Limited liability company

A limited liability company (LLC) in Uzbekistan is a business entity established by one or more shareholders. A shareholder's share in the charter fund is expressed as a percentage or fraction. Shareholders' liability is limited to the value of their contributions to the charter fund.

The charter fund of a company shall be composed of the nominal value of shareholders' shares and defined in the company's charter. The law does not state a minimum amount of charter fund required for LLCs. However a minimum charter fund may be stipulated in licensing requirements for licensed activities.

An LLC shall be responsible for its obligations with all its assets. It shall not be liable for the obligations of its shareholders.

An LLC gains the status of a legal entity upon state registration. After completing the registration process the company can legally operate and engage in business activities.

See our article on setting up a business in Uzbekistan.

An LLC can engage in any legitimate activity. Main business activies should be indicated in the company's charter. Specific activities may require a license, in which case relevant license must be obtained before engaging in such activities.

See our article on licensed activities.

Shareholders of LLC

Shareholders in an LLC can be companies or individuals, including foreign companies and foreign individuals. Government authorities are generally not permitted to be shareholders of an LLC. An LLC cannot have another single-shareholder company as its sole shareholder (nested single ownership), with the exception of a joint-stock company with one shareholder.

The maximum number of shareholders in an LLC is 50. Exceeding this limit requires the company to reorganize into a joint-stock company.

Shareholders have a deadline to fully contribute their capital to the charter fund, which expires in 1 year from the date of the company's state registration. Shareholder contributions to the charter fund can be in the form of money, assets, inventory and intellectual property rights.

If an LLC becomes bankrupt due to a shareholder's actions, that shareholder can be held liable for the company's uncovered debt.

Foundation documents

When an LLC is established by a single shareholder, a charter of the company becomes the sole founding document. If more shareholders establish or join the LLC later, a shareholding agreement needs to be signed between the shareholders. A shareholding agreement typically outlines ownership structure, rights and obligations of shareholders, withdrawal procedures.

The charter of an LLC serves as a core document outlining the fundamental rules and management structure of the LLC. The charter shall include the company name and postal address, the amount of charter fund, the list of main business activities, information about shareholders and their share capital, share transfer procedures, the composition and powers of the corporate governing bodies, etc.

Governing bodies of LLC

The corporate governing bodies are responsible for managing and overseeing an LLC, and are composed of the following levels of authority (in descending order):

1. General meeting of shareholders, or a sole shareholder
2. Supervisory board (if established)
3. Board of directors, or a director

Additional control mechanisms, such as a revision committee under shareholders and an internal audit service, can be set up that further strengthen accountability and transparency within the LLC.

General meeting of shareholders

The general meeting of shareholders holds the highest authority, making key decisions about the company's direction. In a single-shareholder LLC, the sole shareholder assumes all decision-making powers typically vested in the general meeting of shareholders.

The general meeting of shareholders (or, a sole shareholder) has exclusive authority over critical decisions such as:

• defining the company's primary business objectives and strategies
• increasing or decreasing the size of the charter fund
• amending the company charter and shareholding agreement
• electing and dissolving the supervisory board
• electing and dismissing the executive body
• approving annual reports
• deciding on conducting audits and selecting an auditor
• distributing profits
• approving large transactions and transactions with affiliated persons
• establishing subsidiary entities, representative offices or branches
• decisions on reorganization or liquidation of the company

The company's charter can specify the frequency and schedule for these meetings. An annual general meeting must be held within 6 months after the end of each financial year to approve the company's annual performance results.

Supervisory board

Establishing a supervisory board is optional (not mandatory). If a supervisory board is established, it provides oversight of management. The general meeting of shareholders may delegate the following authorities to the supervisory board:

• electing and dismissing the executive body
• supervising the activities of the executive body
• establishing an internal audit service
• approving large transactions
• organizing, preparing and convening the general meeting of shareholders

Members of the supervisory board can be elected from citizens of Uzbekistan or foreign persons. Foreign persons do not need a work permit for appointment as the member of a supervisory board.

Executive body

The executive body of an LLC is responsible for the day-to-day management of the company and reports to the general meeting of shareholders and the supervisory board (if one exists). The executive body can be either:

• sole executive body (director), who acts individually on behalf of the company
• board of directors (including a board chairman), elected by the general meeting of shareholders or the supervisory board. The number of members and appointment term shall be determined by the electing body

Citizens of Uzbekistan and foreign persons can be appointed as a director, or a member of the board of directors. A foreign director (board member) must obtain a work permit in Uzbekistan before being appointed.

See our article on work permit in Uzbekistan.

Sale of shares and shareholder exit

A shareholder in an LLC has the right to sell or otherwise transfer his share in the company's charter fund to existing shareholders or, if permitted by the company charter, to third parties.

When a shareholder intends to sell his share to a third party, the other shareholders have a pre-emptive right to purchase that share. This right protects existing shareholders from unwanted dilution of their ownership and provides them with an opportunity to maintain control over the company's ownership structure. The shareholder seeking to sell their share to a third party must inform the other shareholders and the company in writing about his intention, specifying the price and other terms of the sale.

A shareholder has the right to withdraw (exit) from an LLC anytime. The company shall be obligated to compensate the withdrawn shareholder with the actual value of his share, determined using the latest accounting data before the exit date. The company may choose to pay the value in cash or, with the shareholder's consent, provide assets of equal value.

Company liquidation

An LLC may be liquidated voluntarily by shareholders or by court order. If an LLC has been inactive and under a dormant status for 3 years, it can be liquidated by the state registering authority. Liquidation terminates the company's activities without transferring rights and obligations to other entities.

See our article on liquidation and bankruptcy.