Business restructuring and M&A in Kyrgyzstan

1) In what forms can the reorganization of a legal entity be carried out?

The reorganization of a legal entity can be carried out in the following forms: 

• merger;
• accession;
• division;
• spin-off;
• or transformation.

Reorganization may be undertaken based on a decision by the founders of the legal entity or by a body of the legal entity authorized to do so by the founding documents. In the case of banks and financial institutions, for which the operations stipulated in the license constitute the only permitted type of activity, the decision is made by the authorized state body.

2) What are the procedures for the division or merger of a company?

Merger is a form of reorganization in which two or more legal entities combine to create a new legal entity. As a result of this process, the reorganized legal entities cease to exist, and all their rights and obligations are transferred to the newly formed legal entity through the principle of legal succession.

Division is a form of reorganization in which a legal entity ceases to exist by dividing into two or more new legal entities. In the process, the rights and obligations of the divided company are simultaneously apportioned among the newly created legal entities.

3) How to separate a separate type of activity into a separate company?

The separation of a specific type of activity from an existing company into a distinct entity is possible through the spin-off procedure. As a result of the spin-off, partial legal succession occurs.

4) Is it possible to reorganize a company in case of bankruptcy?

As a rule, reorganization within the framework of bankruptcy is permissible. The reorganization of a legal entity in the event of bankruptcy is conducted either by a court decision or by a resolution of the creditors' meeting. Additionally, in accordance with bankruptcy legislation, the court has the authority to prohibit the management bodies from making decisions on reorganization without the consent of the court or a temporary administrator (if appointed) in order to safeguard the creditors' claims.

5) Which government agencies' approvals should be obtained for mergers and acquisitions?

Generally, state control applies over transactions of business entities in cases of reorganization through merger, accession and transformation of business entities.  For mergers and acquisitions an approval of the Antimonopoly regulation service under the Ministry of Economy and Commerce of the Kyrgyz Republic.

In specific areas, such as banking, reorganization of a bank (including mergers and acquisitions) can only be carried out subject to the consent of the National Bank of the Kyrgyz Republic. Aside from that, different industries’ subjects may require consents from other state authorities.

Author: Elmira Usenova, Associate