March 21 2011
A number of corporate structures can be used to carry on business in Kazakhstan. The most common forms of commercial organisation are the limited liability partnership and the joint stock company. The officers of these entities under the applicable law are:
The liability of officers of a limited liability partnership or joint stock company is basically regulated by:
The board of directors of a joint stock company generally manages the company's activities, except for decisions which fall within the exclusive competence of the general shareholders' meeting (which is the company's supreme management body). The main function of the executive body in both a limited liability partnership and a joint stock company is to carry out the day-to-day management of the entity's activities. While performing his or her duties, an officer must act in the interests of the partnership or company, in good faith and on reasonable grounds.
Certain actions are deemed to conflict with the interests of the partnership or company and, as such, may not be performed by the members of the executive body or their relatives. Such persons are prohibited from:
This list is not exhaustive - the charter of a limited liability partnership or joint stock company may include additional prohibitions. As a matter of law, a company (including a joint stock company or limited liability partnership) may challenge transactions carried out by its executive body (eg, its chief executive officer) with third parties in breach of limitations set forth by the company's charter, provided that the third parties were aware of such limitations.
Liability and grounds
Limited liability partnership
Members of an executive body bear the following civil liability under the law:
Where joint and several liability arises, reimbursement of losses may be demanded from all members and from any particular member of the executive body. If the losses claimed are not reimbursed by the relevant member in full, the outstanding losses must be reimbursed by the remaining joint members of the executive body. Thus, joint members remain liable for the reimbursement of losses caused by their actions until such losses are reimbursed in full.
Such civil liability may be pursued by means of a claim in court proceedings by a participant in the partnership or an interested third party (eg, a creditor or a prosecutor).
Joint stock company
Officers of a joint stock company are liable to the company and its shareholders for damages and losses caused by their actions or failure to act. Liability includes, but is not limited to, damages incurred as a result of:
In addition, if the financial statements of the joint stock company falsify its financial position, the officers who signed the statements are liable to third parties for financial losses as a result of such falsification.
On the basis of a decision by the general shareholders' meeting or a shareholder holding 5% or more of the company's voting shares, a joint stock company can apply to the court with a claim against an officer to seek:
the return of profits accruing to such officer or his or her affiliates as a result of the approval of resolutions on major transactions or related-party transactions that resulted in losses to the company, provided that the officer can be shown to have acted unfairly or to have failed to act.
On the same basis, a claim can be brought against a third party to seek reimbursement of losses to the company as a result of a transaction with such third party, provided that when entering into the transaction, such officer acted in agreement with the third party and in violation of the applicable laws of Kazakhstan, the company charter or internal regulations or that officer's employment agreement. In such cases, the officer and third party are jointly and severally liable to reimburse the company for its losses.
Exemption from liability
A corporate officer may be released from civil liability to a limited liability partnership or joint stock company if he or she proves in court that:
The relevant minutes, decisions and resolutions will be accepted as proof in such cases.
The law requires that officers of a limited liability partnership or joint stock company act in good faith and on reasonable grounds. However, in practice, it is difficult to determine whether they acted in such a way (unless his or her actions are deemed to be a crime). There are no generally known cases in which an officer of a limited liability partnership or joint stock company has been found to bear civil liability in this way.
Corporate officers may also be subject to administrative and criminal liability.
Administrative liability arises if an officer fails to perform his or her functions (or performs them improperly) and thereby has a negative impact on the limited liability partnership or the joint stock company (eg, by causing its bankruptcy).
The maximum administrative penalty for such officers may not exceed 1,000 times the monthly specified index (approximately $10,350).
Officers of a limited liability partnership or joint stock company may be subject to criminal liability if:
The maximum penalty is four years' imprisonment.
Examples of crimes whereby an officer of a limited liability partnership or joint stock company incurs criminal liability are:
Such crimes may result in a penalty, the obligation to undertake corrective measures, arrest and imprisonment - the appropriate penalty will be determined on a case-by-case basis.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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