6. Appendix to the Order dated 16.07.09 No. 2009-40, registered by the Ministry of Justice 30.08.09 No. 2000 “Rules for the Issuing of Securities and State Registration of Issuing of Securities»;

7. Appendix to the Order dated 24.07.12 No. 2012-13, registered by the Ministry of Justice on 31.07.12 No. 2383 “Rules for Providing and Publishing Information on the Securities Market»;

8. Appendix No. 1 to The Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 02.07.14 No. 176 “Regulations on Requirements for Corporate Websites of Joint-Stock Companies»;

9. Resolution of the Plenum of the Supreme Economic Court of the Republic of Uzbekistan dated 27.11.15 No. 290 “On Certain Issues of Invalidation of Transactions (Decisions) of Joint-Stock Companies and Other Economic Companies Made (Adopted) by them in Violation of the Established Procedure for Disclosure of Information about them”.

According to the new amendment to the Law of the Republic of Uzbekistan of 06.12.01 No. 310-II “On Limited and Additional Liability Companies”, LLC is now entitled to issue and offer bonds. Thus, LLCs when issuing corporate securities must comply with certain standards, which will be described below.

According To the Law of the Republic of Uzbekistan of 22.07.08 No. 163, legal entities that issue bonds and bear obligations under them to their owners are issuers, and the issue and offer of securities are referred to as the issuance of securities.

2. Conditions of issue of bonds

Corporate bond:

Issued within the amount of the Issuer’s own capital as of the date of the decision to issue them. If the amount of the bonds exceeds the amount of equity, the Issuer is obliged to provide security for the excess amount;
The Issuer must be profitable and solvent over the past year. It must also have positive indicators of financial stability and liquidity over the past year. Therefore, the Issuer must submit an audit report on the financial statements for the year preceding the bond issue
The issue is carried out with the participation of commercial banks, as payment agents for the payment of funds by issuers to investors.

Infrastructure bonds:

Issued within the limits of the amount of equity, and if in excess, the Issuer provides security;
Issued if there is an auditor’s report on the financial statements for the year preceding the issue;
Funds from the placement are used exclusively for Finance projects stipulated in the decision of the President of the Republic of Uzbekistan or the Cabinet of Ministers of the Republic of Uzbekistan.

Also, business entities with a state share of 50% or more, as well as state-owned enterprises, must issue infrastructure bonds in agreement with the Ministry of Finance (Article 6 of the Law of the Republic of Uzbekistan No. 163 of 22.07.08).

3. Stages of securities issuance

The issuance of securities includes several mandatory stages (Appendix to Order No. 2009-40 dated 16.07.09):

Adoption and approval of a decision on the issue of securities;
Approval of the prospectus (if public offering);
State registration of the issue;
Registration with the Central securities Depository;
Disclosure of information about the issue;
Offering of securities;
Submission of a notification to the Agency for the development of the capital market of the Republic of Uzbekistan.

3.1 Decision to issue securities

The decision must comply with the form provided in the Annex to Order No. 2009-40 of 16.07.09. Specifically, it needs to be specified:

Full name of the Issuer;
Its location;
Date of decision approval;
The names of the Issuer’s management body that approved the decision on the issue;
Type a of corporate securities;
The rights of the owner;
Terms of placement and other information.

The decision to issue securities is adopted by the Issuer’s management body. A separate decision on each issue of securities is registered. The decision cannot provide for both private and public offering of securities. The decision must be signed by the person performing the functions of the sole Executive body or the head of the collective Executive body of the Issuer and the chief accountant.

3.2 State registration of securities issue

For state registration of the issue of securities, the Agency for the development of the capital market is provided with original documents (unless it is determined that certified copies) prescribed by legislation (Appendix to Order No. 2009-40 dated 16.07.09). The Issuer must submit documents for state registration within 3 months from the date of the decision to issue securities is approved, but not later than 1 month from the date the decision to issue securities is adopted.

The Agency for the development of the capital market reviews the documents within 30 days maximum from the date of their receipt. During this time, the registration authority either performs state registration or makes a reasoned decision to refuse registration.

At the state registration of the initial issue of corporate securities, the Issuer must pay a fee of 0.01% of the nominal value of the corporate securities. Also, if the nominal value of already registered securities increases, the Issuer must pay 0.01% of the amount by which the nominal value increases.

3.3 Disclosure of information on the issue of securities

The Issuer discloses information in the prospectus of the securities issue (for public offering); in the quarterly and annual report of the Issuer; in reports on material facts in the Issuer’s activities (Appendix to Order No. 2012-13 dated 24.07.12). The Issuer is obliged to provide the prospectus of the securities issue and the annual report to all interested parties. Moreover, the Issuer must:

Publish information on the official website Of the Agency for the development of the capital market of the Republic of Uzbekistan;
Publish information on its corporate website (Appendix to the PCM of the Republic of Uzbekistan No. 176 dated 02.07.14).

In addition to information about the issue of securities, the Issuer must disclose information about material facts in its activities. The list of material facts is given in Appendix No. 3 to the Appendix to the Order dated 24.07.12 No. 2012-13.

Disclosure of information in electronic form does not require payment from the Issuer. Certification of the disclosed information is carried out by means of an electronic digital signature.

3.3.1 Liability for violation of the established procedure for disclosure of information

Failure to publish or late publication of information that issuers should disclose, as well as failure to submit or late submission of such information to the Central securities Depository and the Agency for the development of the capital market of the Republic of Uzbekistan, entails the imposition of a fine on officials from 3 to 5 BRV (900,000 -1,500,000 Soums) (article 174-I Code of administrative responsibility).

Also, in some cases, a violation by a business entity of the requirements for disclosure of information may become the ground for declaring the decision of the General meeting or the transaction concluded by the company invalid (resolution of the Plenum of the Supreme Court of the Republic of Uzbekistan No. 290 dated 27.11.15). The following may be grounds for declaring a decision invalid due to a violation of the legislation on the disclosure of information:

Non-publication of annual financial statements;
Violation of the procedure for notifying the company’s participants of the date, time and place of the General meeting;
Making a decision that is not included in the meeting’s agenda.

Also, the grounds for declaring a transaction invalid due to a violation of the legislation on disclosure of information may be:

False information posted on the company’s corporate website;
False information provided by an Issuer that offers securities on the stock exchange on the official website of the stock exchange;
Failure to notify the company’s affiliated persons of their affiliation with the company.

3.4 Offering of bonds

Offering of securities is carried out only after their state registration.

Offering of bonds is carried out by concluding a purchase and sale agreement between the Issuer and the buyer for a specified number of bonds. Offering should be completed within the period set by a decision on issue but not later than 1 year from the date of state registration of issue and primary issue not later than 1 year from the date of state registration of Issuer as a legal entity.

No later than 30 days after the date of expiration of the securities offering period specified in the decision, the Issuer must submit a notification on the results of the bond issue to the Agency for the development of the capital market of the Republic of Uzbekistan. And if the bonds are offered earlier than the specified period, such notification must be made no later than 30 days from the date of offering of the last bond. Such notification is provided in the form (Appendix No. 6) established by the legislation (Appendix to the Order dated 16.07.09 No. 2009-40).

4. Liability for non-compliance with the procedure for issuance of securities

Violation of the procedure for the issue of securities by issuers:

Without causing damage to investors – entails the imposition of a fine on officials from 5-7 BRV (1,500,000-2,100,000 UZS);

Causing damage to investors – it entails the imposition of a fine on officials in the amount of 7-10 BRV (2,100,000-3,000,000 UZS).

Also, if this violation is repeated within a year after the administrative penalty is applied, the fine for officials will already be from 10-20 BRV (3,000,000-6,000,000 UZS) (article 174-I Of the Code of administrative liability of the Republic of Uzbekistan)

Moreover, the manufacture or sale of counterfeit securities or securities in foreign currency for the purpose of the sale is punishable by restriction of freedom from 2 to 5 years or imprisonment for up to 5 years. And if this crime is committed repeatedly, or by a dangerous recidivist, or on a large scale, or by prior agreement of a group of persons, the penalty will be imprisonment for 5-10 years. Also, if this crime is committed on a particularly large scale, or by an organized group or in their interests, the imprisonment will be from 10 to 15 years (article 176 of the Criminal Code of the Republic of Uzbekistan).

5. Dependent business entities

If a participating company purchases a share (interest) in a business entity, the participating company must immediately publish information about the acquisition of such a share (interest) in the mass media (article 68 of the Civil code of the Republic of Uzbekistan). Namely, such a publication should be made in one of the Republican Newspapers, for example, in the newspaper “Narodnoye Slovo”.

Procedure for issuing bonds and disclosing information by LLС

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