Liability of the CEO of a company in Kazakhstan

1) Can a CEO of a private company be personally liable for the acts/omission and / or obligations of the company?

A person holding the position of CEO does not automatically become liable to creditors solely by virtue of such status.
 The personal liability of the CEO arises if it is proven that losses were caused as a result of his/her culpable actions or omissions. The CEO may be held liable, in particular, in the following cases:

• causing losses to the Company – if the CEO acted in bad faith or unreasonably, exceeded the authority granted, acted in personal interests, or made decisions beyond the competence established by the charter;
• violation of legislation;
• bankruptcy – if insolvency occurred as a result of the CEO’s actions or omissions (for example, withdrawal of assets, sham transactions, concealment of property, untimely filing with the court), subsidiary liability may apply.

2) In which cases may a CEO incur civil liability in connection with performance or a failure to perform his duties?

• As a general rule, the CEO is not liable for the obligations (transactions) of the Company, since the Company has the status of a legal entity and acts as an independent participant in civil turnover. The CEO, as the sole executive body, acts on behalf of the Company without a power of attorney.

At the same time, the civil legislation of Kazakhstan provides for exceptions under which the CEO may be held liable for improper management of the Company, both at the request of the participants and at the request of third parties. Article 52 of the Law on Limited and Additional Liability Partnerships (Lan on LLP) provides that the CEO may be brought:

• to liability at the request of any participant of the Company for compensation of losses caused to the Company;
• to subsidiary liability together with the Company before third parties for losses they incurred due to the insolvency (bankruptcy) of the Company caused by improper management by the CEO.

Thus, in certain cases, the CEO may be brought to civil liability by a court decision.

3) What violations may trigger administrative liability of a CEO as a company official?

It should be noted that, under the legislation of the Republic of Kazakhstan, the director acts on behalf of the legal entity in legal relations with individuals as well as governmental and non-governmental organizations. At the same time, the director is not subject to administrative liability in his or her personal capacity.

Nevertheless, the law provides for a number of instances where administrative liability for certain offences is imposed directly on the legal entity, in particular for the following violations:

1. Violation of accounting and financial reporting legislation of the Republic of Kazakhstan (evasion of bookkeeping, submission of unreliable financial statements or refusal to submit them, preparation of distorted liquidation statements or their concealment) - entails fines imposed on small businesses in the amount of 100, medium-sized businesses 200, and large businesses 500 monthly calculation indices (MCI).

2. Violation of the labour legislation of the Republic of Kazakhstan (allowing an employee to work without an employment contract, breaches of remuneration requirements, failure to grant leave, unlawful excess of working time limits, discrimination in labour relations, violation of occupational health and safety requirements, etc.) - entails administrative liability ranging from 60 to 240 MCI depending on the category of business entity.

3. Violation of licensing requirements and permit procedures (non-compliance with statutory licensing rules, failure to meet qualification or permit requirements, submission by an applicant of knowingly false information when obtaining a licence) - entails a fine ranging from 45 to 300 MCI depending on the category of business entity, with or without revocation of the licence.

However, although the fines are imposed on the legal entity, failure to comply with statutory requirements in practice often results in personal restrictive measures being applied to the director. For example, non-payment of salaries by the Company may lead to restrictions on the director’s ability to leave the Republic of Kazakhstan, as well as other measures provided by law.

For reference, the amount of one MCI in 2026 equals KZT 4,325 (approximately USD 8).

4) Under what circumstances may a CEO face criminal liability?

Criminal liability of the CEO is possible in the following circumstances:

• failure to comply with measures to protect personal data by a person who is responsible for taking such measures, if this act caused significant harm to the rights and legitimate interests of individuals (Article 147 of the Criminal Code);
• misappropriation or embezzlement, that is, theft of another’s property entrusted to the offender (Article 189 of the Criminal Code of the RK);
• unlawful actions during rehabilitation and bankruptcy (Article 237 of the Criminal Code of the RK);
• deliberate bankruptcy (Article 238 of the Criminal Code of the RK) – where the CEO’s actions lead to insolvency of the legal entity for the purpose of evading debt repayment, including through concealment of property;
• causing insolvency (Article 239 of the Criminal Code of the RK) – actions or omissions, intentional or negligent, that resulted in the legal entity becoming insolvent;
• evasion of tax (Article 245 of the Criminal Code of the RK) and/or other mandatory payments to the budget by organizations through the failure to submit a tax return where such submission is required, or through the inclusion in the tax return of knowingly distorted information on income and/or expenses, by concealing other taxable items and/or other mandatory payments, where such act has resulted in the non-payment of taxes and/or other mandatory payments in a large amount;
• abuse of authority (Article 250 of the Criminal Code of the RK) – use of managerial powers contrary to the interests of the legal entity, resulting in substantial harm to the Company or third parties.

Punishment may include fines, restriction or deprivation of liberty, as well as prohibition from holding certain positions.

5) Can a CEO be held liable for the actions of subordinates, in particular, if he delegates a part of his authorities?

Yes, in accordance with the legislation, the CEO has the right to issue powers of attorney to represent the interests of the Company.

However, if it is proven that the damage arose due to improper supervision, unlawful delegation, or negligence on the part of the CEO, he/she may be held liable, including subsidiary liability.

6) Does the business judgment rule apply to a CEO?

Although this concept is not expressly formulated as an independent rule, in practice it derives from the statutory duty of the CEO to act in good faith and reasonably (Article 51 of the Law on LLP).

A negative financial result in itself does not indicate the CEO’s fault if he/she acted within the scope of authority, on the basis of sufficient information, and without a conflict of interest.

7) Can a CEO be held liable for his actions or omission after termination of their office?

Yes, if the damage was caused by his/her actions or omissions.

Termination of the employment agreement or expiration of the CEO’s authority does not release him/her from the obligation to compensate for damage caused during the period of performance of duties.

For example, pursuant to Article 120 of the Labor Code, termination of an employment agreement after damage has been caused does not release a party to the employment agreement from financial liability to compensate the other party for the damage.

An employee should be understood as the CEO with whom the employment agreement is concluded. If his/her actions caused material damage to the Company, the Company as the employer has the right to claim compensation even after the CEO’s resignation. Accordingly, such claims may be brought after dismissal.

8) Can a CEO’s liability be limited by an employment contract, articles of association or internal corporate documents?

Under the laws of the Republic of Kazakhstan, the liability of the CEO can not be fully excluded or limited by an employment contract, the Company’s charter, or any other internal corporate documents.

Such documents may define the scope of the CEO’s authority and, to a certain extent, set performance standards or allocate risks.

However, they cannot release the CEO from liability for unlawful acts, bad faith, gross negligence, or violations of mandatory legal requirements. Any provisions that contradict applicable law shall be deemed invalid.

Accordingly, internal corporate documents may regulate management and decision-making procedures, but they do not eliminate the civil, administrative, or criminal liability of the CEO as established by law.

9) Is a CEO liable for failure to comply with the tax, accounting and other reporting requirements?

Yes, the CEO is liable for failure to comply with statutory tax reporting requirements. The sanctions applicable to the above violations are set out in paragraph 4 of this table.

At the same time, amendments were introduced to the Criminal Code pursuant to which the criminal liability of a director for violations of accounting and financial reporting legislation was abolished. Currently, such violations entail administrative liability imposed not on the director personally but on the Company.

10) What practical steps can a CEO take to mitigate the risks of his criminal, administrative and civil liability?

In the circumstances, the following practical measures are recommended:

• The charter of the LLP should be carefully reviewed, particularly to identify any limitations on the director’s authority. Decisions and transactions must be undertaken strictly within the scope of the powers granted. 

For example, the charter may establish a transaction value threshold above which prior approval of the General Meeting of Participants or the Supervisory Board is required (e.g., transactions exceeding USD X). In such cases, the director must act strictly within the limits of his or her authority.

• The annual financial statements must be approved each year by the General Meeting in accordance with Article 44 of the Law and the charter of the LLP.
• It is advisable to refer major transactions or decisions involving significant financial risks to the supreme governing body, even where such matters formally fall within the director’s competence.
• All resolutions of the participants should be properly documented in writing in the form of minutes or written resolutions. Significant decisions should not be made solely on the basis of oral instructions from participants.
• The director’s responsibilities must be clearly defined in job descriptions, and all business processes should be comprehensively regulated by internal policies.
• Where authority is delegated, the head of the organization must ensure proper supervision over the exercise of such delegated powers.
• It is also necessary to maintain continuous monitoring of legislative developments and promptly update internal documents to ensure compliance with such changes.

Authors: Zaira Sarsenova, Zhansaya Izimova