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Incorporation

Setting up a company in Kazakhstan

When setting up a company you may want to consider these factors:

  1. Business Factors

    In 2011, Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarised. In 2013, the country eliminated the requirement to pay in minimum capital within 3 months after incorporation and in 2014 reduced the time it takes to register a company at the Public Registration Center. Finally, in 2016 Kazakhstan made starting a business simpler by eliminating registration fees for small and medium-size firms, shortening registration times and eliminating the legal requirement to use a company seal.

  2. Human Rights and Corruption

    According to UN, despite freedom of association has been nominally guaranteed by Kazakhstan’s constitution, in practice a ‘web of laws and practices limit the real-world freedom of political parties, public associations, trade unions and religious associations to operate.’ Corruption can also be an issue; In 2015, Kazakhstan was ranked 123 in Transparency International’s Corruption Perception Index and 41 in the World Bank’s Ease of doing Business index.

  3. Intellectual Property

    As IP rights are territorial, entrepreneurs willing to trade internationally should consider registering their IP rights in their export markets.

Your Options

The legislation in Kazakhstan provides for rather wide range of organizational forms of business entities. Limited liability partnerships (LLP), joint stock companies (JSC), and branches of foreign legal entities, however, remain the most popular.

Ltd Liability Partnership

Similar to practices in other jurisdictions, a limited liability partnership remains one of the most popular forms of a business organisation. This is mostly due to limitation of its partners’ liability to the amounts contributed to the charter fund. Under the law, LLP is a separate legal entity, and a business organisation, capable of having rights and accepting duties, and independently liable on its obligations with its own property. The law on partnerships as of 22 April 1998 is rather well developed and provides for a detailed legal framework for operation of a partnership. However, it must be noted that partnership’s foundation documents constitute its principal basis for operation. With some exceptions, a partnership’s foundation documents take precedence over the provisions of the law. 

One of the principal foundation documents of an LLP is a charter agreement of its founders. Legally, a partnership begins its existence from the moment of its state registration. However, formation of a partnership starts from conclusion of a foundation agreement by its partners. This document lays down the basis for foundation and operation of an LLP. Provisions of a foundation agreement constitute a commercial secret, and may be revealed to the state or official bodies or third persons only at the discretion of LLP’s management, or in cases required by the legislation. A foundation agreement must include:

  • a decision on foundation of a partnership;
  • its name and address;
  • a list of names, addresses and bank details of its founders;
  • rights and obligations of the participants (founders);
  • the amount of the partnership charter;
  • contributions of individual partners and their evaluation;
  • provisions on additional contributions;
  • partners’ equity in the partnership;
  • the procedure for allocation of net revenue.

A foundation agreement may include any other provisions at the discretion of the participants. The terms of a foundation agreement are binding upon the partners, and are enforceable in the court. Under the law, a foundation agreement must be notarised. 

As noted above, the major advantage of this form of a business entity is limited liability of its partners on partnership’s obligations. LLP has a status of a separate legal entity, capable of acquiring rights and obligations, and liable on its obligations with its own property. Unlike partners in other types of partnerships, partners are liable only to the extent of their contributions to the charter capital.

Major disadvantages include restrictions imposed by tax and currency legislation. Having a status of a legal entity, a partnership is a resident of Kazakhstan for purposes of tax and currency legislation. The partnership, and not the partners, is liable on Kazakhstan taxes. Residency for the purposes of currency legislation entails stricter regime on import and export of foreign currency and conducting currency operations. Please see sections on tax and currency legislation in Kazakhstan for more detailed information.

State registration of legal entity (online or in person), obtaining of a digital signature and tax registration at the Public Registration Center.

Registration of medium-sized and large-sized business entities is performed based on a “one-stop-shop” principle: all the registration documents should be submitted to one state authority, the Public/Population Service Centers: The relevant justice authority shall issue a certificate of state registration of a company not later than 1 day following the day of submission. If documents are filed online via electronic government portal the state registration shall be performed within 1 hour from the moment of documents submission. SMEs are exempted from payment of a registration fee as of January 1, 2015. The list of the required documents includes the following: 1) a notification on commencement of entrepreneurial activity; 2) copies of IDs; and 3) power of attorney (if applicable). At the same time entrepreneurs need to obtain an electronic signature. An electronic signature can be obtained at public registration centers in 2 days’ time. On the second day following the application for an esignature entrepreneurs need to present themselves at the registration center for the identity check.

Notarize certificate of state registration and other post-registration documents

Under the Tax Code of January 1, 2009 Article 536(15), the notary fee for certifying copies of the state registration and other post registration documents shall be 10% of the MCI per page. Each registration document is a two-page document, and the total for one set of certified copies (if the charter had 10 pages) would be 10% of MCI x 16 pages. One set of notarized copies of the registration documents and the charter is usually required to open a bank account. Additional copies would be needed if the company were to apply for work permits to employ expatriates, obtain licenses and other operational permits, or set up subsidiaries or acquire shares or ownership interests in other legal entities.

Open the current account in the bank

To open a current account, the founder must provide the bank with the following documents:

  • Cards with sample signatures and an imprint of the company seal.
  • Copy of the state registration certificate of legal entity from the registration body of the Ministry of Justice of the Republic of Kazakhstan. • Copies of identity documents for person(s) listed on the signature card(s) and company founders.
  • Application for bank account setup (bank-provided form).

Register for the obligatory insurance of life and health for employees

Each employee should have employer-paid insurance according to the Law On Obligatory Insurance of The Liability of the Employer for Life and Health Tort to The Employee in Discharge of Labor and (Official) Duties (February 7, 2005) that became effective on July 1, 2005.The amount of insurance premium payable by an employer depends on insurance risks and wages. To assess risks, the insurance companies place all insurable personnel into three categories: administrative, operational, and support. Amounts of the insurance premium vary from 0.04% to 9.99%. According to 7 May 2007 amendments to the law on obligatory insurance, an employer is required to get an insurance policy within 10 business days from the date of state registration indicated in the company’s Certificate of State Registration Payment of insurance premium (set out in an insurance agreement) is required. 1. The amount of the insurance premium depends on insurance risks and the amount of annual payroll fund and is calculated as the amount of insurance coverage multiplied by an insurance tariff which as set out by the law in the range of 0.12% to 2.96%. 2. Insurable personnel is not divided into three categories (administrative, operational and support) as previously for the purposes of risk assessment. 3. An employer is required to get an insurance policy within the first decade of the month in which the company began operating.

Processing Time: Approx. 4 weeks

Charter Capital: Minimum charter capital: Small Enterprises – KZT 100 (approximately USD 1), Medium and Large Enterprises – 100 Monthly Calculation Index (KZT 161,800– approximately USD 1,200).

Joint Stock Companies

The law on Joint Stock Companies adopted on July 10, 1998 defines the legal status of a joint stock company, rights and responsibilities of its shareholders, and sets procedures for its establishment, reorganisation and liquidation.

The law provides for closed and open joint stock companies. A closed JSC may have no more than 100 shareholders who have a preemptive right to acquire shares of other shareholders, and by charter, may also expel shareholders who have violated the company interests. If the number of shareholders exceeds 100, a resolution to reorganize the company to an open joint stock company must be adopted at a shareholders meeting within three months.

Closed joint stock companies are not required to register their shares with the National Securities Commission and may independently maintain their own shareholders register. As opposed to closed JSCs, open JSC may have unlimited number of shareholders. JSC with shareholders of more than 500 are separated into a subcategory of large public JSCs.

Other features of this subcategory include trading of the company shares on a recognised securities market, assets at 200,000 times the monthly calculation index, a minimum board of 5 directors, and maintenance of the shareholder register by the Central Depository or an independent registrar. Independent directors must make up for at least half the board of membership of a public JSC.

The open public joint stock companies are subject to higher standards and scrutiny. For instance, they must submit their annual audited financial statements to the National Securities Commission, notify the Commission on loss of more than 10% of the assets, loans to the company of more than 25% of issued capital, and transactions or events materially affecting shareholder interests.

The law sets the minimum charter capital at 100 times the monthly calculation index for closed JSCs and 5,000 times the monthly calculation index for open JSCs. Concepts of stated and paid capital are introduced. Companies may have authorised but unissued shares, allowing it to issue new stock by board resolution without having to hold a shareholder meeting, amend the charter or reregister the company. 

Closed, private and open share placements are authorised. Closed placement is limited to company founders and other identified persons. Closed placements do not require registration, although a national identification number must be assigned. If the company is an open JSC, placements after the initial one are open or private.

Open placement involves selling stock to anyone by auction or otherwise in accordance with security laws and is subject to registration with the National Securities Commission. Private placement is made to qualified investors who are legal entities with 50,000 monthly calculation indexes in equity capital, operating on the securities market, and not subject to registration. Currently, Kazakhstan parliament is discussing a draft of the new law on joint stock companies. It is not clear yet what changes it will introduce to the legal regime of JSC and its overall impact on development of JSCs in Kazakhstan.

How to get the service in the state agency (required documents)

  • Application form
  • Statute or the statement of legal entity.
  • Statutes (statements) of legal entities that are belonged to the private enterprises objects, their branches and representatives, except for the statutes (statements) of joint stock companies, their branches and representations are not submitting.
  • Protocol of constituent committees (for public and religious inions – conference, congress), accepting the statute signed by the chairman or secretary of meeting (conference, congress) or determination of executive agency of legal entity or the founder of legal entity organizing. Протокол учредительного собрания (для общественных и религиозных).
  • Receipt or the document confirming the payment to the registration budget tax except for the legal entities, appertained to the small and medium enterprises subjects.
  • By the public unions additionally submitting the document confirming its location; initiators-citizens list admonishing the data of middle name, first name, last name, day, month, year of birth, individual identification number, and place of domicile, home and mobile telephone numbers, personal sign.
  • By the religious unions additionally submitting: document, confirming the place of location confirming the union’s location, initiators-citizens list admonishing the data of middle name, first name, last name, day, month, year of birth, individual identification number, and place of domicile, home and mobile telephone numbers, personal sign in electronic and paper form, printed religious materials, disclosing the history of origin and doctrinal statements and containing the data of corresponding religious activity.
  • By political parties additionally submitting every party’s program in two exemplars; list of party members, in which structure must be no less than 40 thousands of party members, representing the structural departments (branches and its representatives) parties in all regions, city of the republic significance and capital, with quantity more than six hundreds of party’s members  admonishing the middle name, first name, last name (upon its occurrence), month, year of birth, number of the personal identification document of the Republic of Kazakhstan, IIN, address of place of domicile.
  • To legal entities, belonging to the subjects of private enterprises with foreign participation, if other is not established by the International contracts, confirmed by the Republic of Kazakhstan, additionally submitting:
  • Legal abstract from the trade register or other organisation, confirming that the founder-foreign legal entity is the legal entity by the Legislation of foreign country, with notary certified translations in Kazakh and Russian languages.
  • Copy of passport or other document, confirming the founder’s personality of foreign founder with notary certified translations in Kazakh and Russian languages.
  • For legal entities, whose business profile is the financial services delivery, additionally submitting the settlements from the National bank of the Republic of Kazakhstan.
  • For legal entities, that are not appertain to the market subjects, possessing the dominating or monopoly position on the correspondent market trade, and state organisations, legal entities, more than 50 percent of accesses (part of participation in state capital) appertain to the state, and affiliated with them persons, which will be implement their activity on the territory of the Republic of Kazakhstan, except for the cases when such organisation directly envisaged by the legislation of the Republic of Kazakhstan, implementing by registration agency with preliminary agreement of the antimonopoly agency.
  • Consumers cooperatives additionally submitting the list of members of its cooperatives admonishing their first name, last name, middle name (under the occurrence), year of birth and personal sign of the document identifying the personality (IIN) and place of domicile – for  citizens and location data, bank tags, data of business-identification card for legal entities.
  • For rural enterprise cooperatives of water users additionally submitting the cooperative members list admonishing the full name, date of birth, ID card, and name of locations of legal entities with admonishing the business-identification number and data of irrigated lands occurrence of agricultural meaning.
  • Housing and house building cooperatives submit the list of their members admonishing the full names, date of birth, individual identification number and address of place of domicile.

Data of ID cards of legal entity’s state registration the service recipient obtain from corresponded state informational systems through the “electronic gateway”.

Under the connection, merger submit the attached act, under the separation, allocating – separating balance admonishing the state of legal succession by the obligations of reorganized legal entity  of confirmation transmission acts and separated balance, and document confirming the written notification of creditors of legal entity’s reorganization.

Under the state registration of legal entity, appertain to the media and large enterprise subjects , application signing and submitting to the registration agency by one of the founders or by the executed founder in case when only founder is a foreign person, Government of the Republic of Kazakhstan, or National bank with constituent documents attachment identified in notary order in cases envisaged by the legislative acts of the Republic of Kazakstan.

Under the state registration of legal entity, that does not appertain to the private enterprise subject, application signing and submitting to the registration agency by the founder or executed person with attachment of constituent documents, certified in notary order in cases envisaged by the legislative acts of the Republic of Kazakhstan.

Processing Time: Approx. 8 weeks

Charter capital: There is no division into open and closed joint stock companies in Kazakhstan. Minimum charter capital is 50,000 Monthly Calculation Index (KZT 80,900,000 – approximately USD 540,000).

The Civil Code of Kazakhstan sets out a legal framework and provides for legal status of representative offices and branches. The Law on Foreign Investments as of 27 December 1994 reiterates provisions of the Civil Code and extends their application to representative offices and branches of foreign legal entities.

According to the law, a branch of a foreign legal entity is a separate subdivision, located and registered in the territory of the Republic of Kazakhstan, and conducting all or part of the operations of the legal entity establishing the branch. A branch does not constitute a separate legal entity and operates on the basis of the Regulations of the Branch. The content of the Regulations of the Branch is similar to the contents of a legal entity’s charter. It includes name and location of the branch, as well as name and location of the founding entity, the term and purpose of existence of the branch, and management of the branch. The Regulations of the Branch do not constitute a commercial secret and should be available to the public.

Unlike representative office branches may engage in entrepreneurial activities. This is the major and only difference between the legal regimes of representative offices and branches. The law limits the scope of representative office’s activities to representation functions only.

The major advantage of a branch of a foreign legal entity flows from the definition of residents under the currency legislation of Kazakhstan. For purposes of the currency legislation, branches and representative offices of foreign legal entities are non-residents. This implies more liberal regime on conducting foreign currency operations, such as settlement of transactions in foreign currency and free export of foreign currency.

The disadvantage of legal regime of branches and representative offices may arise under the licensing and customs legislation. Under the licensing legislation of Kazakhstan, a number of activities subject to licensing require applicants to have a status of a legal entity. As mentioned above, branches and representative offices do not have a status of a legal entity, and therefore do not qualify for certain types of licenses. As for restrictions under the customs legislation, non-residents of Kazakhstan, such as representative offices and branches of foreign legal entities, require assistance of customs brokers to import goods to the territory of Kazakhstan. Although, services of customs brokers are readily available, in practice this restriction may still prove rather burdensome.

Registration Process.

Application for record registration of branch (representative office) according to the 5, 6, 7, 8 appendixes to the standard signed by the executive person, organizing the branch (representative office) and attaches by the legal entity’s stamp (under its occurrence).

Receipt confirming the payment to the budget tax for record registration of branch (representative office).

For branches (representative offices) of legal entities that does not appertain to the private enterprises subjects and joint stock companies additionally submitting the statement of the branch in three exemplars in Kazakh and Russian languages confirmed by the legal entity, copies of statement and legal entity’s statement (except for the public and religious unions) issued to the branch’s manager.

Record registration of the branches (representatives) of foreign legal entities implements in order established by the legislative acts of the Republic of Kazakhstan for record registration of legal entity’s branches op persons of the Republic of Kazakhstan.

Besides the documents envisaged by this order, if other does not established by the international contracts, ratified by the Republic of Kazakhstan additionally submit:

  • Legal reference from the trade register, constituent documents or other legal document of legal entity confirming the tax registration in country of incorporation legal entity with admonishing the number of tax registration (or its analogue).
  • Documents of foreign legal entity, organising the branch (representative office), submitting with notary certified translations in Kazakh and Russian languages.

Under the branch organising by the state organisation additionally submitting the document confirming the agreement of the National bank of the Republic of Kazakhstan or the executive agency on managing the state property on the branch organisation.

Processing Time: Approx. 4 weeks

Charter Capital: No legal restrictions are applied to accreditation terms. The amount of public due depends on the subject of registration (resident/non-resident of Kazakhstan). We also register representative/branch offices of foreign banks, including receipt of corresponding licenses.

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Kazakhstan, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Kazakhstan they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

– the company is looking to setup an office quickly

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Kazakhstan

– the company needs help with tax, employment, immigration and payroll compliance in Kazakhstan

The complexity of employment regulations in Kazakhstan makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Kazakhstan allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Kazakhstan.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Kazakhstan. Read more about outsourced employment through Shield GEO.

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