April 21, 2025
Shareholders agreement in Uzbekistan: subject matter and dispute resolution
Table of contents:
- Memorandum of association of a limited liability company (LLC)
- Memorandum of association of a joint-stock company (JSC)
- Corporate agreement
- Relationship between the corporate agreement and the memorandum of association
The corporate agreement provided for in Article 358-1 of the Civil Code of the Republic of Uzbekistan (CC RU) is not a “memorandum of association” as provided for in the Laws on LLCs or JSCs.
Let us first define what a memorandum of association is.
- Memorandum of association of a limited liability company (LLC) (Articles 10-12 of the Law on LLCs)
A memorandum of association in an LLC is a mandatory agreement for the founders of an LLC if there is more than one founder. The memorandum of association of an LLC is one of the founding documents of an LLC.
The memorandum of association of an LLC must contain:
1) provisions on the obligation of the founders to establish the company;
2) the procedure for joint activities for its establishment;
3) the composition of the founders (participants) of the company;
4) the size of the authorized capital (charter capital) of the company and the size of the share of each of the founders (participants) of the company;
5) the procedure, size, methods, and terms for making contributions to the authorized capital (charter capital) of the company upon its establishment;
6) the liability of the founders (participants) of the company for violation of the obligation to make contributions;
7) the conditions and procedure for the distribution of profits and losses among the founders (participants) of the company;
8) the composition of the company’s bodies and the procedure for the withdrawal of participants from the company.
The above list is a list of essential terms of the agreement. The list is closed (numerus clausus). The absence of provisions regulating the above issues in the memorandum of association may result in its invalidation.
The LLC Act does not assume that other issues may be included in the memorandum of association, but the absence of a prohibition on their inclusion obviously implies that such additional provisions may be included.
2. Memorandum of association of a joint-stock company (JSC) (Articles 10-12, 31 of the Law on JSCs)
The memorandum of association in a JSC is a mandatory agreement for the founders of the JSC if there is more than one founder. The memorandum of association of a JSC is not classified as one of the founding documents of the JSC.
The memorandum of association of an AO contains:
1) a provision (i) on the establishment of the AO,
2) the procedure for the founders to carry out joint activities to establish the AO,
3) information on the size of the authorized capital (statutory capital) of the company,
4) information on the types of shares to be placed among the founders,
5) information on the size and procedure for payment for shares,
6) a list of the rights and obligations of the founders in establishing the joint-stock company.
3. Corporate agreement (Article 358-1 of the Civil Code of the Republic of Uzbekistan and Articles 12 and 26 of the Law on Joint Stock Companies)
A corporate agreement is not an agreement on the establishment of a legal entity and does not have the nature of the memorandum of association, therefore it does not require the participation of all participants or shareholders of the company. In other words, only some of the participants or shareholders may participate in the corporate agreement.
As indicated in the Civil Code of the Republic of Uzbekistan, a corporate agreement is an agreement on the procedure for the exercise by participants (in a limited liability company) or shareholders (in a joint stock company) of their rights as members of the company.
In accordance with this agreement, the specified participants of the business company undertake to exercise their membership rights or refrain (refuse) from exercising them, including:
1) voting at the general meeting of the company’s participants,
2) acting in concert to manage the company,
3) acquire shares (stocks) in the authorized capital at a certain price;
4) acquire shares (stocks) in the authorized capital upon the occurrence of certain circumstances;
5) refrain from acquiring shares (stocks) in the authorized capital;
6) refrain from alienating shares (stocks) in the authorized capital.
The corporate agreement cannot include provisions on corporate governance mechanisms, in particular:
- a) on voting by company participants in accordance with the instructions of the company’s bodies, and
- b) on determining the structure of the company’s bodies and their powers.
When concluding a corporate agreement, potential conflicts between the charter, the memorandum of association, and the corporate agreement must be taken into account.
4. Relationship between the corporate agreement and the memorandum of association
In accordance with Article 1191 of the Civil Code of the Republic of Uzbekistan, “the law of the country where the legal entity is established shall apply to an agreement on the establishment of a legal entity with foreign participation.” Accordingly, the memorandum of association, like the charter, is governed by national law.
As for the corporate agreement, it is not an agreement on the establishment of a company and therefore, if there is a foreign element, it may be governed by foreign law.
The laws on LLCs and JSCs provide a list of issues that are subject to mandatory regulation by the charter and the memorandum of association. This subject matter competence of the founding documents may be interpreted by the courts of Uzbekistan as exclusive.
That is, in the event of a conflict (direct or interpretative) between the provisions of these three documents, the judge may proceed from the priority of issues directly related to the subject matter of their regulation.
It should also be noted that corporate disputes fall under the exclusive jurisdiction of the economic court and are initiated at the location of the legal entity. According to the Resolution of the Plenum of the Supreme Court of the Republic of Uzbekistan “On Certain Issues of the Application of Economic Procedural Law by the Court of First Instance” No. 13 dated May 24, 2019, “the list of corporate disputes is not exhaustive, and claims for disputes not specified in this article of the EPC, but which are essentially considered corporate, are also filed at the location of the legal entity.” Therefore, when concluding a corporate or other agreement to regulate relations between shareholders (participants), other than the memorandum of association provided for in Article 10 of the Law on Joint Stock Companies and Article 12 of the Law on Limited Liability Companies, and referring the resolution of disputes related to it to the jurisdiction of arbitration courts, arbitration tribunals, or foreign courts, it is necessary to take into account the rule of their exclusive jurisdiction specified in Article 30 of the Economic Procedural Code of the Republic of Uzbekistan.
There are also frequent cases when a corporate agreement is concluded in order to regulate relations under foreign law. However, if a corporate agreement governed by foreign law covers issues that fall within the scope of the founding agreement, the court must refuse to apply foreign law to them on the basis of Article 1191 of the Civil Code of the Republic of Uzbekistan, according to which “the law of the country where the legal entity is established shall apply to an agreement on the establishment of a legal entity with foreign participation.”
