a foreign investor in the Statutory fund should make up not less than 15%;

2.Prior to September 30, 2017 the Statutory fund was required to make not less than the equivalent of US$ 400000.

2

Limited liability company

 

 

 

 

 

 

 

 

 

40-fold minimum wage (MW) on the date of presenting documents for government registration of an enterprise

-Law “On limited and additional liability companies” №310-II dated December 16, 2001.

 

 

 

3

Private enterprise

Not established

-Law “On private enterprise” №558-II dated December 11, 2003.

 

4

Family enterprise

10-fold minimum wage (MW) on the date of presenting documents for government registration of an enterprise

-Law “On family entrepreneurship” №ЗРУ-327 dated April 26, 2012.

 

 

5

Farms

Not established

Law “On farms” №602-I dated April 30, 1998.

1)The contribution to the farm Statutory fund can be in the form form of money, securities, buildings, structures, other property or property rights that have a monetary value. At the same time, the head of the farm credits his business with property, equipment and money declared in an open tender for the provision of a land plot for farming.

2)There are other conditions for the creation of a farm:

- for those specializing in the production of livestock products – availability of livestock numbering not less than 30 conventional heads. The minimum size of land leased to a farmer is at least 0.3 hectares per one conventional head of livestock in the irrigated lands of Andijan, Namangan, Samarkand, Tashkent, Ferghana and Khorezm provinces, not less than 0.45 hectares of irrigated land in other provinces and the Republic of Karakalpakstan and not less than 2 hectares per one conventional head of livestock on non-irrigated (rain-fed) barren lands;
- for those specializing in crop production, the minimum size of land for leasing for cotton growing and grain production is at least 30 hectares; for horticulture, viticulture, vegetable growing and cultivation of other crops - at least 5 hectares.2.For legal entities with foreign investors:


     2.
 For legal entities with foreign investors: 


Name of the organizational and legal form


Requirements to the minimum amount of Statutory fund
(soums)




Legal act




Note

1

Enterprises with foreign investments

600 mln.

-Decree of the President of the Republic of Uzbekistan №УП-5197 dated September 29, 2017;

-Decree of the President of the Republic of Uzbekistan №УП-1652 dated November 30, 1996 “On additional incentives and benefits provided to enterprises with foreign investments”.

1)There are also two other requirements:

-the share of foreign investments makes up at least 30% of the Statutory fund;

-one of the participants shall necessarily be a foreign legal entity;

2)until September 30, 2017, the Dtatutory fund was required to be not less than the equivalent of US$ 150000.

2

Other enterprises with the participation of foreign capital

Not established

-Decree of the President of the Republic of Uzbekistan №УП-1652 dated November 30, 1996 “On additional incentives and benefits provided to enterprises with foreign investments”;
- Annex №1 to the Resolution №66 of the Cabinet of Ministers dated February 9, 2017.

 

 

3. For legal entities carrying out the following licensed types of activities*:



Name of activity form


Requirements to minimum amount of Statutory fund
(soums)



Legal act



Note

1

Commercial banks

100  bln.

-Law “On banks and banking activities” №216-I dated April 25, 1996;

-Decree №УП-5197 of the President of the Republic of Uzbekistan dated September 29, 2017;

-Resolution №ПП-1317 of the President of the Republic of Uzbekistan dated April 6, 2010 “On measures on further raising the financial sustainability and consolidation of investment activity of the banking system”.

1)The authorized capital of the bank consists of funds paid by the bank's founders and shareholders. Use of the bank funds received on credit, on bail, and other raised funds for the formation of the authorized capital shall not be allowed.

In exceptional cases, in accordance with legislation, budgetary funds can be used to form the authorized capital of the bank.

The minimum authorized capital must be paid by the founders of the bank by the time of its registration.

2)prior to September 30, 2017, the Statutory fund was required to be:

-not less than the amount equivalent to 10 million Euros for commercial banks;

-not less than the amount equivalent to 5 million Euros for private banks.

3)Till January 1, 2019 the Central Bank jointly with commercial banks was entrusted to increase the commercial banks’ Authorized capital to the level of the established minimum.

2

Pawn shops

500 mln.

-Resolution of the Board of the Central Bank (Ministry of Justice registration  №1291 dated December 10, 2003) “Regulation on the procedure for licensing pawn shop operations”;

-Resolution of the Board of the Central Bank (Ministry of Justice registration №1291-8 dated October 10, 2017.

 

 

 

1)In addition, the Statutory funds of pawn shops are required to be formed solely on account of its founders’ funds. Use of the pawn shop funds received on credit, on bail and such other raised funds for the formation of its Authorized fund shall not be allowed.

2)No requirements had been established as to the amount of the Statutory funds of pawn shops  prior to October 10, 2017;

3)The operating pawn shops will have to ensure that the minimum amount of the Statutory fund up to the level of the established minimum requirements shall be reached by January 1, 2019.

3

Microcredit organizations

2,0 bln.

-Law “On microcredit organizations” №ЗРУ-53 dated September 20, 2006;

-Annex to Resolution of the Board of the Central Bank (Ministry of Justice registration № 2093 dated April 13, 2010) “Regulation on the procedure of licensing the activities of microcredit organizations”;

-Resolution of the Board of the Central Bank (Ministry of Justice registration №2093-8 dated October 10, 2017).

1)The statutory fund of a microcredit organization shall be formed from money, as well as other property, the amount of which shall not exceed 20% of the size of this organization’s Statutory fund. The use of funds received on credit, on bail, and such other raised funds for the formation of the authorized fund of a microcredit organization shall not be allowed.

2)proior to October 1, 2017 the requirements for the amount of microcredit organizations’ Statutory funds had been established to be not less than the amount equivalent to 100 thousand Euros;

3)Operating microcredit organizations will have to bring up their Statutory fund amounts up to minimum requirements by January 1, 2019.

4

Insurers

-In the field of general insurance - 7,5 bln. soums

-In the field of life insurance - 10 bln. soums;

-In obligatory insurance - 15 bln. soums;

-Exclusively in reinsurance - 30 bln.soums.

 

- Law “On insurance activities” №358-II dated April 5, 2002;

-Decree of the President of the Republic of Uzbekistan №УП-5197 dated September 29, 2017;

-Annex №2 to the Resolution №ПП-618 of the President of the Republic of Uzbekistan dated April 10, 2007.

-Annex №1 to the Resolution №413 of the Cabinet of Ministers of the Republic of Uzbekistan dated November 27, 2002 “Regulation on licensing insurance activities of insurers and insurance brokers”.

 

 

 

1)Not less than 90% of the insurer’s Statutory fund shall be formed on account of the founders (participants) funds. Use of funds received on credit, on bail, and such other raised funds for the formation of the Statutory fund of the insurer shall not be allowed. The initial Statutory fund of the insurer will have to be formed by its founders by the time the license receipt and it cannot be less than the minimum amount of the Statutory fund established by legislation.

2)prior to September 30, 2017, the Statutory fund was required to make up:

-the amount equivalent to US$ 500 thousand in the general insurance sector;

-the amount equivalent to US$ 750 thousand in the life insurance sector;

-the amount equivalent to US$ 1000 thousand in the in compulsory insurance sector;

- the amount equivalent to US$ 3000 thousand in exclusively reinsurance sector.

2)The operating insurers will have to bring the amount of their Authorized capital in accordance with the requirements by July 1, 2018.

5

Wholesale trade

 Not established

-Decree №УП-5197 of the President of the Republic of Uzbekistan dated January 16, 2018 “On measures on further securing the country’s food safety”;

-Annex to the Resolution №242  of the Cabinet of Ministers of the Republic of Uzbekistan dated November 5, 2005 “Regulation on licensing the activities on carrying out wholesale trade”.

Prior to February 1, 2018 the Statutory fund required:

-availability of a formed Statutory fund in the amount of not less than 3,500-fold minimum wage, of which cash made up not less than 1200-fold MW.

6

Tourist activities

For carrying out tourist activities in the following directions:

-“Internal tourism” – in the amount equal to a legal entity’s related organizational and legal form, established by legislation;

-“Out-bound and In-bound tourism” -  in the amount equal to not less than 400-fold MW;

-Law “On tourism” №830-I dated August 20, 1999;

-Annex №1 to the Resolution №189 of the Cabinet of Ministers of the Republic of Uzbekistan dated April 6, 2017 “Regulation on the procedure of licensing tourist activities”.

 

 

 

 

 

7

Realtor activities

Realtor organizations carrying out:

-information and consultancy services in the real estate market -  not less than 100-fold MW;

-mediation activities in concluding deals with real estate and with the right to them - not less than 500-fold MW;

-trust management of real estate objects – not less than 1000-fold MW;

-Organization of real estate trading and the rights to them – not less than 3000-fold MW.

-Law “On realtor activities” №ЗРУ-269 dated December 22, 2010;

-Annex to the Resolution №129 of the Cabinet of Ministers of the Republic of Uzbekistan dated  May 10, 2011 “Regulation on the procedure of licensing realtor activities”. 

 

 

1)A license seeker planning to offer several types of real estate services will have to have a shaped Authorized capital by the types of realtor services, which provide for the formation of Authorized capital in their maximum amounts.

 

 

8

Assessment activities

Assessment organizations carrying out:

-Valuation of movable property, with the exception of securities, shares, objects of intellectual property and other intangible assets – not less than 1500-fold MW;

-Valuation of real estate, except for an enterprises as a property unit – not less than 2000-fold MW;

-Assessment of a business (enterprise as a property unit, all types of tangible and intangible assets – not less than 2500-fold MW.

-Law “On assessment activities” №811-I dated August 19, 1999;

-Annex to the Resolution №210 of the Cabinet of Ministers of the Republic of Uzbekistan dated May 8, 2003 “Regulation on the procedure of licensing the assessment activities”.   

At the same time, at least 30% of the Authorized capital will have to be contributed in the monetary form.

9

Audit activities

Audit organizations carrying out:

-Only initiative audits – not less than 1500-fold MW;

-Initiative and mandatory audits of business entities, with the exception of joint stock companies, banks and insurance companies – not less than 3000-fold MW;

-Audit of all business entities – not less than 5000-fold MW.

-Law “On audit” №78-II dated May 26, 2000;

-Annex to the Resolution №ПП-615 of the President of the Republic of Uzbekistan dated April 4, 2007 “Regulation on audit organizations”;

-Resolution №ПП-907 of the President of the Republic of Uzbekistan dated July 2, 2008 “On additional measures for raising the financial sustainability of audit organizations”.

In addition, the Statutory fund requires:

-Not less than 51% of the audit organization’s Statutory fund will have to belong to one or several staff auditors of this audit organization (exept for the cases of setting up an audit organization, when an audit organization is a branch or a subsidiary of a foreign company);

-Not less than 50% of the audit organization’s Statutory fund shall be formed on account of the founders’ (participants) funds, while the remaining part – on account of material values ​​used directly in carrying out the audit activities.

10

Organization of lotteries

200 mln. soums.

-Annex to the Resolution №314 of the Cabinet of Ministers dated July 16, 2003 “Regulation on licensing the activities on the organization of lotteries”.

1)In addition, the requirement establishes that not less than 50% of funds shall be formed for legal entities, who carry out activities on the  organization of lotteries. Use of funds received on credit, on bail, and such other raised funds for the formation of a Statutory fund for legal entities, who carry out activities for the organization of lotteries, shall not be allowed.

11

Production of ethyl alcohol and alcohol products

10 000-fold MW

-Annex to the Resolution №285 of the Cabinet of Ministers of the Republic of Uzbekistan dated December 30, 2005 “Regulation on the procedure for licensing activities on the production of ethyl alcohol and alcohol products”.

The exceptions shall include the enterprises of primary processing of grapes and fruits, as well as specialized enterprises that produce solely naturally fermenting wines (without adding ethyl alcohol).

* Only requirements to the amount of Statutory fund have been indicated here, no indication of any other license requirements)

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