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General legal newsletter for November 2022

Some of the most notable legal developments in Uzbekistan in November 2022 were the adoption of the Laws “On the Registration of Rights to Immovable Property” and “On Standardization”; changes aimed at liberalizing and simplifying the corporate legislation and some general regulatory requirements for business entities; and measures for incentivizing trade on national commodity exchanges.

1. LAW ON REGISTRATION OF RIGHTS TO IMMOVABLE PROPERTY

A Law “On the Registration of Rights to the Immovable Property”, unifying and systematising the relevant rules and procedures, has been adopted. The Law applies to such types of immovable property as land plots; buildings and structures, including objects under construction; perennial plantings; and property complexes (i.e. in simple terms, total assets of an enterprise transferred as a whole). The Law enters into force on 1 March 2023 and, among others, provides for the following:

the following rights and restrictions on relevant immovable property are subject to the registration: (i) full ownership, (ii) permanent possession, (iii) permanent use, (iv) lifelong inherited possession, (v) lease, (vi) sublease, (vii) economic control, (viii) operational management, (ix) fiduciary management, (x) free use, (xi) rent, (xii) mortgage, (xiii) easement, (xiv) any restrictions on rights to immovable property arising based on law or imposed by authorized state agencies;
the Chamber of State Cadasters of the Cadaster Agency under the State Tax Committee of Uzbekistan is a state agency responsible for the registration;
the following entities may act as intermediaries in carrying out the registration and handling of related documents: centers for state services, notaries, real estate agents, commercial banks, the State Assets Management Agency, and individuals and legal entities authorized by the President;
the Law provides for lists of documents that may serve as a ground for registering each category of immovable property rights and restrictions as well as for canceling such registration;
disputes related to the registration of immovable property may be resolved out of court by specialized commissions formed by the Chamber of State Cadasters based on applications of interested parties.

Law No. ZRU-803 of 28 November 2022

2. NEW LAW ON STANDARDIZATION

A new edition of the Law on Standardization has been adopted. It will enter into force on 5 November 2023 and, among others, provides for the following novelties:

three categories of standards are distinguished: national (O‘zMSt), international/regional, and foreign standards;
all standards will be stored in the Single Database of Standards, maintained by the Uzbek Institute of Standards under the Uzbek Agency for Technical Regulation;
new basic rules for approving national standards and implementing international and foreign standards are set;
the use of standards is voluntary, except for cases where mandatory compliance with standards is provided in law, e.g. in cases where manufacturers or contractors declare that their products or services comply with relevant standards.
where legal entities fail to follow state inspectors’ prescription on non-compliance with mandatory standards, the following fines may be imposed on them: (i) up to 50% of the value of sold non-compliant goods, if a relevant breach is committed once or (ii) up to 100% of the value of sold non-compliant goods, if a breach is committed again within one year after the date of a previous breach.

Law No. ZRU-800 of 3 November 2022

3. CHANGES IN CORPORATE LEGISLATION

The President has signed a Resolution providing for changes in the corporate legislation, including the following:

(a) starting from 1 December 2022, the following requirements will, among others, be abolished:

to establish the internal audit service in LLCs (except for credit organizations and LLCs where the state share is 50% or more and the book value of assets exceeds 100,000 times the baseline calculation value (BCV) (approx. USD 2,700,000)) and JSCs where the state share is 50% or more and state unitary enterprises where the book value of assets is less than 100,000 times the BCV;
to register the foundation agreement of LLCs;
to notarize powers of attorney issued by LLC participants to their representatives for participating at general meetings;
the minimum amount requirement for the reserve fund of LLCs where established (not less than 15% of the charter capital of LLC);

(b) starting from 1 March 2023, it is no longer permitted to establish additional liability companies and unitary enterprises; the Ministry of Justice and some other state bodies are instructed to develop a plan ensuring the reorganization of legal entities who operate in these forms till 1 January 2025;

(c) starting from 1 April 2023:

where non-monetary contributions with a value exceeding 10,000 times BCV (approx. USD 27,000) are considered to be made to the charter capital of LLC, they shall be pre-assessed by an appraisal company. The value of the contribution then approved by LLC participants may not exceed the relevant appraisal value;
in case of reorganization of legal entities through a merger, a joining, or a change of a legal form, rights and obligations of involved entities automatically pass to a legal entity established/remaining after the reorganisation irrespectively of that whether this is provided for in a relevant transfer act;

(d) starting from 1 July 2023, information on the establishment of branches and representative offices; the full payment of the charter capital; and the initiation of insolvency proceedings will be published on the Single Portal for Interactive Public Services;

(e) starting from 1 October 2023:

business entities whose securities are listed on the national stock exchange will have to disclose information on their cashflow and on the cancellation of a part of a share issue;
business entities whose securities are not listed on the national stock exchange will no longer have to disclose material facts about their activities (except for banks, insurance companies, JSCs where the state share is 50% or more and JSCs being a part of their structure).

(f) a roadmap for further improvement of the corporate legislation has been approved (Annex to the Resolution). It, among others, provides for the following:

till 1 March 2023, the Ministry of Justice, the Ministry of Finance, and the State Assets Management Agency shall develop drafts of legal acts providing for a clearer definition of the rights of participants/shareholders of business entities and rules for the conclusion of shareholders’ agreements;
till 1 March 2023, the Ministry of Justice and the Antimonopoly Committee shall develop drafts of legal acts on consortium agreements. It is envisaged that only business entities will be able to conclude consortium agreements and only for achieving a specific commercial purpose. Members of a consortium will be jointly and severally liable for the consortium’s obligations;
till 1 July 2023, a draft of a new Law on LLCs shall be prepared;
till 1 January 2024, a draft of a Law on Partnerships shall be prepared (it appears that the legal form of partnership (partnerstvo) will differ from the currently existing form of tovarischestvo, which is usually translated as a partnership);
till 1 January 2024, a draft regulatory act establishing fiduciary duties and responsibilities of members of the executive board and the supervisory board and majority participants/shareholders of business entities shall be prepared.

Presidential Resolution No. PP-415 of 8 November 2022

4. LIBERALIZATION OF REGULATORY RULES FOR BUSINESS ENTITIES

A Presidential Decree on measures to liberalise regulatory control over business entities has been issued. The following is, among others, provided by the Decree:

(a) starting from 1 January 2023:

the following requirements will be abolished: (i) that business entities shall notify creditors and make an announcement in mass media before reducing their charter capital; (ii) that new cars imported to Uzbekistan shall be sold only by legal entities being official dealers of relevant manufacturers; (iii) that the supply of electricity to legal entities shall be suspended if they have consumed electricity in excess of the monthly volume specified in a relevant supply contract;
a new regulatory regime “regulatory sandbox” will be introduced. The regime will allow legal entities to test new products, services, or results of intellectual activity in specific spheres (e-commerce, transport and logistics, industrial production, agriculture, and construction) for a limited period and/or within a limited territory without getting required licenses or special permits and/or being allowed not to follow some regulatory requirements;

(b) starting from 1 March 2023:

taxpayers will be able to appeal decisions of the tax authorities made after conducting an on-site tax inspection or a tax audit directly to court;
all legal entities will be allowed to provide commercial services through the Single Portal for Interactive Public Services. Relevant rules will be determined by the Ministry for the Development of Information Technologies and Communications;
it will not be allowed to fulfill procurement orders under direct public procurement contracts performed in accordance with decisions of the Cabinet of Ministers if the amount of one of such orders is equal to or exceeds 3,500 times the BCV ( approx. USD 93,275);

(c) till 1 June 2025, a Single Electronic Register of Mandatory Requirements in the Area of Entrepreneurship will be gradually launched. Business entities will be exempted from responsibility for violating requirements for their activity if such requirements are not included in the Register.

Presidential Decree No. UP-244 of 9 November 2022

5. SIMPLIFICATION OF REPORTING RULES

The President has signed a Resolution simplifying rules for submitting and storing financial, tax, and statistical reports. It, among others, provides for the following:

(a) legal entities no longer have to store and transfer to archives the following documents:

on paying salaries and other amounts to their employees and on relevant tax operations (starting from the period from 1 January 2022);
financial, tax, and statistical reports submitted starting from 1 January 2022 to the tax and statistics authorities in electronic form as well as documents executed in electronic form through automated information systems of the tax authority;

(b) starting from 1 January 2023:

legal entities and other entities/persons required to maintain financial accounting will no longer have to quarterly submit financial reports to the statistical and tax authorities;
business entities paying turnover tax at a fixed tax rate will no longer have to submit annual financial reports to the tax authorities;
some forms of statistical reporting (e.g. on working conditions) will be abolished;

commercial banks will be allowed to open bank accounts for business entities remotely provided that founders of entities - applicants are residents of Uzbekistan and banks have created all necessary conditions for the remote identification of applicants;
legal entities will be allowed to conclude contracts with utility providers in electronic form.

Presidential Resolution No. PP-419 of 10 November 2022

6. COMMODITIES EXCHANGE TRADING

The President has signed a Resolution on the improvement of trade on national commodity exchanges. The following measures are, among others, envisaged:

where a new business entity is registered, it automatically gets accreditation within the exchange system;
foreign suppliers no longer have to obtain an electronic digital signature to participate in public procurement procedures;
entrepreneurs trading based on direct contracts concluded outside commodity exchanges may now use guaranteed settlement services of commodity exchanges;
the procedure for the sale of goods under forward contracts now applies to export and import contracts concluded at commodity exchange trades;
from 1 December 2022 to 1 January 2024, some types of goods sold locally must be sold only at commodity exchange trades (sheet metal, cement, cotton seeds, ethyl alcohol, etc., as produced by specific categories of legal entities noted in the Resolution).

Presidential Resolution No. PP-430 of 24 November 2022

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Have a good day!

Sincerely,
Kosta Legal Law Firm

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