Law of  the Republic of Tajikistan

On joint-stock companies

The present Law determines general legal and economic principles of structural organization and activity of joint-stock companies in the Republic of Tajikistan in the context of a transition to a market economy.

The law aims to foster conditions allowing various forms of property, defines the rights and duties of shareholders, and regulates relations between joint-stock companies and the State.

Section I

General provisions

Article 1                Joint-stock companies and their main objectives

                A joint-stock company (hereinafter referred as a company) is a voluntary association based on an agreement of legal and physical persons including foreigners to unite funds in order to carry out an economic activity figuring within the companies charter, and not prohibited by law.

                A company is created without restriction of its term of existence unless otherwise stipulated in its charter.

                Companies are legal entities, have a firm name and logo, a round seal with the firm name and registered logo. If necessary a company may have an official abbreviated name.

                A company is a fully independent entity in its business activity, form of management, economic decision making, employment practices and distribution of its profits.

The State influences a companyÒs activity through taxation, minimum wage regulations and the fixation of prices on certain kinds of production.

Companies can have representations and branches in other republics and abroad, and may also own shares of other companies.

Article 2                Types of joint-stock companies

A company can be open or closed in accordance with its charter and the firm name. The shares of an open company can be alienated without other shareholdersÒ consent. The shares of a closed company can be alienated only with the other shareholdersÒ consent.

The number of shareholders in a closed joint-stock company must not exceed fifty. If the number of shareholders in a closed joint-stock company  exceeds fifty, then within three months the company must hold  a general meeting of shareholders and take the decision to change the type of the company. If the company is not transformed into an open joint-stock company after the expiry of the specified term, and (or) the number of shareholders is not decreased to the specified limit, then the people concerned file a petition in court.

A company is not responsible for its shareholdersÒ liabilities.

                A company is responsible for its liabilities to the extent of all its assets (whole property). Shareholders are responsible for  the companyÒs liabilities to the extent of the value of the shares that belong to them.

Section II

THE Founding of joint-stock company

and ITS registration procedures

Article 3                The founding of a joint-stock company

                The founders of company may be both physical and legal persons. A company can also be founded by foreign legal and physical persons as  long as it does not contradict the laws of the Republic of Tajikistan.

                The number of  founders of a company is not restricted.

                Founding documents consist of a founding agreement and the charter of the company.

Article 3 (1)                Transformation of  state owned enterprises into  joint-stock company

                A state owned enterprise can be transformed into an open joint-stock company through issue of shares amounting to the whole value of the enterpriseÒs property.

                The decision to transform a state owned  enterprise based on national state property into a joint-stock company is taken by the State Property Committee, and the decision to transform a state owned enterprise based on communal property into a joint-stock company is taken by the local Madjles of PeopleÒs Deputies together with State Property CommitteeÒs local representation.

A company that was originally a state enterprise, is legally considered the successor of the state  enterprise.

Article 4                The charter of a company

                Joint-stock companies act on the basis of their charter, which must comply with the law.

                The charter should contain all basic characteristics of the company including:

a) The type of the company;

b) Aims of its business activities;

c) Initial shareholders (founders);

d) The name and location of the company;

e) The authorized capital,

f) Information about the categories of shares to be issued and their nominal value and correlation between each other;

g) Amount of the shares being purchased by the founders,

h) Consequence when obligations to buy shares are not fulfilled;

i) The order of profit distribution or loss compensation;

j) The competence and composition of management;

k) The order of their decision making authority, including a list of questions for which a unanimous or qualified majority of votes is necessary to reach a decision.

Article 5                The foundersÒ meeting of a joint-stock company

In case there is one founder, the decision to create a company is taken by him and there is no founding meeting.

                The foundersÒ meeting is considered authorized in the presence of all founding shareholders or their representatives.

                The chairman of the meeting  is elected by a simple majority of the votes of those present.

The foundersÒ meeting confirms the charter of the company and elects directors.

                Management authority elected at the founding meeting  shall function until the first general shareholdersÒ meeting.

Article 6                Registration of a company

The registration of a company is accomplished on the basis of the application in writing, charter, and document confirming the payment of not less than 30 % of the share value of the company not later than 30 days after the founding meeting  (except the cases when the company is created by one founder) takes place; as well as legal conclusion of the founding documents issued by the Ministry of Justice of the Republic of Tajikistan, classifierÒs code of the statistic bodies and certificate confirming the payment if the state duty.

                The registration fee is paid only once as determined by the Government of the Republic Tajikistan.

                When entities of state property are involved as founders, state duty and other payments are not required and the document  on payment of not less than 30 % is not required.

                Share-stock banks and other credit institutions are registered by local notary office in accordance with the present law and bank legislation and are included in the State Register of Joint-Stock Companies following registration.

                Companies with participation of foreign legal and physical persons are registered in the local notary office according to the present Law and other legal acts of the Republic Tajikistan.

                The registration office has no right to demand additional documents from the initial shareholders except those required by the present law.

                Registration must occur within 5 days from the submission of the application. Registration may be refused only when there are violations of the rules on establishing companies. The refusal decision may be contested in court. Following registration a company is given a registration certificate by the appropriate body.

                A company must inform the registry office of any changes or modifications in its charter within 15 days after the alteration of the charter.

                The Minister of Finance of the Republic of Tajikistan must be notified about the registration of the company within 10 days in order to be included in the State Registration List.

                The Ministry of Finance published the State Registration List of the Republic of Tajikistan which includes all registered and liquidated companies.

Section iii

the authorized capital of a company

Article 7                The formation of authorized capital

                When a company is founded, its authorized capital consists of the stipulated number of shares devisable by ten, each share having an equal value.

                The authorized capital of a company should be no less than 60 times the minimum wage for a closed joint stock company and no less than 100 times the minimum wage for an open joint stock company.

                At the registration no less than 30 % of the share value must be paid. During the first year of the companyÒs existence, the initial share value must be paid completely. For some companies the order, pay rate and payment period is determined by the Government of the Republic of Tajikistan.

With the agreement of all the initial shareholders, initial contributions equal to the value of a definite number of shares may be made in the form of buildings, construction, equipment or other goods with material value, including property rights and intellectual property. The value of the property to be paid is determined in cooperation with all the participants.

                Open subscription for the company shares is not admitted until the primary authorized capital is paid in full. At creation of the company, all its shares must be distributed among its founders. Shareholders are not free from the duty to pay for the shares.

Article 8                The procedure for changing the level of authorized capital

                The general meeting of shareholders by majority of votes (not less than three fourths of those present) can:

- increase the authorized capital by increasing the face value of shares, or issuing additional shares;

- reduce  the authorized capital by decreasing the face value of shares, or by purchasing the portion of shares  in order to annul them.

                The decision to change the authorized capital comes into force after the general meeting made it, and  from the moment of registration of changes and amendments in the charter in the procedure stipulated by this Law. Changing of the authorized capital until  the changes and amendments in the charter are registered,  is not admitted.

                A requirement on the shareholders to fully pay for their stock may be made by directors of the company when needed and must be completed within 15 days.

For shares unpaid at a stipulated period, a percentage of money owed is calculated for the benefit of the company in accordance with the charter of the company.

Increasing of the authorized capital is permitted only after it is paid in full. Increasing of the authorized capital to cover loses is not allowed.

The company has no right to reduce the authorized capital, if within 30 days  the decision to reduce the authorized capital was not published in mass media.

At the expiry of three months after publication of the companyÒs decision to decrease the authorized capital, the shares not submitted to be  annulled or purchased, shall be admitted invalid.

The company has the right to consolidate or exchange shares with other shares at a premium or lesser nominal value.

Section iv

Shares

Article 9                Common characteristics of  shares

                A share is a part of the authorized capital of the company.

                The nominal cost of a share may be no less than 100 roubles.

                A company may issue shares of different types and nominal values.

A company may issue registered shares, as well as common shares to bearer.

                A company issues shares in materialized and dematerialized forms. The form of issuance of shares is defined when the decision to issue shares is made.

Article 10                Types of shares

A company can issue common shares (which confer a right to vote) and priority shares (not conferring a right to vote).

At a meeting of shareholders each share of common stock bestows the right of one vote, and one share of any distributed profit after the reserves are replenished and the taxes paid out to the State.

Priority shares do not confer voting rights, but provide fixed dividends and have priority over common stock in the division of profits and liquidation of the company.

When the companyÒs profits are not sufficient to pay out dividends, payment for priority shares is granted from the reserve fund of the company.

Priority shares are issued in a sum not exceeding 10 per cent of the authorized capital of the company.

Article 11                The registration of shareholders

                Each company must keep a registration list of shareholders.

                Registration List  of shareholders of an open joint-stock company  is kept by a body (organization)  as defined by the Government of the Republic of Tajikistan.

A close joint-stock company  has the right to keep the Registration list of shareholders independently, or  entrust the registration list to the body (organization) as defined by the Government of the Republic of Tajikistan.

 Procedure and regulations to keep the registration list are defined by the Government of the Republic of Tajikistan.

Article 12                Share certificate

A share certificate indicates the name of a person who owns a definite number of the companyÒs shares.

A shareholder is issued one certificate for all the shares belonging to him free of charge provided that full payment for the shares has been made. Additional certificates are issued for a fee.

                The certificate lists the following information:

- serial number;

- amount of shares;

- the nominal value of a share;

- name of the emitter;

- the status of the emitter;

- the emitterÒs authorized capital;

- the type of shares;

- the ownerÒs name;

- the number of votes;

- the dividend rate of any priority share;

- the signature of two officials of the company;

- the companyÒs stamp;

- terms of circulation;

- the name and address of the company;

- where the company is registered;

- the name of the companyÒs bank or banking agency on the back side of the list.

A lost certificate may be replaced for a fee.

Section V

The borrowed capital of the company

Article 13                Characteristics of borrowed capital

The borrowed capital of a company consists of a bonded loan for a period of more than one year.

A bond is a promissory note of the company according to which a nominal sum is paid under the stipulated terms or stipulated interests paid annually.

                Bonds may be issued in amounts not exceeding the authorized joint stock capital of the company.

                Issuance, registration and circulation of bonds are regulated by the law of the Republic of Tajikistan.

Article 14                Types of bonds

                Bonds may be registered or payable to the bearer. A bond payable to the bearer contains the following information:

- serial number;

- nominal value;

- interest rate of the bond;

- companyÒs name that issued the bonds;

- the total amount of the loan;

- conditions of the payment of interests.

                Regarding registered bonds, a company must keep a special registration list of their owners.

Article 15                The rights of bondholders

                Bondholders have the priority in the distribution of any profits and assets of the company during liquidation to the share-owners.

                A lost registered bond may be reissued for a fee.

                A lost bearer bond may be reissued in an order determined by the civil legislation of the Republic of Tajikistan on the re-establishment of the rights of bearers of lost documents.

Section VI

the financial activity of a company

Article 16                Profit of the company

                The balance and net profit of the company is defined in the procedure stipulated in the Law of the Republic of Tajikistan.

                The net profits of a company (after taxes are paid) remains at the companyÒs disposal and may be distributed between the shareholders as dividends or transferred to the companyÒs cash reserves.

Article 17                Dividends

A dividend is part of the net profit of the company, distributed among stockholders in proportion to the quantity of the shares owned.

                Dividends may be paid on a quarterly, biannual, or yearly basis. Interim dividends are announced by the directors at a fix rate. The final dividend is determined by the general annual meeting after consideration of the interim dividend payments.

                The final dividend rate from every common stock share is determined by the general meeting of the shareholders upon the proposal of the directors. Dividends may not exceed the rate recommended by the directors but they may be decreased by a decision of the shareholders.

                The fixed dividend of priority shares and the interests payment on bonds is established when they are issued.

A dividend is not paid on shares that were not sold or which have been retained by the company.

                A dividend may be paid in shares (capitalization of profits), in bonds or in goods as specified by the charter of the company.

                Dividends are paid by a bank acting as an agent for the company or by the company.

                A company announces the size of a dividend without taking into account taxes raised.

The company or its agent acts as an agent of the State collecting taxes from its resources and reducing dividends to shareholders by the required tax.

                A company may grant a minimum dividend rate to its shareholders.

                The order of the payment of dividends is stipulated in the issued securities and is stated on the back side of the stock certificate.

Interest is not charged on non received and non-paid dividends.

                Shares must be obtained no later than a month prior to the date of payment in order to have dividend rights.

                A dividend is paid by means of a check, payment order, postal transfer or direct deposit in a personal account. The dividend is charged in proportion to the turnover.

Article 18                Reserves

                A company must establish a cash reserve of no less than 15 % of its authorized capital. The companyÒs charter determines the appropriate rules to use the cash reserve.

                Deductions for the reserve fund are determined by the shareholders but cannot be less than 5 % of the net annual profit until the 15% minimum is reached.

Article 19                Options

                A company has the right to provide its staff with the right to purchase a definite number of shares under favorable terms in accordance with its charter or the decision of shareholders (option).

                A company may assign a definite profit ratio after tax payment payable in cash or in shares, for distribution between the staff.

Article 20                Required record keeping

                The fiscal year of a company runs from January 1 through December 31.

The annual meeting must be held no later than 3 months after the end of the fiscal year to discuss the results of the fiscal year.

                Within a month after the annual meeting, the annual report and balance sheet must be issued.

                The annual report must be inspected and attested by an audit firm appointed by the shareholders before the presentation of the report at the annual meeting.

                A company and its officials bear responsibility for the reliability of the information in the report.

                A company must issue and distribute a quarterly balance sheet, an account of any profit or loss, and any other current information to the shareholders.

Section vii

management

Article 21                The shareholdersÒ meeting

The supreme authority of the stock company is the general meeting of shareholders. The exclusive rights of the annual meeting include:

a) Defining the general trends and plans of the companyÒs activity, and approving reports on their fulfillment;

b) Changes in the companyÒs charter;

c) The election or recall of the stock companyÒs board of directors (supervision council);

d) The election or recall of the companyÒs executive officers and the audit commission;

e) The confirmation of the annual results of the companyÒs activities, including its branches, confirmation of the reports and conclusions of the audit commission, the order of profit distribution, and the payment agreement for any compensation;

f) The establishment, reorganization or liquidation of branches and representations and the approval of regulations concerning those entities.

g) The adoption of decisions concerning legal cases or disputes concerning the civil responsibility of a companyÒs official;

h) Confirmation of the rules of procedure and other internal documents, and the determination of the organizational structure of the company;

i) The acquisition of its own shares by the company;

j) The definition of the employment contract of the officials of the company, its branches and representations;

k) The confirmation of concluded contracts exceeding the maximum limit indicated in the companyÒs charter;

l) The confirmation of a decision to liquidate the company, appoint a liquidation commission and confirm the companyÒs balance sheet upon liquidation.

                                m) The decision to reorganize the company.

The companyÒs charter may refer other questions exclusively in the annual shareholders meeting.

                A company must hold at least one annual meeting of shareholders regardless of other meetings. More than 15 months may not elapse between annual meetings.

                All meetings are special apart from the annual meeting.

Special meetings are called by the companyÒs directors; audit commission or shareholders with no less than 10 % of the companyÒs shares.

                Written notices about the meeting must be sent to the shareholders no later than 30 days before the day of the meeting by registered mail to the address stated in the share. The notification requirement may be carried out through advertisement in a newspaper.

                Notices about a special meeting must contain the questions that are to be discussed about.

                Notices are sent to all shareholders who have fully paid for shares of common stock and the companyÒs auditing.

                Shareholders owing common stock have the right of one vote per share.

                The annual meeting of shareholders:

a) Approves the report of the directors, the annual balance sheet, account of profits and losses the profit, distribution of any profit, including the final dividend;

b)    Elects directors and other officials of the company;

c)     Nominates auditor and establishes his compensation.

The meeting must have a quorum of the owners or representatives of not less than half the companyÒs shares.

                The chairman of the board of directors or his deputy presides at the meeting. In their absence, one of the directors presides at the meeting according to the choice of the members of the board of directors. The meeting elects a chairman from among the shareholders if the directors or refuse to preside.

                A meeting called by the shareholders is dissolved if a quorum is not reached within half an hour of the time set for the meeting. A meeting called by the directors is delayed by the chairman (by not more than 30 days). A repeated meeting may proceed regardless of the number of present shareholders.

                Questions may be decided by voting by a show of hands or by voiced vote if the chairman and not less than 5 shareholders or their representatives or shareholders possessing at least 10 % of the companyÒs shares do not demand a secret ballot according to the number of shares.

                The chairman must cast the deciding vote in case of an equality of votes.

                Alteration of the charter, decision concerning merging,  and decisions concerning liquidation are decided by a qualified majority of three fourths of the shareholders present at the meeting. A simple majority of shareholders is sufficient for all other questions.

                A shareholder or his representative may be present at the meeting only after the settlement of any debts on his shares

                A shareholderÒs representative may take part at a meeting and vote provided he or she has been granted power of attorney.

                Every present shareholder has one vote by show of hands and in cases of secret balloting: as many votes as it corresponds to the number of shares he or she possesses.

Article 22                The Board of directors (supervision council) of the company

                The board of directors (supervision council) is the supreme management authority of the company during the interval of each annual meeting.

                The board of directors and supervision council are elected by the annual meeting of shareholders.

                The number of directors is determined at the general meeting of shareholders and should be an odd number.

                A director may be a shareholder or a shareholderÒs representative provided that he or she possesses a number of shares in accordance with the companyÒs charter.

                A director is elected for a period of two to five years and may be reelected an unlimited number of times.

                Persons nominated for elections by the director or the shareholders may be proposed for election at the annual meeting. The companyÒs secretary must be informed in writing about the intention to nominate the candidate for the post of director and receive the signed consent of the candidate.

                The annual meeting may increase the number of directors and elect additional directors for specific functions.

                The meeting can discharge the director from office before the expiration of his or her term of appointment.

                During the interval between annual meetings the board of directors or supervision council may appoint directors to fill in vacancies. The latter director is required to step down prior to the following general annual meeting. He or she however, may be elected to become a director.

                Directors maintain all plenary powers regardless of new vacancies.

                Transportation and other expenses are compensated for the period the director executed his or her duties, and a fixed sum determined at the general meeting is paid to him or her.

                A representative of the employees of the company may join the board of directors and be entitled with the right to vote.

                Decisions made at annual meetings cannot repeal decisions not contradicting the companyÒs charter taken by the board of directors.

The directors of the company take decisions and organize their work at their discretion. Unless otherwise stipulated in the charter, a quorum consists of the presence of two thirds of the members of the board of directors. In case of a tie, the chairman casts the deciding ballot.

Session of the board of directors is called  by the boardÒs chairman or  by two directors of the board.

                Directors elect the boardÒs chairman and one or several deputies for a period of two to five years. The boardÒs chairman or his deputies preside at meetings of the board.

                The decision signed by all the directors has the same validity as a decision of the board of directors.

                The board of directors may establish a committee from among their employees to examine and decide specific issues.

                Directors establish minutes of the annual meeting and meetings of the board of directors and record all decisions, motions and nominations.

                The board of directors meets whenever necessary.

                The management authority of an open joint-stock company cannot be the members of the Board of directors (supervision council).

Article 23                Executive directors

                From among all the directors, the annual meeting must nominate not less than two executive directors to direct the business of a company. One of them is appointed as the General Executive Director (president, chairman) of the company.

                Executive directors and managers in charge of the most important sectors of the company together make up the Executive Authority of the company. The General Director (president, chairman) presides at the meeting of the board.

                During intervals between the shareholders annual meeting and any meeting of the board of directors, the board directs the business activity of the company within the limits of the charter.

                Meetings of the board are held when necessary.

                The General Director (president, chairman) has the right to act on behalf of the company without a power of attorney. Other members of the board work within the limits allowed by the charter or the decisions of the shareholders during annual meetings.

                The General Director (president, chairman) is required to have somebody write minutes of all meetings of the board. Records of minutes should be available for shareholders at any time.

Article 24                Auditing commission

                According to the charter, the annual meeting elects an auditing commission to control the companyÒs finances from among the shareholders. Members of the auditing commission may not be members of the board of directors or one of the executive directors.

                Inspections are carried out by the auditing commission on instruction of the general meeting of shareholders, on their own initiative or upon the request of any shareholder possessing more than 10 % of the total number of shares.

                The members of the auditing commission have the right to demand the disclosure of all necessary documents and receive personal explanations from the companyÒs officials.

                The auditing commission submits the results of its inspection to the annual meeting of shareholders.

                In the absence of auditors, the auditing commission is required to reach a conclusion based on annual reports and balance sheets.

                Members of the auditing commission must demand a shareholders special meeting if a serious threat to the companyÒs interests is discovered.

Section viii

Liquidation and reorganization of the company

Article 25                Conditions for liquidation

                A company is liquidated:

a) After the expiration of the term for which it was created, if stipulated in the charter;

b) On the resolution of the shareholdersÒ general meeting ;

c) On the courtÒs adjudication;

Article 26                Order of liquidation

                The voluntary liquidation of a company is carried out by a liquidating commission appointed by the company, and in the case of a mandatory liquidation, it is carried out by a commission appointed by the court.

                From the moment a liquidating commission is appointed, it is invested with the power of management of the company. The liquidating commission estimates assets, reveals creditors and pays off debts to them as well as to the shareholders, it makes liquidating balance sheets and submits them to the shareholdersÒ meeting and the Ministry of finance of the Republic of Tajikistan.

                The assets of the company, including income from the sale of property, are distributed among the shareholders after paying off labor expenses and obligations to creditors and the State.

                A company is considered fully liquidated once the liquidation has been registered in the State Register.

                Claims and accusations against the company and within the company are resolved by court according to the legislation of the Republic of Tajikistan.

Article 27                Reorganization

                Reorganization arises from the merging of companies, the splitting of a company, its segmentation, the absorption of another company or its transformation.

                The charter and appropriate state register on liquidation are updated when a company is reorganized.

                At the time of the companyÒs reorganization all rights and duties of the company are passed on to its successors.

The merging of companies occurs when a new company is transferred all rights and liabilities of two or several companies whose business is terminated. At merging of companies all rights and obligations of every company are transferred to a newly created company in accordance with the transferring act.

                Division is carried out by creating new independent companies with  their own balance sheets and capitals; new issue of shares.

                Segmentation is carried out by creating new companies with their own balance sheets, capitals and new shares on the basis of a sub-division. The first company continues performing its activity following respective modifications of its assets and liabilities.

                Absorption occurs when 50 % of a companyÒs shares are acquired by another company. The purchased company may retain an independent status. However if 100 % of its shares are purchased, it may lose its independence, have its balance sheet consolidated into the purchasing company, and have its structure of management modified.

                A company can be transformed into any other type of enterprise according to the current legislation.

Section IX

SUBSIDIARY COMPANIES, BRANCHES AND REPRESENTATIONS

Article 28                Subsidiary companies

                A company may have subsidiary companies or representations in the territory of other States.

                A company is a subsidiary company when 50 % of the stock plus one share  are owned by another company.

                A subsidiary stock company acts as an independent commercial entity and its relationship with the main shareholder must conform to the charter and legislation of the Republic of Tajikistan.

Article 29                Branches, departments and representations

                Branches, departments and representations operate according to plans approved by the shareholdersÒ meeting.

                The creation of branches and representations must conform to the legislation of the Republic of Tajikistan.

                Branches and  representations are provided fixed and working capital at the expense of the parent company.

                The creation of branches and representations abroad is regulated by the laws of the Republic of Tajikistan.

                Branches and the representations have their own balance sheets, which are part of the parent companyÒs balance sheets.

                Branches and representations are responsible for obligations of the parent company, and the parent company is responsible for the obligations of its branches and representations.

Section X

Audit

Any company can engage a specialized firm for inspection and confirmation of the annual statement. The (external) auditing firm must sign the annual report and confirm that it is a true statement given the information available about the companyÒs performance.

An internal audit of a company may be carried out by the auditing commission.

The President

of the Republic of Tajikistan                                                               R. Nabiev

December 23, 1991

Dushanbe

№ 454

This law was amended and modified by the Majlisi Oli on December 19, 1996 by the amendment Decree No. 337; second - on December 12, 1997 by the amendment law No. 498; third - on May 22, 1998 by the amendment law No. 634