GILS Corporate law: Armenia
ARMENIA
(1) Forms of doing business and Establishment
1.1. What are the options for establishing a company's presence in a country (branch, representative office, subsidiary, etc.), and what are their key advantages and limitations?
The most popular organisational and legal form of organisation in the Republic of Armenia (RA) is a limited liability company. Also, in the case of foreign organisations, separate divisions are practised in the form of branches or representative offices, which, however, are not independent legal entities, and the latter also does not conduct commercial activities but only performs representative functions. It is also possible to establish joint-stock companies, the distinctive feature of which is the maintenance of a register of founders and some management differences compared with LLCs. Other legal forms of organisations are less popular.
1.2. What is the process for creating a legal entity or another form of presence in the country, including the laws to follow, legal entities to be considered, documents required, stages and terms for registration?
Founding documents vary depending on the number of founders, their status, and the organisational and legal form of the established legal entity. The minimum capital for an LLC is not established by law but is usually stated at AMD 10 000 (equivalent to USD 25). The standard package of documents includes the following: minutes of the founding meeting (decision of the sole founder), constituent documents of the founder(s) - legal entity(ies), charter(s) and extract(s) from the trade register of the country(s) registration of the founder(s) - legal entity(ies), passport(s) of the founder(s) - individual(s), translations of all specified documents into Armenian. For representatives of countries that are not members of the Minsk (1993) or Chisinau (2002) conventions but are parties to the Hague Convention (1961), it is necessary to submit the specified documents with an apostille. The standard registration period is 3 business days when registering organisations with a foreign element.
1.3. What additional authorizations/approvals are required to create a legal entity or start operations, and how do they vary depending on the type of business (if any)?
As a general rule, if business activity involves conducting licensed activities, then the activity can only be carried out upon acquisition of the corresponding licence. It should also be noted that if business activity is not conducted in accordance with the economic activity codes selected during business registration but does not imply licensed activity, then any restrictions will not apply to this entity. There are no other special requirements.
1.4. What are the most common types of Legal Entities in your country and the differences between them in terms of taxation, liability, and management?
1.4.1. What are the shareholder structures of these types of legal entities?
1.4.2. What is the Shareholders’ responsibility in these types of legal entities?
1.4.3. What is the responsibility of the representatives in these types of legal entities?
1.4.4. Briefly, what are the characteristics of the other types of Legal Entities?
The most common types of legal entities in the Republic of Armenia are limited liability companies (LLC) and joint stock companies (JSC). From the point of view of taxation and liability, there are no significant differences. In terms of management, there are several requirements applicable to JSCs and not applicable to LLCs, including requirements for the formation of certain management bodies, the procedure for establishing, changing, and terminating labour relations with the head of the executive body, the procedure for the alienation and transfer of shares in the authorised capital of the company, the requirement to maintain a register of shareholders, as well as several others. JSCs can be open or closed. There are no significant differences in the liability of shareholders/participants in trading (commercial) legal entities. The general rule regarding liability for both types of companies is as follows: the company is liable for its obligations with all its property, and the company is not responsible for the obligations of its participants/shareholders. Among other legal entities, we can mention production and trade cooperatives, public organisations, foundations, etc.
1.5. What are the operating costs associated with the maintenance of a legal entity or presence in the country?
Always different. Example: if we are dealing with an LLC with only one employee and which does not yet have an operating profit, then the main expenses, in addition to the rent for the presence of office space, will include the cost of accounting (reporting and bank payments) in the amount of AMD 50 000 per month, and the salary of the only employee - the head of the executive body - is AMD 104 000 per month.
(2) General taxation issues
2.1. What tax obligations are associated with doing business in the country?
Monthly, quarterly, and annual tax payments and submission of relevant reports.
2.2. What tax and customs incentives are available in a country?
Several customs benefits apply to specific organisations depending on the activity type and other circumstances, including special tax regimes (from 0%), a simplified taxation system, and others. Generally, goods imported from the EAEU countries are not subject to customs clearance.
2.3. What are the accounting and reporting requirements for different types of presence, and how often must they be submitted?
To maintain accounting records and submit tax reports, as well as carry out other necessary activities within the framework of accounting services through electronic document management with tax authorities, you must have Armenian citizenship since electronic document management with the tax authorities is possible only if you have an identification card with a storage device, which is issued only to citizens RA.
2.4. What is the taxation of dividends for foreign investors?
Payment of dividends to residents and non-residents is taxed at a flat rate of 5%.
2.5. What strategies exist for minimising tax liability when conducting international business?
Strategies developed taking into account the specifics of a particular business and many other components, so there is no single answer to this question.
(3) Regulatory and miscellaneous
3.1. What are the general data protection and privacy requirements in the country, and how do they affect company operations?
Requirements for data protection and confidential information are established at the level of local legislation.
3.2. What labour law features should be considered when hiring local and foreign employees?
There are no special restrictions for hiring local employees. However, employment relations with foreign citizens can be established during the period of residence (residence permit), which is usually issued for a period of up to one year. There are some exceptions to the timing and procedure for obtaining a residence permit and work permit for citizens of EAEU member countries, managers and founders/shareholders of companies, and ethnic Armenians.
3.3. What are the requirements for currency regulation and currency control?
Generally, payments between residents of the Republic of Armenia are made in Armenian drams, the national payment currency. There are some exceptions. Any payments between legal entities are made in non-cash form; in B2C relationships, there are also several restrictions on cash payment for goods and services. Individuals and legal entities are not prohibited from opening bank accounts in foreign currencies. Bank compliance services usually check transfers to and from foreign persons. There are certain restrictions on transfers of currencies other than Armenian drams and Russian rubles to the accounts of persons in the Russian Federation.
3.4. What corporate law features should be considered when planning mergers, acquisitions, and company restructuring in the country?
First, it is necessary to consider the applicable norms of the RA Civil Code, the RA Law “On Limited Liability Companies”, the RA Law “On Joint Stock Companies”, etc.
3.5. What are the most efficient mechanics for dispute resolution?
Through negotiations or judicially – through state courts.
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