On June 9, President Armen Sarkissian signed the law “On Amendments and Additions to the Law “On Joint-Stock Companies”, developed in collaboration with ANIF
The adoption of the package of these legislative amendments is of great importance for the development of corporate law in the Republic of Armenia, as since the adoption of the RA law “On Joint-Stock Companies”, the law has contained provisions that were not in harmony with modern business practice.
The amendments are also caused by the adoption by the Government of the Republic of Armenia of Decision No. 1441-L “On Approval of the Strategy of Judicial and Legal Reforms of the Republic of Armenia for 2019-2023 and the action programs resulting from it” dated October 10, 2019, which also refers to the outdated nature of corporate law regulations.
Grigor Chobanyan, General Counsel of ANIF, highlighted the following amendments that can have a positive impact on corporate governance, the development of the capital market and the improvement of the investment environment in general։
- the possibility of issuing common shares of various classes, which, for example, may allow a certain category of investors to receive dividends on preferential terms and at the same time be able to vote on broader issues than preferred shares with current regulations;
- opportunities for mandatory sale and purchase of company shares (squeeze-out/sell-out), which are additional protection tools for major and minor shareholders;
- modern flexible mechanisms of assigning shares to employee have been introduced, which will provide companies with additional opportunities to encourage employees and prevent their outflow;
- in some cases, companies with negative capital are allowed to operate, which may be of particular importance for those companies whose profitability begins several years after the commencement of activities;
- the restriction for issuing unsecured bonds within the first three years has been abolished, which will allow start-up companies to raise additional funds by issuing bonds at the beginning of their operations;
- from the point of view of protecting the rights of minority shareholders, the provision concerning the storage of fractional shares is important, according to which the possibility of minority shareholders withdrawing from joint-stock participation through consolidation shall be eliminated;
- the delegation of powers of the general meeting of shareholders, the board of directors and the executive body of the company has become more flexible;
- the threshold for large transactions has been raised, giving the right to approve them only at the general shareholders meeting, and the approval of transactions that are not considered large – both at the general meeting and at the board of directors and executive body levels;
- the legal fiction of the payment of the charter capital during the registration of the company, as well as the mandatory requirement for the presence of an auditor in the case of closed companies, which in practice also was fictitious, was eliminated.
According to Mr. Chobanyan, as a result of these legislative changes, the corporate regulations in Armenia will become more accessible and attractive for both local and foreign investors, while at the same time providing effective mechanisms for protecting the rights of shareholders.
You can read the official publications of the law, as well as related laws included in the package, by clicking on the links provided below.
1. https://www.arlis.am/DocumentView.aspx?docid=153397
2. https://www.arlis.am/DocumentView.aspx?docid=153410
3. https://www.arlis.am/DocumentView.aspx?docid=153409
4. https://www.arlis.am/DocumentView.aspx?docid=153408
5. https://www.arlis.am/DocumentView.aspx?docid=153405