Form of Business

Branches and Representative Offices of Legal Entities 

Branches and representative offices of foreign companies do not belong to legal entities of the Kyrgyz Republic. They are endowed with property of legal entities that have founded them, and act on the basis of the approved bylaws. Legislation of the Kyrgyz Republic distinguishes between branches and representative offices. Functions of representative offices are limited to representation of a foreign legal entity and protection of its interests, performance of transactions and other legal actions on its behalf. Branches, on the other hand, are in the position to perform all functions of the foreign legal entity or part of these functions, including the function of representation. 

Under the legislation of the Kyrgyz Republic, branches and representative offices have the following rights and obligations: 

o To open bank accounts and execute payments in any currency; 

o To hire local employees; 

o To hire foreign employees and obtain relevant work permits for them; 

 o To enter into any contractual relations with local and foreign companies and execute/assume liabilities under any agreements providing for payments in local or foreign currency; and 

o To have permits for purchase or lease of immovable property. 

Legislation of the Kyrgyz Republic provides for a number of restrictions with respect to branches and representative offices. Thus, a branch or a representative office may only exist as long as their parent company exists. A branch or representative office may not be licensed to perform certain types of activities or provide certain types of services. 

Registration of Branches and Representative Offices 

Branches and representative offices located within the territory of the Kyrgyz Republic, with the exception of branches and representative offices established within territories of free economic zones, are subject to mandatory registration. 

Branches and offices of foreign legal entities shall be registered with the Ministry of Justice of the Kyrgyz Republic. For the purposes of registration, a foreign legal entity shall submit the following documents to the Ministry of Justice of the Kyrgyz Republic:

(i) Application for registration; 

(ii) Bylaws of the branch or representative office approved by the authorized body of the foreign legal entity; 

(iii) Extract from the resolution of the authorized body of the foreign legal entity on establishment of the branch or representative office, approval of the bylaws of the branch or representative office, and appointment of the head of the branch or representative office;

(iv) Copy of the state registration (re-registration) certificate of the foreign legal entity; 

(v) Documents proving location of the branch or representative office (such as a lease agreement, an agreement on gratuitous use of premises, or an official letter); 

(vi) A power of attorney issued by the foreign legal entity to the head of its branch or representative office subject to the legislation of the Kyrgyz Republic, with a notarized translation into the national or official language; 

(vii) Copies of notarized founding documents of the foreign legal entity that establishes a branch or representation office, with a notarized translation into the national or official language; 

(viii) A legalized extract from a registry or another document proving that the entity opening the branch or representative office is an operating legal entity under the laws of its country, with a notarized translation into the national or official language; and 

(ix) A bank statement proving payment capacity of the legal entity that establishes a branch or representative office, with a notarized translation into the national or official language. 

A permit of the National Bank of the Kyrgyz Republic is required for the establishment of a branch or representative office of a foreign bank. 

Liquidation of Branches and Representative Offices 

To liquidate a branch or representative office, the following documents need to be submitted to the registering authority: 

(i) A resolution of the authorized body on liquidation of the branch or representative office; 

(ii) Originals of the founding documents of the branch or representative office, registration (re-registration) certificates, and statistical card; 

(iii) A reference from the militia body proving that the seal and stamps of the branch/representative offices have been delivered, and a reference from bank proving that the account of the branch/representative office has been closed; 

(iv) A tax inspection report, a reference from the respective division of the National Committee for Taxes and Duties of the Kyrgyz Republic proving that the branch/representative office has no outstanding tax liabilities; and 

(v) A reference from the respective division of the Social Fund of the Kyrgyz Republic proving that the branch/representative office has no arrears. 

The registering authority (the Ministry of Justice of the Kyrgyz Republic) performs registration of branches and representative offices, as well as registration of their liquidation, within 10 days from the date of submission of the required documents. 

Legal Entities 

A variety of organizational legal forms of legal entities exist in the Kyrgyz Republic, the most common being: 

  • Limited liability companies; and
  • Joint stock companies (open or closed).

The key legal acts regulating activities of legal entities are the Civil Code of the Kyrgyz Republic, the Law of the Kyrgyz Republic “On Business Partnerships and Companies”, and the Law of the Kyrgyz Republic “On Joint Stock Companies”. 

Limited Liability Companies 

A limited liability company (LLC) is one of the most widespread types of legal entities in the Kyrgyz Republic, having a number of advantages: 

o Participants of an LLC are not liable for its obligations, and their risk of losses that may be incurred as a result of the company performance is limited to the amount of their respective contributions; and 

o The structure and powers of management bodies of an LLC are not subject to detailed legislative regulation, therefore, management and decision making in an LLC is more flexible. 

The minimum amount of an authorized fund of an LLC may not be lower than one statutory rate (which, as of September 2007, is 100 soms, or about $2.5) established in the Kyrgyz Republic as of the time of participants’ contributions to the authorized capital. 

It must be noted that, subject to legislation of the Kyrgyz Republic, if the founding legal entity consists of one shareholder/participant, it may not act as the only founder/participant of an LLC. 

The number of participants in an LLC may not exceed 30; otherwise the LLC must be reorganized into a joint stock company within 1 year. Should an LLC fail to comply with this requirement, it will be subject to liquidation by judicial procedure. 

Joint Stock Companies 

A joint stock company is another popular form of a legal entity as shareholders are not liable for the obligations of the company. Also, the risk of losses that they may incur as a result of the company performance is limited to the value of shares owned by the shareholders. 

A joint stock company must issue shares in the national currency of the Kyrgyz Republic, regardless of the form of original contribution. In addition to shares, joint stock companies may issue other securities (such as debenture bonds) to raise working capital. 

According to the legislation of the Kyrgyz Republic, if a founding legal entity consists of one participant/shareholder it may not act as the only founder/participant of a joint stock company. 

Authorized capital of a joint stock company may not be lower than 100,000 soms (which, as of September 2007, equals about $2,677). As of the date of founding, authorized capital must be completely paid in and distributed among founders. 

Joint stock companies established in the Kyrgyz Republic may be either open or closed. closed joint stock company is a joint stock company whose shares may only be distributed among its founders or within another predetermined group. A closed joint stock company may not carry out a public placement of shares issued or otherwise offer them to an unlimited group of persons. The number of shareholders in a closed joint stock company may not exceed 50; should the number of shareholders in a closed joint stock company exceed 50, the company must be reorganized into an open joint stock company within 1 year. Upon expiry of this period, unless the number of shareholders has decreased to meet the established limit, the company will be subject to liquidation by judicial procedure. Shareholders of a closed joint stock company have preemptive right to purchase shares offered for sale by other shareholders of the same company. 

An open joint stock company is a joint stock company participants of which may alienate their shares without the consent of other shareholders. An open joint stock company may carry out open subscription to the shares it issues and may freely sell them on conditions established by law. An open joint stock company that has 500 shareholders or more and has carried out at least one public placement of securities must annually publish in the media an annual report on its financial and business performance. 

Registration of Legal Entities 

In the Kyrgyz Republic legal entities obtain the respective status upon their state registration with the Ministry of Justice of the Kyrgyz Republic. 

State registration of the establishment or liquidation of a legal entity is performed free of charge within 10 business days from the date on which an application with all supporting documentation is submitted to the registering authority. 

Should a legal entity be founded by a foreign entity, the following documentation has to be submitted to the relevant justice bodies: 

(i) Application for registration; 

(ii) Charter and founding agreement of the newly established legal entity approved by its founders’ meeting; 

(iii) Minutes of the founders’ meeting on establishment of the legal entity, approval of its charter and founding agreement, and appointment of managerial bodies; 

(iv) Documents proving the location of the legal entity (such as a lease agreement, an agreement on gratuitous use of premises, or an official letter); 

(v) Legalized copies of founding documents of a foreign legal entity that acts as a founder of the new legal entity, with a notarized translation into the national or official language; 

(vi) A legalized extract from a registry or another document proving that the foreign legal entity is an operating legal entity subject to legislation of its country, with a notarized translation into the national or official language. 

Should a legal entity be founded by a foreign individual, instead of the last two documents on the above list, a copy of passport or other ID (with the visa term specified in cases where the foreign citizen resides within the Kyrgyz Republic) shall be submitted with a notarized translation into the national or official language.

Business Re-Organization and Restructuring 

Reorganization of a legal entity (consolidation, merger, division, separation, and transformation) may be performed by the decision of its founders/participants, by the decision of the body of the legal entity duly authorized by founding documents, or, in the case of banks, finance and crediting institutions (or other institutions for which the only permissible activity is the activity provided by their license) by decision of an authorized government body. 

To restrict monopoly, legislation may provide for cases and procedures of mandatory restructuring of for-profit organizations subject to judicial procedure. 

A consolidation of legal entities presupposes that the rights and obligations of each entity participating in the consolidation are transferred to the newly established legal entity according to a transfer deed. 

A merger of a legal entity with another legal entity presupposes that the acquiring entity obtains the rights and obligations of the entity acquired according to a transfer deed. 

A division of a legal entity presupposes that its rights and obligations are transferred to the newly established legal entities according to a division balance sheet. 

A separation of one or more legal entities from the original legal entity presupposes that rights and obligations of the legal entity reorganized are being transferred to each of the entities according to a separation balance sheet. 

In the case of transformation of a legal entity of a given type into a legal entity of another type (change in the organizational legal form of the entity), rights and obligations of the restructured legal entity are transferred to the newly established legal entity according to a transfer deed. 

A transfer deed and a division/separation balance sheet are required for reorganization of a legal entity. They must contain provisions on legal successorship with respect to all liabilities of the legal entity reorganized. The transfer deed and division/separation balance sheet shall be approved by founders/participants of the legal entity or the authority that has taken the decision to reorganize, and shall be submitted together with the founding documents for state registration of the newly established legal entities or for amendment of the founding documents of existing legal entities. 

In the case of restructuring a legal entity, its founders must inform its creditors in writing about the restructuring. 

According to the legislation of the Kyrgyz Republic, in the cases of business entity reorganization specified in the anti-monopoly legislation of the Kyrgyz Republic, consent of the anti-monopoly authority of the Kyrgyz Republic is required for reorganization. 

Closure of a Business 

Liquidation of a legal entity entails cessation of its activities without transfer of its rights and obligations to any other persons. 

A legal entity may be liquidated