Foreign ownership restrictions / limitation of foreign investments and equity in corporations in Uzbekistan
1) Are there any restrictions on foreign ownership in companies?
As a general rule, the legislation of the Republic of Uzbekistan does not impose restrictions on the participation of foreign investors in business entities. Foreign citizens and legal entities have the right to act as shareholders (participants) of companies on an equal term with residents of Uzbekistan.
Foreign investors may own up to 100% of the shares in the charter capital of LLC (JSC) without the mandatory involvement of a local partner. In addition, foreign legal entities may also open representative offices and register permanent establishment in Uzbekistan.
2) Is government approval required for foreign investment in local companies?
In general, the legislation of the Republic of Uzbekistan does not require prior approval from state authorities for the establishment of legal entities with foreign investment.
However, in certain cases, such as the establishment of a legal entity with the participation of state-owned enterprises and/or their affiliates, obtaining approval from the relevant authorized bodies may be required.
Also, in accordance with the requirements of antitrust legislation, if, as a result of a transaction, a person or group of persons (regardless of their residence) acquire the right to dispose of more than 25% of the voting shares of a JSC or more than 1/3 of the shares in the charter capital of an LLC, prior consent from the antitrust authority of the Republic of Uzbekistan should be obtained if the book value of assets or revenue from the sale of goods for the last calendar year of one of the economic entities participating in the transactions exceeds USD 8,107,000, or the total book value of their assets or revenue from the sale of goods for the last calendar year exceeds USD 16,215,000.
3) Which sectors are subject to special rules or restrictions for foreign investors?
In certain strategically important sectors, special restrictions may apply to the participation of foreign investors. Such restrictions are generally aimed at protecting national interests and may be regulated by specific laws and regulations, particularly in the media, banking, land transactions, and sectors affecting national security, and other interests protected by law.
4) Can foreign persons own 100% of a limited liability company or joint-stock company?
In accordance with the legislation of the Republic of Uzbekistan, foreign individuals and legal entities have the right to own 100% of the shares in the charter capital of an LLC or JSC.
5) Are beneficial ownership rules applicable to foreign participants?
According to the legislation of the Republic of Uzbekistan, the ultimate beneficial owner is a natural person who is the true owner of the property of the legal entity being established or who controls the applicant or in whose interests a transaction with funds or other property is carried out.
Information about the ultimate beneficial owner is requested during the process of applying for registration of a legal entity and when opening bank accounts during the bank's internal audit.
The need to disclose information about beneficial owners is explained by antitrust control, prevention of tax evasion, the anti-corruption, combating money laundering, and the effective organization of the fight against terrorist financing.
In practice, information about the ultimate beneficial owner is stored in the systems of state authorities and the servicing bank and is not published in open sources.
6) Are there any quotas or thresholds on foreign ownership in strategic companies?
At present, the legislation of the Republic of Uzbekistan does not establish universal quotas or a single limit on the participation of foreign investors in the charter capital of strategic companies. The permissible amount of foreign ownership is determined on an individual basis through decisions of the President of the Republic of Uzbekistan on the privatization of specific state-owned assets. Articles 19 - 23 of the Law on Privatization of State Property stipulate that the terms of sale, including requirements for the buyer and the size of the stake being sold, are set out in the tender documentation/invitation.
7) Is disclosure of foreign shareholders/participants required when registering a company?
For state registration of a legal entity, the founding documents, including the resolution or minutes containing information about all shareholders, shall be submitted to the registering authority.
If the shareholder is a foreign legal entity, a legalized (apostilled) extract from the commercial register of the country of its registration, confirming the legal status of the shareholder should be provided. This extract must be translated into Russian or Uzbek and notarized accordingly.
If the shareholder is a foreign individual, a copy of their passport must be submitted.
8) Are there any restrictions on the acquisition of real estate by foreign legal entities?
In accordance with the law, foreign legal entities are allowed to acquire real estate (except for land plots). However, in practice, such transactions are accompanied by a number of nuances that should be taken into consideration in advance.
According to Articles 17 and 18 of the Land Code of the Republic of Uzbekistan, foreign legal entities can own land plots only on the leasehold basis, with the exception of land plots used by diplomatic missions and equivalent international organizations accredited in the Republic of Uzbekistan.
Land plots can be leased to foreign legal entities for a term of up to 25 years.
9) Are there any business or office localization requirements for foreign investors?
In the event of opening a permanent establishment, representative office, or legal entity, the law requires that a postal address be provided for communication purposes, and the permanent establishment, representative office, or legal entity is required to notify the state registration authority of any change in its postal address.
10) Are sanctions or other restrictions applied to investors from specific countries?
Regardless of the composition of the shareholders, when conducting compliance checks, banks analyze the ownership structure of the legal entity down to the ultimate beneficial owner - a natural person.
If the founders, ultimate beneficial owners, and/or executives are included in sanction lists, this can entail a number of restrictions, including difficulties in establishing or conducting the activities of a legal entity: opening bank accounts, conducting banking operations, interacting with counterparties, etc.
Authors: Bakhodir Karimov, Sitora Kozimjanova