Administrative barriers restricting business development (continuation)

July 3, 2014

Following up upon administrative barriers restricting business development, we offer to consider following cases from our practice.

  1. Licensing

Dealing with the cases on the licenses in construction sphere, we can provide following example, which demonstrate vague provisions regulating the license issues in Kazakhstan.  Well, in case of obtainment the license in construction sphere (for design works or for installation and civil works)applicant shall meet the qualification requirement on presence of minimal material and technical equipment.  The matter is interpretation of the word “minimal”, who determinates minimal rate and quantity.  In other words, negative circumstances for applicants like rejection in issuance of the license happened due to inaccurate wording of legislation acts.

  1. Court fee in case of considering tax disputes

Plaintiff has to pay court fee in amount 1% of argued sum due to consider tax dispute in the court.  In practice it happened that amounts of additional charge of tax reaches enormous rates, for instance, 100 millions KZT (approximately 546 000 US dollars), 2 billions KZT (approximately 10 930 000 US dollars), etc. In such case, taxpayer has to prepare considerable funds just to enjoy constitutional right for judicial protection. According to the available information, certain international experts had visited Kazakhstan and confirmed the court fee in amount of 1 % is too heavy.  According to them court fee shall be fixed fee in order to any person could enjoy the constitutional right for judicial protection.  Taking into account effective court fee and that the positions of taxpayers are deliberately open to objection, taxpayers do not bring tax dispute to the court due to the risk to lose millions on the court fee.

  1. Termination of the contract on allotment of shares

In practice during consideration of termination the contract on acquisition of shares of Joint-Stock Company (hereinafter “Contract”) we faced with the matter that termination of such Contract within mutual agreement is very complicated. In our case, the Contract stated two stages of shares acquisition:

  • about 10 000 shares in frame of the first shares emission of the JSC;
  • about 2 000 shares in frame of the second emission of the JSC

Officials of the Committee for the Control and Supervision of the Financial Market and Financial Organizations of the National Bank of Kazakhstan (hereinafter “CFS”) informed us that termination of the Contact is impossible due to:

  • Law of the Republic of Kazakhstan “On Joint-Stock Companies” dated May 13, 2003 No. 415-II states only one way to take back shares by JSC is repurchase of shares; and
  • Legislation of the Republic of Kazakhstan does not provide the provision to amend the report on allotment of shares in case of Contract termination

Certainly, position of the CFS’s officials is not so perfect and could not cover every case. For instance, application of general provisions of the Сivil code on termination of the contracts or situation when contract terminated by decision of court (provided parties initially agreed that everything obtained in frame of the contract should be returned to parties in case of termination of such contract).  However, it was counter-productiveto argue with CFS, thus, we had to find other ways to resolve the matter.

  1. Registration of the Branch (Representative office)

The essential amendments[1], which had been designated to simplify procedure of registration/re-registration of legal entities and registration of branches and representative offices, were adopted recently. However, it is obscure why legislator stated requirement to fix the application on registration of the branch (representative office) with stamp of the legal entity (previously such requirement did not exist).  In practice, such provision allows to officials of the Justice authorities to reject in branch (representative office) registration in case of absence of the stamp, even if the authorized person signed the application, for instance, on base of Power of Attorney.  There is should not be any matters with the stamp if the branch (representative office) is established by Kazakhstan legal entity.  But how about foreign legal entities, if they do not have stamps due to the legislation of incorporation?!


[1] it is referred to the amendments adopted by Law of the Republic of Kazakhstan “On introduction amendments to the various legal acts of the Republic of Kazakhstan on issues of state registration of legal entities, branches and representative offices” dated December 24, 2012 No. 60-V ЗРК. Among new changes shall be underlined following: terms of registration were reduced and the list of required documents for registration/re-registration of legal entities and registration of branch (representative office) was simplified.

Yersultan Mussaliyev