Compulsory Division or Separation of Legal Entities in Uzbekistan

The development of a competitive environment is one of the key factors of sustainable economic growth. To prevent abuse by enterprises that hold a dominant market position, Uzbekistan’s antimonopoly legislation provides a special measure — the compulsory division or separation of legal entities. This procedure is regulated by Resolution No. 256 of the Cabinet of Ministers of the Republic of Uzbekistan, dated May 1, 2024.

Division — the creation of several new companies based on an existing one, with the termination of its activities.

Separation — the formation of new entities with the transfer of part of the assets and liabilities to them without terminating the activity of the original organization.

The main goal is to eliminate the abuse of a dominant position, create healthy competition, and improve the quality of goods and services.

Compulsory division or separation is permitted if:

• other antimonopoly measures have proven ineffective;
• there are organizational and territorial conditions for the independent operation of new companies;
• there is no close technological dependence between the divisions.

Division of a legal entity is not allowed if it will result in:

• a decrease in the technological level of production;
• a reduction in production volumes;
• significant economic losses;
• inability to comply with banking standards.

 

Procedure for Review. The competent authority is the Committee for Competition Development and Consumer Protection and its regional divisions.

The process includes:

1. Initiating a case of abuse of dominance.
2. Analyzing the possibility of division: examining the company’s structure, financial indicators, production links, market position, etc.
3. Issuing a conclusion by a Special Commission with the participation of interested parties.
4. Filing a claim with the economic court for compulsory division or separation.
5. Execution of the court decision by the owner or by an appointed manager.

 

Study of the Feasibility of Compulsory Division or Separation

The procedure begins if previous measures to eliminate antimonopoly violations have not yielded results and the company continues to abuse its dominant position.

1. Initiation of the Procedure

• The antimonopoly authority opens a case on the violation.
• A Special Commission on Violations is created, which decides to conduct an analysis.

2. Data Collection and Analysis

During the analysis, the following data blocks are examined:

a) General characteristics of the entity:

• Name and types of activities;
• Location;
• Market behavior.

b) Organizational structure:

• Interrelation of divisions and their legal status;
• Cross-ownership of shares/participations;
• Geographical location of divisions and branches;
• Social infrastructure on the balance sheet.

c) Main performance indicators:

• Production, sales, and export volumes;
• Share of monopoly goods;
• Number of employees;
• Book value of assets;
• Profitability.

d) Production process:

• Technological links between divisions;
• Sources of raw material supplies;
• Organization of internal supplies;
• Specialization of production lines;
• Independence of divisions in terms of territory, finance, and management;
• Nature of the produced goods and their competitiveness;
• Main consumers.

e) Socio-organizational factors:

• Attitude of owners and the workforce toward division.

3. Special Conditions for Banks and Credit Institutions

Additional analysis is carried out regarding the requirements and standards of the Central Bank of the Republic of Uzbekistan.

4. Analysis Period

Indicators for the last three years are used, or for the entire period of operation if it is less than three years.

5. Assessment of the Competitive Environment

• Identification of main competitors;
• Market share distribution;
• Geographical market structure.

6. Criteria for Feasibility of Division

The decision is made if the following conditions are met:

• Possibility of separating divisions;
• Absence of close technological links;
• Ability of new entities to operate independently;
• Expected improvement of competitive conditions, growth of market participants, increase of efficiency, expansion of export opportunities.

7. Expert Assessment

If necessary, independent experts are involved. In the case of financial markets, the procedure is coordinated with relevant government bodies.

 

Decision on Compulsory Division or Separation

After completing the analysis of possibility and feasibility, the antimonopoly authority proceeds to the decision-making stage.

1. Preparation of the Decision

Based on the study results, a set of measures is carried out:

• Comparative assessment of positive and negative consequences of division/separation.
• Development of a project of division or separation — form, structure, and further conditions for the operation of new entities are determined.
• Preparation of the organizational structure scheme of the newly created enterprises.
• Calculation of the economic efficiency of the future restructuring.

Important: The new companies must not become part of a group of persons already occupying a dominant position.

2. Review of Materials

• Materials are submitted to the Special Commission of the antimonopoly authority.
• A decision is made with the participation of interested parties.
• The division/separation project is discussed.

3. Judicial Stage

Based on the Commission’s decision, the antimonopoly authority files a claim with the economic court within 10 days.

If the claim is satisfied by the court, the division/separation is carried out by the owner or the authorized body within the timeframe set by the court decision.

4. Execution of the Decision

If the owner does not comply with the court decision, the antimonopoly authority may request the appointment of a manager to carry out the procedure.

5. The manager:

• Receives all powers of management bodies,
• Accepts property and documentation based on an inventory,
• Implements the division/separation in compliance with creditors’ and participants’ interests,
• Represents the company without a power of attorney,
• Signs binding documents and orders,
• Organizes state registration of new entities.

6. Financial Matters

All expenses are borne by the divided business entity.