ARMENIA Trends and Developments Contributed by: Tachat Voskanyan and Artashes Petrosyan, HAP
An LLC is not liable for its owners’ obligations and this gives it the option of creating a business and generating profit without being concerned that the obligations of its owners may be tied to the financial performance of the company. Individuals wishing to establish a company should conclude a written agreement. The founding document of a company is the charter approved by its founders. The legislative regulation provides for the aliena - tion of shares. Shares must be sold by a simple written contract and there is no need for notary ratification in alienation. This option means an LLC is suitable for specific investors, who want to try to make an investment but leave the company easily when it needs to. Investing in a company is risky. However, if a successful investment is made, an investor can generate profit. From this perspective the law specifies types of settlements which involve share transfers. Shares in the authorised capital of a company will be transferred to the heirs of citizens and legal successors of legal entities participating in a company, unless the company’s charter provides that the transfer is only permitted with the consent of the remaining participants in the company. It can therefore be stated that, by virtue of this legislative regulation, a shareholder is protected and there is legal certainty that the share yielding profit will subsequently be transferred to their heirs and to their successor in the case of a legal entity.
In many instances, participants in a business may, through their actions or involvement, impede the development of the company. To address this, mechanisms have been put in place to prevent the interference. The law provides a right to file a lawsuit for the removal of the participants, against owners who hold at least 10% of the company’s shares. This provision effectively ensures the protection of the rights of participants in a company in a court. On corporate governance issues, the Armenian Code of Civil Procedure contains special provi - sions that regulate disputes of this kind. Features and Characteristics of JSCs JSCs can issue stocks and can generate income through issued stocks. The owner’s liability is limited to their investment. There are two types of JSC: OJSC and closed (CJSC). In an OJSC, owners can sell their shares without the consent of the shareholders. Meanwhile in a CJSC, shares are only issued between share- holders or a predetermined group and other shareholders typically have to approve their transfer. OJSCs allow for broader shareholders’ partici - pation and can raise substantial capital through public stock markets. This structure enables shareholders to easily sell their shares and leave the company. This model is commonly adopted by large enterprises seeking transparency and openness in manage - ment. The number of shareholders in OJSCs is not limited.
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