Setting Up a Joint-Stock Company in Uzbekistan: Capital, Share Issue, Audit

Founders and the founders' agreement

A JSC is created by incorporation or by reorganization of a legal entity (Art. 9). Founders are the legal entities and individuals that sign the founders' agreement; the number of founders and shareholders is unlimited (Arts. 10, 11). State bodies may not be founders unless a law or a decision of the President or the Cabinet of Ministers provides otherwise.

The founders' agreement sets out how the founders act jointly to establish the company, the size of the charter fund, the types of shares to be placed among founders, the amount and procedure of payment, and the founders' rights and obligations (Art. 10). Until state registration, founders are jointly and severally liable for obligations related to the company's creation (Art. 11).

The founders' meeting

Decisions to incorporate the company, approve the charter and approve the monetary valuation of non-cash contributions are taken by the founders unanimously (Art. 10). Other matters are decided by the founders' meeting by simple majority, with votes counted by contributed shares; amending the founders' agreement requires the consent of all founders (Art. 12). Decisions are recorded in minutes signed by all founders. With a single founder no meeting is held — that founder decides alone.

• the decision to incorporate and approval of the charter;
• approval of contracts concluded during incorporation;
• the procedure for founders to pay for shares;
• the types and number of shares to be issued;
• election of the supervisory board and the audit commission (auditor);
• formation of the executive body.

Charter and registration

The charter is the JSC's founding document (Art. 13). It must state: the full corporate name, location and e-mail address; the subject and purposes of activity; the charter fund amount; the number, nominal value and types of shares; and the governance structure, including the number of members of the supervisory board, audit commission and executive body, how they are formed and their powers.

For registration, the charter and other documents required by law are filed with the registering authority (Art. 14). Refusal on the grounds that creating the company is inexpedient is not allowed. Within three months of registration, the company must approve at a general meeting the regulations on the general meeting, the supervisory board, the executive body and the audit commission.

Charter fund: no minimum, but deadlines

The charter fund consists of the nominal value of shares acquired by shareholders and is expressed in soums; all shares must have the same nominal value (Art. 16). The law sets no general minimum charter fund for a JSC: the amount is set by the charter, and a minimum may be prescribed by licensing requirements for certain activities (Art. 17).

The charter fund must be formed in the amount stated in the charter no later than one year after state registration. The company must place ordinary shares and may place preferred shares, but their nominal value may not exceed 25% of the charter fund. On incorporation, all shares are placed among the founders (Art. 16).

Placing shares

The placement period for the initial issue is no more than one year from the company's state registration; for additional shares — no more than one year from state registration of their issue (Art. 33). Shares not placed in time are cancelled.

The placement method — open or closed subscription — is set by the charter or the general meeting; if it is set nowhere, placement may only be by open subscription, which is held exclusively on organized securities markets. An issue is deemed failed if, in a private placement, less than 60% of the issue is placed within the deadline; in a public placement on organized markets, the issue is deemed completed regardless of volume.

Governing bodies and control

The supervisory board exercises general management except for matters within the general meeting's competence (Art. 74). If there are fewer than thirty holders of voting shares, the charter may assign the board's functions to the general meeting. Board members are elected for three years by cumulative voting; the director and management board members may not be elected to it; with more than five hundred shareholders the board has at least seven members, with more than a thousand — at least nine (Art. 76). The number of independent members is stated separately in the charter.

An audit commission (auditor) is formed if the charter provides for it (Art. 107). A company with assets on the balance sheet exceeding one hundred thousand BCV must set up an internal audit service reporting to the supervisory board (Art. 108). A company whose shares are on a stock exchange quotation list must create an audit committee of supervisory board members (Art. 74).

Mandatory audit from the first year

Joint-stock companies are subject to a mandatory annual audit (Art. 35 of Law No. ZRU-677 "On Auditing Activity"). The audit organization examines the company's financial and business activity and issues an audit report under a contract (Art. 109 of the JSC Law), and is liable for damage caused by an incorrect conclusion in the report.

For a new JSC this means planning the audit from the first financial year: choosing an audit organization, signing a contract with it and setting up accounting so that the first year's statements pass the audit without material adjustments.