Key Changes in Financial Legislation of Kazakhstan in 2022

In 2022, the process of introducing important changes to the financial legislation of Kazakhstan continued. For the first time, changes were made to the legislation of Kazakhstan, according to which liquidation netting will be recognized in bankruptcy and other insolvency procedures of Kazakh legal entities. These changes are of great importance, as they will increase the level of confidence of international counterparties and will contribute to the development of the financial market in Kazakhstan in
in general.

In order to develop the financial and securities markets, some restrictions were lifted and the capabilities of banks and microfinance organizations were expanded. For example, banks have been allowed to participate in the capital of financial technology organizations; banks and microfinance organizations are now allowed to assign their loan portfolio to a wider range of persons, including non-residents. Microfinance organizations were given the opportunity to convert into a bank. The requirement to obtain permission from the authorized body for the issue and placement of securities on the territory of a foreign state was canceled, and the requirement for a local offer in the case of an “indirect issue” was canceled. The restrictions applicable to “qualified investors” now apply only to individuals.

1) Changes in the civil code of the Republic of Kazakhstan:

• According to the Law of the Republic of Kazakhstan (“RK”) dated July 12, 2022 No. 138-VII “On introducing amendments and additions to certain legislative acts of the Republic of Kazakhstan on the regulation and development of the insurance market and the securities market, banking activities”, some changes to the Civil Code of the Republic of Kazakhstan (“Civil Code of the Republic of Kazakhstan”) were put into effect. In particular, such concepts as “security payment” and “repo” were introduced into the Civil Code of the Republic of Kazakhstan. Previously, these structures were used in practice, but they have only now received legislative recognition in order to provide legislative support for issues related to them.
• A security deposit (analogous to a security deposit in Western legal systems) is a separate type of security for the fulfillment of a monetary obligation (including the obligation to compensate for losses or pay a penalty in case of breach of contract). When using this type of security, by agreement of the parties, a certain amount of money (security fee)
• transferred by one of the parties to the ownership of the other party. If circumstances stipulated by the contract occur, the amount of the security payment is counted towards the fulfillment of the corresponding obligation. In other cases, the security payment, as a general rule, is subject to return. The rules on security payments also apply in cases where securities, other financial instruments and (or) things defined by generic characteristics are transferred in exchange for security.
• It is important to note that the security payment provided to the creditor in the manner and on the terms determined by the transaction (transactions) within the framework of the master financial agreement (such as the ISDA Master Agreement - see below), before the date of initiation of bankruptcy and (or) rehabilitation proceedings or the date of revocation of the debtor's license to engage in activities in the financial sector and (or) activities related to the concentration of financial resources, depending on which of these dates occurred earlier, is not included in the property estate debtor upon his bankruptcy.