Legislative Changes to Improve Business Climate in Uzbekistan

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Uzbekistan aims to increase its overall ranking in the World Bank’s “Doing Business” report from the latest 76th to the 20th position by 2022 (Resolution of the President of the Republic of Uzbekistan No. PP-4160) and continues to adopt measures to enhance its business environment. Currently, the country is bringing its legislation into conformity with these measures. On March 20, 2019, the President of Uzbekistan Shavkat Mirziyoyev signed Law No. ZRU-531 “On introducing changes and amendments to some legislative acts of the Republic of Uzbekistan in connection with the adoption of additional measures to improve the business climate in the country” (ZRU-531). The Law introduces amendments to a wide range of national legal instruments related to business activities in Uzbekistan, including:

  • Civil Code of the Republic of Uzbekistan
  • Tax Code of the Republic of Uzbekistan
  • Civil Procedure Code of the Republic of Uzbekistan
  • Economic Procedure Code of the Republic of Uzbekistan
  • Law of the Republic of Uzbekistan “On Joint-Stock Companies and Protection of Shareholders’ Rights”
  • Law of the Republic of Uzbekistan “On Limited and Additional Liability Companies”
  • Law of the Republic of Uzbekistan “On Private Enterprise”
  • Law of the Republic of Uzbekistan “On Arbitration Courts” and other legislative acts 

In particular, changes brought by ZRU-531 include the following:

Setting up a company 

  • Abolition of the requirement for a minimum charter capital of joint-stock companies, limited and additional liability companies, business partnerships and family enterprises (minimum charter capital requirement remained only for some entities involved in licensing activities, e.g. banks and microcredit organizations);

  • Cancellation of the requirement for a compulsory foreign investor share (not less than 15 percent) in the charter capital of joint-stock companies;

  • Replacement of the requirement for companies to have a corporate round seal with the right to have the corporate round seal

Payment of dividends in LLCs

Term and procedure for payment of dividends in a limited liability company (LLC) are determined by the LLC’s charter or by the decision of shareholders’ general meeting.  However, there is now a time limit for payment of dividends that equals 60 days following the decision on profit distribution among shareholders.

Dispute resolution

Economic court proceedings

  • Introduction of a simplified procedure in economic judicial proceedings for claims against:
    Legal entities – if the claim value does not exceed 20 monthly minimal wages (MMW) 
    Individual entrepreneurs - if the claim value does not exceed 5 MMW. 

Period for case examination under the simplified procedure is no longer than 20 days (no extension is possible) from the date of accepting the statement of a claim and filing a case (under the general procedure – no longer than one month with a possible extension). 

*The simplified procedure does not apply to cases related to corporate disputes and enforcement of legal sanctions.

  • Ensuring transparency of economic court proceedings through publication of judicial acts that entered into force on the official web site of the court (except for judicial acts adopted in closed court hearings). Judicial acts can be published either with the consent of the parties or with anonymization. 

    Mediation

  • Possibility to resort to mediation in civil court and economic court proceedings. Mediation agreement can be concluded by parties at the first instance court before the court retires to the deliberation room to deliver the judgement. 

Parties to a dispute can also resort to mediation in domestic arbitral proceedings1 until the court renders its decision. In the event that the parties conclude a mediation agreement, the arbitration court terminates the proceedings.

Compulsory notarization

  •  Abolition of the requirement to notarize all real estate sale contracts. The requirement for compulsory notarization remains with respect to residential real estate sale contracts.

Suspension of bank account transactions by tax authorities

 

The legislation of Uzbekistan entitles tax authorities to suspend bank accounts of tax payers in certain cases. ZRU-531 clearly determines cases when tax authorities may suspend bank accounts with a court order and when the suspension is possible on an extrajudicial basis.

Suspension of bank account transactions with a court order applies to cases when a tax payer:

  • obstructs tax inspection or denies access of tax authorities to the territory and places related to taxation.
    Suspension of bank account transactions on an extrajudicial basis applies to cases when a tax payer:

  • is absent at the stated address;

  • fails to present the tax/financial report in due time or to justify inconsistencies/clarifications in the tax report upon the results of an in-house tax review;

  • sells goods (works, services) without filing receiving reports (suspension up to 5 bank days).

Suspension of bank account transactions on an extrajudicial basis also applies to cases of legalization of income derived from criminal activity, the financing of terrorism and financing of the proliferation of weapons of mass destruction.

The Law was officially published and entered into force on March 21, 2019.


1 The scope of domestic aribtration courts (“treteiskiy sud”) in Uzbekistan covers only domestic awards. Adoption of a law on international arbitration is now under consideration in Uzbekistan.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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