ARMENIA Trends and Developments Contributed by: Tachat Voskanyan and Artashes Petrosyan, HAP
receives dividends from the profits generated by the company’s activities. At the same time hold - ers of preferred shares do not have the right to vote at the meeting, unless otherwise provided for by the law and the charter for certain classes of preferred shares. In the business sector these two types of shares suggest a variety of possibilities. If a business maker only wants a profit from the company’s activities and is not interested in managing, a dividend is more suitable than privileged shares. However, when it necessary to also join in the management of a company, holding common (ordinary) shares is a more suitable way. There is also a clarifying regulation on the share agreement. This regulation allows shareholders to take particular co-ordinated actions or even refrain from taking these actions. For example, the shareholders’ agreement can cover: • the obligation to vote at the GSM in the way specified by the agreement; • the voting procedure or voting with other peo - ple; or • voting on the instructions of other people, to acquire shares at a pre-determined price etc. A new regulation has also been developed for companies that allows investors to attract certain funds to the company’s capital at the expense of the investor’s funds. This type of agreement is called a simple agree - ment for future equity (SAFE). It establishes a commitment from one party, typically the inves - tor, to contribute a specified amount of financial resources to the company. In return, the company agrees to issue and allocate shares of a specified
quantity, type and class, as stipulated in the agree - ment, once the conditions set out in it are met. This legislative regulation is suitable for those companies who want to use financial resources and generate some profit. The legislative regulation provides an opportu - nity to secure financial resources upfront while fulfilling obligations laid out in the contract. A JSC also may allocate shares to employees in line with its charter or an employee share own - ership plan approved by the GSM. These plans regulate the acquisition, use, transfer and buy - back of shares, providing JSC’s with a tool to incentivise and retain key personnel. Features and Characteristics of Co-operatives Profit-seeking organisations in Armenia can also be co-operatives, which is an association of indi - viduals and legal entities. Its primary purpose is to meet the material or other needs of its members, which is achieved by pooling their resources, specifically through financial contributions. The main characteristic of a co-operative is that it is based on both the membership of individu - als (legal entities) and their financial contributions, which means that unlike LLCs or JSCs, which have no participation and are based on the shares of participants and dividends, a co-operative is solely focused on profit distribution. A co-oper - ative also imposes a participation fee and meets the material or other needs of its members. As a commercial entity, a co-operative operates on the principle of achieving economic goals to serve the interests of its members.
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