Adopted by the Legislative Chamber on June 10, 2025 and approved by the Senate on September 4, 2025, the new Law of the Republic of Uzbekistan “On Limited Liability Companies” represents not merely an adjustment to existing regulation, but an independent legislative act that fundamentally updates corporate law governing the activities of limited liability companies. Structurally, the Law has been expanded from 7 to 8 chapters and from 55 to 71 articles. The principal directions of the reform are the introduction of the institution of fiduciary duties of management bodies, comprehensive regulation of affiliated persons and transactions involving them, the establishment of guarantees for the rights of minority participants, the consolidation of majority participant obligations, and a substantial elaboration of the procedure governing the activities of the Supervisory Board.
The new Law establishes for the first time a mandatory term of office for members of the Supervisory Board (hereinafter “SB”) of three years, unless otherwise provided by the constitutional documents. The constitutional documents of the company are henceforth required to specify the number of independent members of the SB, whereas previously this matter was governed solely by the charter. A fundamental innovation is the introduction of a mandatory minimum quorum for SB meetings of not less than 75% of the elected members, with no reduction of this threshold permitted by the charter. This eliminates the possibility of decisions being made by a narrow group of SB members affiliated with the majority participant in the absence of independent members. At the same time, absentee voting by the SB has been legalised, with decisions adopted by a two-thirds majority of members with documentary confirmation of their expression of will (by post, telegraph, telephone, or electronic communication). The authority to decide on the issuance of bonds by the company, where the charter contains a corresponding provision, has also been attributed to the SB. The role of the SB in overseeing affiliated transactions has been substantially expanded: the Executive Body is obliged to notify the SB in writing of a planned transaction with an affiliated person, after which the SB reviews it and renders a decision within 15 days. In the event that two or more SB members are themselves affiliated persons, the authority to approve the transaction passes to the General Meeting of Participants, and the affiliated person is excluded from the discussion and vote.
Article 44 of the Law introduces into Uzbek corporate law for the first time the very concept of fiduciary duties and establishes their specific content in relation to SB members, the Director, and members of the Collegial Executive Body. Fiduciary duties are understood as the obligation to act in good faith, reasonably, and exclusively in the interests of the company and its participants, encompassing a prohibition on using the company’s property for personal gain without an appropriate resolution of the authorised body, a prohibition on deriving benefit from the company’s business opportunities for personal interests without the consent of the management bodies, a prohibition on engaging in competing business activities without proper consent, a prohibition on receiving material and other benefits from interested parties in exchange for making decisions, as well as an obligation to maintain confidentiality with respect to information constituting the company’s trade secret. A breach of fiduciary duties constitutes a ground for bringing the guilty person to liability in accordance with Article 46 of the Law.
The new Law introduces for the first time the concepts of “minority participant” and “majority participant.” A minority participant is one whose vote does not affect the outcome of voting on a particular matter, while a majority participant is one owning more than 50% of the charter capital or whose share exceeds that of any other participant and whose vote may have a decisive influence on the outcome of a vote. Pursuant to Article 47 of the Law, a Minority Participants Committee — an independent body in whose activities neither the SB nor the Executive Body may interfere — may be established within the company for the protection of the interests of minority participants. The majority participant is subject to a direct prohibition on using a dominant position for personal gain, making decisions that clearly cause harm to the company and other participants, or including in the agenda matters that are contrary to the interests of the company. The majority participant bears liability to the company and other participants for breach of these requirements. The period for sending minority participants an offer to purchase their shares upon reaching 50% of the charter capital has been reduced from 30 to 15 days.
The new Law, for the first time, establishes in Chapter 7 an exhaustive list of 12 categories of affiliated persons of the company, encompassing: legal entities with a participation share of 20% or more, their participants with an equivalent share, individuals owning 20% or more jointly with close relatives, SB members and members of executive bodies, subsidiary and dependent companies, as well as legal entities belonging to the same economic association. An affiliated person is required to notify the company of its status and of a planned transaction; the relevant information is subject to publication on the company’s website or transmission by post or electronic mail. Information on all transactions with affiliated persons and identified conflicts of interest is included in the company’s annual report on a mandatory basis. The Executive Body, together with the Internal Audit Service, reviews the transaction within three business days, after which the materials are submitted to the SB, which renders a decision within 15 days. For transactions whose value amounts to 10% or more of the company’s net assets, a market valuation of the property by an independent valuation organisation and a review of the transaction terms by an external auditor are mandatory. Any participant is entitled to challenge such a transaction in court. Furthermore, a participant holding a share of 5% or more is additionally entitled to independently engage an auditor, the costs of which, upon the establishment of violations, are reimbursed by the company within one month.
Article 7 of the new Law contains, for the first time, detailed regulation of this matter. A subsidiary company is not entitled to acquire a share in the charter capital of its parent company. Subsidiary companies that acquired such a share prior to the entry into force of this prohibition are deprived of voting rights at the General Meeting of the parent company. The parent company bears joint and several liability for transactions concluded by the subsidiary company in execution of its mandatory instructions, provided that the right to issue such instructions is expressly stipulated in the agreement or the charter of the subsidiary company. In the event that the subsidiary company becomes insolvent through the fault of the parent company, the latter bears subsidiary liability for its obligations, and the participants of the subsidiary company are entitled to demand from the parent company compensation for the losses caused.
The new Law draws a distinction between two moments of transfer of rights to a share. The right to a share passes to the acquirer upon entry of the relevant record in the Unified State Registry, with an extract from the registry serving as the confirming document. At the same time, written notification to the company remains a mandatory requirement – it is from the moment of its receipt that the new participant is entitled to exercise rights and bears the obligations of a participant within the company. Accordingly, notification alone is no longer sufficient for a complete transfer of the right to a share; state registration of the corresponding changes in the registry is also required. Retained earnings are expressly named as a permissible source for increasing the charter capital. A decision to increase the charter capital at the expense of company property may only be adopted on the basis of financial statements confirmed by an external auditor’s opinion. In the event of a judicial dispute concerning shares, the court is entitled to impose restrictions on changes to the charter capital – a corresponding power that is absent from the current law. The Law also provides for the possibility of expelling a participant who has failed to make a contribution within the established period by court order upon application of the Executive Body, provided that such circumstance materially impedes the activities of the company.
The scope of control of the Internal Audit Service has been expanded and, alongside the Executive Body, representative offices, and branches, it now encompasses subsidiary and dependent companies. The Law permits the conduct of an external audit not only by resolution of the General Meeting, but also upon the expiry of the Director’s term of office or upon his application for removal from office. The Secretary of the General Meeting is obliged to send a copy of the minutes to all participants no later than five business days from the date of its preparation. The period for compulsory liquidation of a dormant company has been reduced from three years to one year. Where the constitutional documents contain a corresponding provision, deadlock corporate situations may now be resolved through mediation or arbitration in addition to judicial proceedings.
Since the new Law enters into force three months after its official publication, existing limited liability companies should take note of the following. In accordance with the general principle of the primacy of law over constitutional documents, charter provisions that contradict the new Law effectively cease to be applicable from the date of its entry into force. This means that charter provisions concerning an SB quorum below 75%, the absence of an indication of the number of independent SB members, a procedure for approving transactions with affiliated persons that does not meet the requirements of the new Chapter 7, as well as provisions that fail to account for the rights of minority participants and the obligations of the majority participant, will no longer be applicable in the form in which they are currently set out in existing charters. Accordingly, in order to avoid legal uncertainty and corporate disputes, it is advisable for companies to bring their constitutional documents into conformity with the new Law in advance — above all with regard to the structure and powers of the Supervisory Board, the regulation of affiliated transactions, and the consolidation of minority participants’ rights.