July 9, 2021
LLC Management organs in Uzbekistan
The management bodies of a limited liability company (LLC) in different countries have their own specifics. The following are the features of foreign models and Uzbek model of LLC management.
1. American model
In an American corporation, the general meeting of shareholders is endowed with much less powers than the German meeting of shareholders. Since the countries of the common law system are characterized by a merger of management and control functions, the board of directors is fully responsible for the activities of the corporation and manages the corporation (the term “supervisory board”, existing in Russian and Uzbek legislation, is not applicable to it). The Board of Directors is a collegial executive management body of the corporation, to which another executive body reports. And above these bodies is the general meeting of shareholders. The American model is actually dual-level. In this model, the board of directors is a strong body.
The German model of management is a tri-level one. Between the shareholders ‘ meeting and the executive body, there is a supervisory board with a control function in relation to the management board (executive body). This is due to the separation of management and control institutions in the joint-stock laws of the countries of the Roman-German (civil) legal family. The German model has a weak board of directors.
The Russian model is four-level or tri-level, it includes a general meeting, an optional supervisory board, a collegial management board and a sole executive body. With the introduction of the supervisory board, control over the management board and the sole executive body is strengthened. This is done in order to give more flexibility to participants.
The Uzbek model of management bodies in an LLC can be dual-level or tri-level.
Dual-level management organs:
(1) the supreme organ – the shareholders’ level (meeting of multiple shareholders or sole founder); and
(2) the executive (individual or collective);
Tri-level management organs:
(1) the supreme organ – the shareholders’ level (meeting or sole founder);
(2) the intermediary organ – the supervisory board (optional); and
(3) the executive (individual or collective);
The executive organ which is an organ performing functions of the CEO – true management organ performing daily managerial operations of the company. This organ is mandatory.
It can be individual or collective.
When executive organ is individual it is a sole director who performs all executive functions and no other organ performs daily executive management. This system does not exclude that there could be a separate supervisory organ as a superior organ above the sole director or manager. The director then is subordinate to the supervisory organ.
When company’s executive organ is a collective organ, it could be called the “management”, the “directorate” or “board of directors” or otherwise. When the executive organ is collective it shall make all decisions by voting. Although it is not rare when foundation documents allocate powers between the members of the collective executive organ and even appoint one of the members of the collective executive organ as a general director with separate powers enabling him/her to act independently. However, the latter would not be correct, as the collective executive organ implies collective decision-making. One, all or few of the members of the collective executive organ shall be vested with the powers to act on behalf of and represent the Company before third parties and shall hold the power of Company’s signatory, including in bank transactions. An individual performing functions of the executive organ solely or collectively must be an employee of the Company. It is implied that if they are foreign residents they shall obtain work permit and at least periodically stay in Uzbekistan to perform their daily work duties.
The supervisory organ is an intermediary organ and is not mandatory.
It does not perform daily transactions and executive management of the company, but carries out certain managerial functions of higher level, such as determining certain programs, policies, categories of transactions (size- or direction-wise), makes appointments of executive organ, internal auditing organ, grants approvals, permissions etc. All such functions are closer to the powers of the general shareholders meeting. In fact the supervisory board acts under the powers delegated to it by the general shareholders meeting. Members of the supervisory organ are not employees of the Company, but may receive remuneration for their services. Members of the supervisory organ never hold powers of the executive organ and do not represent the Company before third parties and shall not hold the power of Company’s signatory, including in bank transactions. If members of the supervisory board are foreign residents they do not have to any work permit.
Please also note that there a limitation for the simultaneous combination of membership in executive organs and supervisory boards: members of the executive organ of your Uzbekistan company or its subsidiaries or any Uzbekistan company’s employee are prohibited from becoming a member in the supervisory board of the same Uzbekistan company (should such a board of directors established in it).