Establishing an LLP with participation of a non-resident in Kazakhstan

The number of participants is not limited, which means the participants may include several individuals (general meeting of participants) or one individual (sole participant), but in this case, there is one restriction; it should be taken into account that an LLP may not have as its sole participant another legal entity consisting of one individual. For example, if a foreign legal entity (LLP, GmbH etc.) includes one individual; such foreign legal entity cannot be the sole participant in the LLP.

The requirements for the establishment of an LLP are regulated by the provisions of the Civil Code of the Republic of Kazakhstan, the Law of the Republic of Kazakhstan On Partnerships with Limited and Additional Liability and the Law of the Republic of Kazakhstan On State Registration of Legal Entities and Record Registration of Branches and Representative Offices.

On our part, we recommend a non-resident^[1] to obtain an individual identification number (IIN) for a non-resident individual or a business identification number (BIN) for a non-resident legal entity, which is indicated in the registration certificate for a non-resident. These identification numbers will be applied when establishing and registering an LLP and when opening and maintaining bank accounts in Kazakhstan banks and for bank transfers. Please also take into consideration that in case if the first executive will be a non-resident, then the IIN will also be required to open a bank account for salary payments.

 

After obtaining the IIN/BIN, we recommend obtaining an electronic digital signature (EDS) for the partici­pant(s). It is not a mandatory procedure, but greatly simplifies the registration procedure, as it is possible to submit the registration documents online via portal for public services www.egov.kz.

In Kazakhstan, the founding documents of an LLP are the memorandum of association (in the case when an LLP is established by several participants) and the charter. Thus, Kazakhstan corporate legislation provides that the LLP’s founding documents must contain key terms, including, but not limited to:

• an LLP’s corporate name
• information on a LLP’s charter capital
  
• information on a LLP’s registered address
  
• a list of LLP’s founders/participants
• information on a LLP’s bodies
• and other terms established by the legislation

 

We recommend that the name of an LLP be created and preliminarily checked with the name of the registered legal entity for similarity, since under the established requirements of the civil legislation of Kazakhstan a firm name like the firm name of an already registered legal entity cannot be used to such an extent that it may lead to matching of the respective legal entities as well as misleading consumers. Moreover, there is an exclusive right to a firm name registered in the Republic of Kazakhstan as a designation of a legal entity in Kazakhstan.

 
There are special requirements to the name of certain legal entities, in particular the name of a microfinance organization must necessarily contain the words “microfinance organization” or the abbreviation “MFO”, the name of a credit partnership or a pawnshop must necessarily contain the words “credit partnership” or “pawnshop” accordingly.

 
Thus, the LLP’s foundation documents must contain information on the name of an LLP.

Charter capital of an LLP

The size of the charter capital is determined by the volume of business, which depends on an average annual number of employees and average annual income of an LLP. An LLP can be considered as small business entity if average annual number of employees of LLP is not more than 100 persons and average annual income of the LLP is not more than 300,000 monthly calculation index – monthly calculation index in 2023 is 3,450 KZT –that is not more than 1.035 billion KZT (approximately 2,325,843 US dollars).

 
However, an LLP cannot be considered as a small business entity if it is going to or already carries out activities that require an authorization document, for example, auditing activities etc. In this case an LLP relates to medium business entity and is classified as a medium business. The same criteria apply to medium business as to a small business.

 

An LLP is considered a large enterprise if the average annual number of its employees is more than 250 persons and/or the average annual income is more than 3 million monthly calculation index, that is 10.35 billion KZT as of 2023 (approximately US 23,258,427 US dollars).

 
Thus, for small businesses, the charter capital of a LLP can be defined as zero, for medium and large business­es as not less than 100 monthly calculation indexes, that is 345,000 KZT as of 2023 (approximately us 775 US dollars).

 
There are exceptions to the amount of the charter capital; in particular, for payment organizations, as well as organizations engaged in microfinance activities, the minimum amount of the charter capital is determined by the legislation of the Republic of Kazakhstan. For example, according to the Resolution No. 192 of the Board of the National Bank of the Republic of Kazakhstan dated 14 November 2019 on approval of prudential standards and other obligatory norms and limits for the observance by the organization, carrying out microfinance activity, methods of their calculation the amount of the charter capital for the microfinance organization is 100 million KZT (approximately 224,719 US dollars).

 
In this case, we considered a contribution to a LLP’s charter capital as money, however a contribution to an LLP’s charter capital can also be shares, property, property rights, including land use rights and rights to the results of intellectual activity, but a contribution in the form of personal non-property rights and other intan­gible benefits is not allowed.

 
If a participant’s contribution is in kind or in the form of property rights, the value of such a contribution must be valued in monetary form by agreement of all LLP participants or by decision of the general meeting of LLP participants, but if such a contribution exceeds the amount equivalent to 20,000 monthly calculation index, that is more than the amount of 69 million KZT as of 2023 (approximately 155,056 US dollars), the assessment of such a contribution must be confirmed by an evaluator.

 
All participants should contribute to a LLP’s charter capital within one year of a LLP’s registration, otherwise this failure to form a charter capital on time is a ground for terminating the LLP’s activities.

Registered address of an LLP

We recommend to conclude a relevant (sub-)lease of non-residential premises on behalf of the participant, which can be re-signed by a LLP after its establishment. Another option is, when a third party or the participant himself may provide his residential premises as the registered address of a LLP, in which case the consent of the owner of the premises is executed and certified at the notary’s office.

 
The legislation of the Republic of Kazakhstan does not provide any restrictions for the choice of a registered address for an LLP. Currently, when registering an LLP as a small business entity, it is not required to provide location documents. It is sufficient to provide information on the leased real estate: the exact address as well as the registered address code (RCA).

 

However, it should be noted that the existence of a document confirming the registered address of an LLP is an important aspect in the case of inspection by the state authorities, especially if an LLP is a value-added tax­payer.

 
The LLP’s incorporation documents should contain a LLP’s registered address.

Type of activity of an LLP

It is recommended to consult the website of the Bureau of National Statistics, where there is a General Classifier of Economic Activities (GCEC), which contains information on all types of activities applicable in Kazakhstan and to select the types of activities for an LLP. The main type of activity and its code should be indicated in an application for LLP registration.

 
There are a number of restrictions on activities for LLPs with non-resident participation. For example, such LLPs are prohibited from carrying out all types of security activities. Also, non-residents are prohibited from directly and/or indirectly owning, using, disposing of and/or managing more than 20 percent of the shares of a legal entity – the owner of the mass media in the Republic of Kazakhstan or carrying out activities in this field. There are other restrictions on activities for LLPs involving non-residents.

 
Even the requirement for the content of information on LLP types of activities is not regulated by the corporate legislation of Kazakhstan, from our practice we recommend that such information be indicated in the LLP’s foundation documents.
 

Bodies of an LLP

The LLP’s bodies are the general meeting of participants or the sole participant, which is the supreme body of the LLP, the executive body of the LLP is a sole manager or the collegial body of managers. An LLP may establish

• a Supervisory Board, the main function is to control the activities of the executive body of an LLP, or
• an Audit Commission or a sole auditor, whose function is to control the financial and business activities of the executive body of an LLP and
• other bodies
  

 

The executive bodies, including the members of a Supervisory Board of an LLP are officers of an LLP.

The foundation documents of an LLP must contain information on the procedure for the formation and powers of the bodies of an LLP.

 
In addition to the above, and if necessary, we recommend to draft and to issue powers of attorney in advance to represent the interests of a non-resident in establishing an LLP. We also recommend that extracts from the commercial register are apostilled in advance if a participant is a foreign legal entity or a participant has a foreign passport.

 
If the participant is a foreign citizen, then he needs to obtain a business visa (visa category C5), otherwise the registration authority may refuse to register an LLP. There are also important aspects regarding migration legislation (obtaining work visas and the need to obtain work permits and passing quotas) if the executive body or other bodies/employees are foreign citizens. In addition, within the framework of labor legislation, it is necessary to obtain an IIN for a foreign citizen.

Actions related to signing the foundation documents of an LLP 

Once the BIN/IIN for non-residents has been received and all the above conditions have been agreed, a set of foundation documents is prepared for signing by the participants of an LLP. The LLP’s memorandum of associa­tion is concluded and the LLP’s charter is approved by its participants.

 
The LLP’s charter must be approved by the sole participant or by the general meeting of participants unani­mously and must be signed by all founders or their authorized representatives; currently it is not required to certify the LLP’s charter at the notary’s office.

 
The memorandum of association must be signed by all participants, and if an LLP is a small or medium-sized business, it must be in simple written form, however if an LLP is a large business, the memorandum of associa­tion should be certified by the notary. It should be taken into account that the memorandum of association is a document constituting a commercial secret, unless otherwise provided for in the memorandum of association, and is subject to presentation to state and other official bodies, as well as to the third parties only by decision of the LLP bodies or in cases stipulated by the legislation of the Republic of Kazakhstan.

 

Actions related to registration of an LLP

After signing and collecting of all documents it is necessary to file an application for state registration with the registration authority, the application includes the decision/minutes on LLP establishment, apostilled extracts from the Commercial Register or passport with notarized translation into Kazakh and Russian languages, power of attorney (in case of attraction of the third parties) and document evidencing payment of fee in the amount of 6.5 monthly calculation indices, that is 22,425 KZT as of 2023 (approximately 51 US dollars), except if the LLP has been established as a small or medium-sized business.

 

The memorandum of association and an LLP’s charter are not submitted to the registration authority when registering an LLP.

 
The term for registering an LLP is no later than one working day following the day of filing application, however in practice the process may take longer.

 
Certificate of State Registration of a Legal Entity and of Record Registration of a Branch, Representative Office is the confirmation of registration.

 

Once an LLP has been registered, it is necessary to make a stamp of an LLP, obtain an EDS for the director, which will be required if an LLP is to be a value added taxpayer, and consider opening a bank account, entering the employment agreements and other actions related to the LLP’s business activities.