ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Tachat Voskanyan, HAP
According to Armenian law, anyone who acquires more than 75% of an issuer’s equity securities through one or more transactions must make a mandatory offer to buy all remaining securities of that class, following the Law “On the Securities Market.” This mandatory offer requirement can be seen as a challenge for transferring securities. In joint-stock companies, the company charter (approved by 3/4 of shareholders’ votes, unless a higher number is required) may limit the maxi - mum number, total nominal value of shares, or voting rights one shareholder can have. Howev - er, each ordinary share cannot grant more than 10 votes. For limited liability companies (LLCs), the Char - ter Capital can be increased through additional contributions from existing participants, often making it harder for new entities to join the company. However, the General Meeting can approve the entry of a third party into the com - pany if the company charter allows it. At the same time, a shareholder of a closed joint- stock company has a pre-emptive right to pur - chase shares sold by other shareholders of the company. If, within the period stipulated by the Company’s Charter, none of the shareholders exercise their pre-emptive right, the company is entitled to purchase these shares at a price agreed with the owner. Some restrictions also apply to investment com - panies. Specifically, investment companies are prohibited from carrying out any other activities not provided by the law “On the Securities Mar- ket” unless otherwise prescribed by the regu - latory legal acts adopted in accordance with this law. The violation of this restriction shall be considered grounds for revoking the investment company’s license.
It should be noted that due to national security considerations, foreign investments may be sub -
ject to additional restrictions. 4.4 Dealings in Derivatives
Under Armenian legislation, derivative transac - tions are not restricted. However, the derivatives market in RA is still underdeveloped. The CB has the authority to regulate derivative financial instruments and their markets if their unregulated use could harm financial stability, investors’ interests, or the proper functioning of financial markets. Since March 2022, fluctuations in Armenia’s for - eign exchange market, especially among busi - nesses involved in foreign trade, have increased the need to use derivative financial instruments. After discussions with the financial sector, the CB introduced regulatory reforms to simplify the offering of derivatives. The foreign exchange risk management requirements for commercial banks were relaxed, as they previously hindered the development of the derivatives market. The CB also made several regulatory changes to expand the foreign exchange market, giving participants access to better pricing and more financial instruments. Furthermore, under the Tax Code, transactions involving the sale, transfer, exchange, or other disposal of derivative financial instruments by banks, credit organisations, and other taxpay - ers, as well as all payments stipulated under such transactions, are exempt from VAT except for payments made in exchange for the actual supply of goods subject to VAT. According to the Law “On JSC,” company can issue convertible bonds and other securities that allow bondhold - ers to convert them into shares or acquire shares with priority. However, the company cannot
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