50 Questions on the Law on Limited Liability Companies (LLC)

1. What is the legal nature of a limited liability company (LLC)?

Answer: An LLC is an independent legal entity established by one or more persons with charter capital divided into participation interests. Its key feature is the limited liability of participants: they are not liable for the company’s obligations and bear the risk of losses only within the value of their contributions, except in cases of incomplete payment of interests or subsidiary liability arising from culpable actions.

2. From what moment does an LLC acquire the status of a legal entity?

Answer: From the moment of its state registration in accordance with the procedure established by law. Prior to registration, the company cannot act as a subject of civil rights and obligations.

3. May an LLC engage in any type of business activity?

Answer: Yes, an LLC may carry out any activities not prohibited by law. However, certain types of activities are permitted only upon obtaining a license (for example, banking, insurance, or educational activities).

4. How is the company’s place of location determined?

Answer: The place of location is deemed to be the place of state registration. The charter may specify that the place of location is the permanent location of the management bodies or the principal place of business.

5. What restrictions apply to the company’s trade name?

Answer: The trade name must obligatorily contain the words “limited liability company” or the abbreviation “MChJ” and may not include other organizational and legal forms, including those borrowed from foreign languages.

6. Who may be a participant in an LLC?

Answer: Individuals and legal entities. State authorities may not be participants unless otherwise expressly provided by law.

7. What is the maximum number of participants in an LLC?

Answer: No more than 50 participants. Exceeding this limit entails an obligation to reorganize into a joint-stock company or a production cooperative, or liquidation by court decision.

8. What key rights are granted to participants of the company?

Answer: Participants have the right to participate in management, obtain information on the company’s activities, receive profit distributions, dispose of their participation interest, withdraw from the company, and receive property upon liquidation.

9. What are the main obligations of LLC participants?

Answer: The main obligations are to make contributions to the charter capital and to refrain from disclosing confidential information about the company’s activities.

10. Which documents are constitutive documents of an LLC?

Answer: The foundation agreement and the charter. If the company is established by one person, only the charter is required.

11. Is the foundation agreement subject to state registration?

Answer: No. Only the charter and amendments thereto are subject to state registration.

12. Which decisions of the founders must be adopted unanimously?

Answer: Approval of the company’s charter and approval of the monetary valuation of non-monetary contributions.

13. Do founders bear liability prior to the company’s registration?

Answer: Yes. Founders bear joint and several liability for obligations incurred prior to state registration of the company.

14. What information must necessarily be included in the LLC charter?

Answer: The trade name, scope of activities, address, management bodies, charter capital, participants’ interests, procedure for withdrawal and transfer of interests, document retention, and provision of information.

15. What constitutes the charter capital of the company?

Answer: The nominal value of participants’ interests expressed in monetary form or in appraised non-monetary contributions.

16. How are non-monetary contributions valued?

Answer: The valuation is approved unanimously by the general meeting of participants, and if the statutory threshold is exceeded, with the involvement of a professional appraisal organization.

17. Within what timeframe must participants fully pay their interests?

Answer: Within the period established by the constitutive documents, but not later than one year from the date of state registration.

18. Is an increase in charter capital permitted prior to its full payment?

Answer: No. An increase in charter capital is permitted only after the previously established capital has been fully paid.

19. By what methods may the charter capital be increased?

Answer: Through the company’s property, additional contributions of participants, and (if not prohibited by the charter) contributions of third parties.

20. In which cases is the company obliged to reduce its charter capital?

Answer: In the event of incomplete payment of capital within one year or if the value of net assets becomes less than the charter capital.

21. Which body is the supreme management body of an LLC?

Answer: The general meeting of participants.

22. Which matters fall within the exclusive competence of the general meeting?

Answer: Amendments to the charter, changes to charter capital, profit distribution, reorganization and liquidation, formation of management bodies, and approval of financial statements.

23. What is the minimum quorum and voting procedure?

Answer: Each participant has votes proportional to their interest. Decisions are adopted by a simple majority, qualified majority, or unanimously, depending on the matter.

24. May a decision be adopted without holding a meeting?

Answer: Yes, through absentee voting (by polling), if permitted by the charter and if the matter does not relate to exclusive competence.

25. May a participant challenge a decision of the management bodies?

Answer: Yes. A decision may be declared invalid by a court if it violates the law, the charter, or the participant’s rights. The limitation period is two months.

26. What constitutes an interested-party transaction in an LLC?

Answer: An interested-party transaction is one in which a personal interest exists on the part of a participant holding, together with affiliated persons, 20% or more of voting rights, or on the part of a member of the company’s management bodies.

27. How is a person’s interest in a transaction manifested?

Answer: Interest arises if the person or their affiliated persons are parties to the transaction, hold a significant interest in the counterparty, or occupy positions in its management bodies.

28. Is approval of an interested-party transaction required?

Answer: Yes. Such a transaction may not be concluded without prior approval by the general meeting of participants.

29. What are the consequences of concealing an interest?

Answer: The transaction may be declared invalid, and the interested person may be held liable for losses caused to the company.

30. May the LLC charter expand the list of interested persons?

Answer: Yes. The law expressly allows the establishment of additional grounds for interest in the company’s charter.

31. What constitutes a major transaction in an LLC?

Answer: A major transaction is one involving the disposal or potential disposal of company property whose value exceeds the statutory or charter-defined threshold, typically representing a significant portion of the company’s assets.

32. What is the procedure for approving a major transaction?

Answer: A major transaction is subject to prior approval by the general meeting of participants, and in cases provided by the charter, by the supervisory board.

33. May a major transaction be challenged?

Answer: Yes. A transaction concluded without mandatory approval may be declared invalid by a court at the claim of the company or a participant.

34. Do management bodies bear liability for unlawful approval of a transaction?

Answer: Yes. Members of management bodies are liable for losses caused to the company as a result of approval or execution of an unlawful transaction.

35. In what forms is reorganization of an LLC permitted?

Answer: Reorganization is permitted in the form of merger, accession, division, separation, or transformation.

36. Which body adopts the decision on reorganization?

Answer: The decision on reorganization falls within the exclusive competence of the general meeting of participants.

37. Are the company’s obligations preserved upon reorganization?

Answer: Yes. All rights and obligations are transferred to legal successors in accordance with the transfer deed or separation balance sheet.

38. Do creditors have the right to object to reorganization?

Answer: Yes. Creditors may demand early fulfillment of obligations or their termination with compensation for losses.

39. May an LLC be liquidated by court decision?

Answer: Yes. Judicial liquidation is possible, inter alia, in the event of violation of the maximum number of participants or other material violations of the law.

40. In which cases is voluntary liquidation carried out?

Answer: By decision of the general meeting of participants, for example, upon achievement of the company’s objectives or loss of economic feasibility.

41. Who carries out the liquidation of the company?

Answer: An appointed liquidator or liquidation commission acting on behalf of the company.

42. In what order are creditors’ claims satisfied?

Answer: In the order of priority established by law, after which the remaining property is distributed among participants in proportion to their interests.

43. When is the company deemed liquidated?

Answer: From the moment an entry on liquidation is made in the state register of legal entities.

44. What is the liability of LLC management bodies?

Answer: Management bodies are obliged to act in good faith and reasonably; in case of breach, they bear liability for losses caused to the company.

45. Is joint and several liability of management members possible?

Answer: Yes. Where losses are caused jointly, liability is joint and several.

46. May a participant bring a claim against the director?

Answer: Yes. A participant has the right to file a claim in court for recovery of losses caused to the company by the actions of the executive.

47. How do the provisions of the law and the charter correlate?

Answer: The charter may not contradict the law. In case of conflict, statutory provisions prevail.

48. Are provisions of civil legislation applicable?

Answer: Yes. In matters not regulated by the special law, the provisions of the Civil Code of the Republic of Uzbekistan apply.

49. May the company establish additional corporate rules?

Answer: Yes. Additional rules may be set out in the charter and corporate agreements, provided they comply with the law.

50. What is the practical significance of Chapters V–VII of the Law for corporate disputes?

Answer: These chapters are most frequently applied by courts when considering disputes on invalidation of transactions, directors’ liability, protection of minority rights, and liquidation of companies.