General legal newsletter for January 2023

Some of the most notable legal developments in Uzbekistan in January 2023 were the adoption of a Law bringing changes to the legislation on corporate governance in business entities, measures to support the textile industry, and measures to empower the Chamber of Commerce and Industry.

 1.  CORPORATE GOVERNANCE IN BUSINESS ENTITIES

А Law introducing amendments to the corporate legislation has been adopted. The Law will come into force on 20 April 2023 and will, among others, provide for the following:

• at least one independent member will have to be appointed to the supervisory board of (i) JSCs whose shares are included in the quotation list of a stock exchange and (ii) JSCs and LLCs where the state share exceeds 50%. The following persons may not, among others, be appointed as independent members of the supervisory board of a company: those owning more than 5% of voting shares (participatory interest) of this company, those who have worked in this company or its any affiliate during the last 3 years, and those who have been members of this company’s supervisory board for 6 consecutive years;
• it is provided that if the general director or, where applicable, members of the executive board of LLCs and JSCs (i) violate a procedure for concluding large transactions or transactions with affiliated parties, (ii) damage is, thereby, caused to a  relevant company, and (iii) fault of the general director or members of the executive board is proven in accordance with law, the general director or members of the executive board bear subsidiary liability for obligations of the company to repay its debts.

 
Law No. ZRU-814 of 18 January 2023

 2.  SUPPORT FOR THE TEXTILE INDUSTRY

The President has signed a Decree on the reform and support of the textile industry. The Decree aims to increase the volume of production and export of finished textile products by 2.1 times and by 2.6 times respectively over the next 5 years and, among others, provides for the following measures:

• USD 200 mln will be allocated to the Export Support Fund under the Export Promotion Agency and credit lines for USD 100 mln will be made available to commercial banks for rendering support to textile enterprises;
• the Export Promotion Agency will (i) cover 50% of textile enterprises’ costs for the introduction of the International Financial Reporting Standards, up to USD 25,000; (ii) provide funds for financing pre-export and export operations of textile enterprises for a term not exceeding 3 years; the relevant amount of funds varies from USD 1 mln to USD 20 mln, depending on the volume of export of a textile-enterprise applying for the funds;
• small industrial zones with incentives for textile manufacturers will be established in the Andijan, Kashkadarya, and Namangan regions and a specialized industrial park will be created in the Tashkent region;
• textile enterprises are allowed to transfer up to USD 100,000 abroad for the establishment  of trade houses and stores; 
• measures will be taken to procure the establishment of representative offices of at least 3 large foreign companies able to ensure the provision of certificates for products of Uzbek textile enterprises;
• the Ministry of Economy and Finance and the Ministry of Trade, Investments, and Industry are instructed to develop proposals for the provision of additional incentives to textile enterprises within 2 months from the date of the Decree.

Presidential Decree No. UP-2 of 10 January 2023

 3.  EMPOWERMENT OF CHAMBER OF COMMERCE AND INDUSTRY

The President has signed a Resolution empowering the Chamber of Commerce and Industry of Uzbekistan (a state-supported association of all country’s business entities, whose main aim is to promote their interests). It is, among others, provided in the Resolution that:

• the Chamber is, among other things, entitled to (i) submit mandatory for consideration proposals to improve the business environment to the government and regional executive authorities; (ii) submit applications (in the interests of business entities) and complaints about court decision to the Supreme Court; (iii) represent the interests of business entities in the Parliament, the Administration of the President, the Cabinet of Ministers, ministries and state departments, and international organizations;
• starting from 1 February  2023, (i) the Chamber’s entry and membership fees will be abolished for small and medium-sized businesses; (ii) the state registration authorities will share information about registered businesses with the Chamber for registering their membership.

Presidential Resolution No. PP-15 of 23 January 2023

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Have a good day!

Sincerely,
Kosta Legal Law Firm