July 25, 2025

Executing transactions on regulated exchange and OTC markets

This memorandum is about the key legislative issues related to the purchase and sale of shares and other types of securities conducted on the domestic market of Uzbekistan.

Key Legal and Regulatory Acts Governing Transactions with Shares:

1. Law of the Republic of Uzbekistan “On the Securities Market” No. 387 dated June 3, 2015.
2. Resolution of the Cabinet of Ministers “On Measures to Ensure the Effective Operation of the Republican Stock Exchange ‘Tashkent’ and the Development of Securities Market Infrastructure” No. 285 dated June 8, 1994.
3. Order “On Approval of the Regulation on the Procedure for Conducting Securities Purchase and Sale Transactions on the Organized Over-the-Counter Market,” Registration No. 1384 dated July 16, 2004 (invalidated following the adoption of Regulation No. 3596).
4. Order “On Approval of the Regulation on the Procedure for Executing Purchase and Sale Transactions on the Organized Over-the-Counter Securities Market,” Registration No. 3596 dated December 27, 2024.
5. Order “On Approval of the Regulation on the Register of Over-the-Counter Securities Transactions,” Registration No. 1919 dated March 9, 2009.

First of all we need to examine how and on which platforms securities purchase and sale transactions are executed. According to the legislation of the Republic of Uzbekistan, the following types of markets are established for such transactions:

1. Organized exchange market
2. Organized over-the-counter (OTC) market
3. Unorganized over-the-counter (OTC) market

Each of these markets is governed by its own set of legal and regulatory frameworks that determine the procedures for executing transactions. The choice of market for concluding a transaction depends on the specific objectives pursued by the parties involved.

Organized Exchange Market

Organized exchange markets are official stock exchanges operating under internal rules and regulations. A key example in Uzbekistan is the Republican Stock Exchange “Toshkent” (RSE). This market is used for the issuance and trading of securities on the exchange—primarily by public Joint Stock Companies (JSCs). It is also utilized in cases involving planned IPOs (Initial Public Offerings) or SPOs (Secondary Public Offerings).

The activities of organized exchange markets are governed by the Law of the Republic of Uzbekistan “On the Securities Market” No. 387 dated June 3, 2015 (hereinafter – “Law on the Securities Market”) and Resolution of the Cabinet of Ministers No. 285 dated June 8, 1994 “On Measures to Ensure the Effective Operation of the Republican Stock Exchange ‘Toshkent’ and the Development of Securities Market Infrastructure” (hereinafter – “Resolution No. 285”).

Organized Over-the-Counter (OTC) Market

The organized over-the-counter market is also an official market but operates outside of the stock exchange itself. Transactions are carried out via specialized electronic trading systems, such as Elsys or NegoBoard. In Uzbekistan, a unified electronic platform known as VTP is publicly used for this purpose. This platform enables the registration of securities purchase and sale transactions.

Organized OTC markets are relevant in the following scenarios:

• Transactions involving shares of ordinary JSCs that are not listed on a stock exchange;
• Deals between a limited number of parties (typically 1:1 or 1-to-several), and so on.

Thus, organized OTC markets are used when the transaction parties are predetermined, but a formal operation is required to transfer ownership rights to securities.

The functioning of organized OTC markets is also regulated by the Law on the Securities Market and Resolution No. 285. In addition, specific regulation is provided in the Order “On Approval of the Regulation on the Procedure for Executing Purchase and Sale Transactions on the Organized Over-the-Counter Securities Market” No. 3596 dated December 27, 2024 (hereinafter – “Order No. 3596”).

Unorganized Over-the-Counter (OTC) Market

Unorganized over-the-counter markets refer to markets that operate without the involvement of a stock exchange or trading platform. In such markets, transactions are conducted directly between parties and include specific categories of securities transactions that are permitted to occur outside the organized securities market. These include exchange (barter), donation, pledge, swap, and other transactions, except for purchase and sale.

The procedure for executing transactions on unorganized OTC markets is regulated by the Order “On Approval of the Regulation on the Register of Over-the-Counter Securities Transactions” No. 1919 dated March 9, 2009 (hereinafter – “Order No. 1919”).

Comparative table No. 1

Type of Market	When Used	Participants	Applicable Regulations
Organized Exchange Market	Public JSC shares, IPO, privatization	Public companies, investors, government. Sale through RFB Tashkent.	Cabinet of Ministers Resolution №285 dated 08.06.1994. Form of transaction: electronic.
Organized Over-the-Counter	Purchase and sale of shares of ordinary JSCs	Private investors, companies Transaction through trading platforms.	Ministry of Justice Order №1384 Ministry of Justice Order №3596. Form of transaction: electronic.
Unorganized Over-the-Counter	Gift, inheritance, intra-group transactions	Individuals and legal entities – in special cases: gift, succession, etc.	Ministry of Justice Order №1919. Written form of transaction is allowed.

Procedure for transactions on the organized exchange and over-the-counter markets

Now let us review the procedure and forms for concluding transactions on the organized exchange and over-the-counter markets, which in practice often raise the most questions.

Transactions on the organized exchange and over-the-counter markets are regulated by:

• The Law of the Republic of Uzbekistan “On the Securities Market” №387 dated 03.06.2025 (Law “On the Securities Market”);
• Resolution of the Cabinet of Ministers “On Measures to Ensure the Effective Operation of the Republican Stock Exchange ‘Tashkent’ and the Development of Securities Market Infrastructure” №285 dated 08.06.1994 (Resolution №285).

According to Article 16 of the Law “On the Securities Market”, the procedure for conducting transactions on the organized market is as follows:

When concluding purchase and sale transactions on organized markets, the settlement periods are established by the rules of the securities trading organization; in other cases — by the purchase and sale agreements. If the established settlement periods are violated, the transaction is deemed invalid.

Electronic form of transactions

The execution and registration of securities transactions on organized securities trading platforms are carried out in electronic form without the need for their written (paper) documentation. Other transactions with securities are concluded in written form and must be registered in accordance with the procedure established by law.

As follows from the provisions of the law, transactions are carried out exclusively in electronic form without further execution in paper form. A similar rule is stipulated in paragraph 5 of Resolution №285:

“The execution and registration of securities transactions on organized securities trading platforms are carried out in electronic form without the need for their written (paper) documentation. Other transactions with securities are concluded in written form and must be registered in accordance with the procedure established by law.”

The provision of legislation requiring transactions to be concluded exclusively in electronic form raises questions about the necessity and validity of concluding a share purchase agreement in written form.

If we turn to the previous regulation of transactions on organized over-the-counter markets, Order №1384 provided the possibility to conclude a share purchase agreement in written form. This act was replaced by Order №3596 dated 27.12.2024, where paragraph 7 stipulates that: On the organized over-the-counter securities market, transactions with securities are concluded and registered in electronic form.

Thus, the provisions of legislation are limited only to registration transactions (transactions executed in electronic form on the trading platform).

The disadvantage of electronic transactions is that the existing software used for the registration of securities transactions does not allow the parties to include non-standard contractual provisions. A registration transaction executed in electronic form contains only the minimum required information about the transaction.

The inability to conclude a share purchase agreement in written form creates the following legal risks for the parties:

1. The impossibility of including in the share purchase agreement non-standard terms, such as: representations and warranties, conditions precedent and subsequent, options, and other tools to protect the interests of the parties. As a result, the parties are limited only to the registration transaction, which in practice means a mere transfer of rights to the securities.
2. Even if the parties conclude a separate written agreement containing a broader set of protective provisions, a court may declare such agreement invalid by referring to the registration transaction as established by law.

In view of the foregoing, it becomes evident that the parties to the transaction are deprived of legal protection mechanisms provided by civil legislation and other instruments under national or foreign law.

Practice

To mitigate this risk, the following method of concluding a transaction is often used in practice:

1. The parties sign a share purchase agreement (the “Agreement”) that reflects their agreed terms and conditions and simultaneously prepare a draft of the Registration Transaction. The provisions of the Registration Transaction must not contradict the Agreement but should remain subordinate to it. This arrangement reduces conflicts if, after signing both documents (the Agreement and the Registration Transaction), the parties submit either the Agreement (which may be rejected) or only the Registration Transaction to the exchange or trading platform, while the Agreement continues to remain in force between the parties.
   The enforceability and judicial protection of the parties’ obligations under such an Agreement have not yet been tested in court. Nevertheless, we believe that having such an agreement increases the likelihood of protecting the parties’ interests.
2. The parties provide each other with documents confirming the fulfillment (completion) of the Conditions Precedent. The parties then sign an act confirming the completion of the Conditions Precedent, upon which the Agreement enters into force.
3. The parties sign the Registration Transaction for the purchase and sale of shares in a form that complies with the requirements of the organizer of the exchange or over-the-counter market.
4. The Seller and the Buyer submit an Application for the transaction to purchase and sell the shares in the form and manner established by the rules of the exchange or over-the-counter market organizer.
5. Authorized participants in the securities market carry out the debiting of the shares from the Seller’s personal account and crediting them to the Buyer’s personal account. Following these actions, the organizer of the over-the-counter market or the investment intermediary, in accordance with the established rules of the exchange or over-the-counter market, provides the Buyer with a statement from the Buyer’s depo account confirming the crediting of the shares to the Buyer’s account.
6. The parties draw up an acceptance-transfer act confirming the transfer of the shares from the Seller to the Buyer and the transfer of funds (the Purchase Price as payment for the shares) from the Buyer to the Seller.

This sequence of actions can protect the interests of the parties to the transaction in the context of legislation requiring transactions to be concluded only in electronic form (i.e., through a Registration Transaction). However, it is important to note that this practice has not yet been tested in court, and therefore the question of the validity of a written agreement preceding the Registration Transaction remains open.