Conclusion of Transactions by a Joint-Stock Company

A joint-stock company (JSC) is one of the key organizational and legal forms of entrepreneurial activity in the Republic of Uzbekistan. The legal regulation of JSC activities is established by the Law “On Joint-Stock Companies and Protection of Shareholders’ Rights” (new edition dated May 6, 2014). Transactions concluded by a JSC play an essential role in corporate relations, as they serve as instruments for managing property, attracting investments, and implementing the company’s strategic goals.

Concept of JSC Transactions

Transactions of a joint-stock company are legally significant actions of its governing bodies and officials aimed at the emergence, alteration, or termination of the company’s civil rights and obligations. Unlike transactions by individuals, JSC transactions are governed not only by civil law but also by corporate regulations, reflecting the need to protect the interests of shareholders and creditors.

The law delineates the competence among the company’s governing bodies:

• General meeting of shareholders approves major transactions involving significant assets or requiring amendments to the charter.
• Supervisory board reviews matters within its exclusive competence, including approval of major transactions.
• Executive body (director or management board) is authorized to conclude current and other transactions within the limits established by the charter and shareholders’ resolutions.

Major Transactions

A major transaction is defined as a contract or a series of interrelated contracts involving the acquisition, disposal, or potential disposal of property whose value constitutes a significant portion of the company’s assets. Such transactions must be approved by the supervisory board or the general meeting of shareholders, depending on their size and nature. This mechanism prevents abuses by the executive body and ensures shareholder control.

Interested-Party Transactions

The law also provides for interested-party transactions — cases where members of management bodies, shareholders, or affiliated persons have a financial interest in the transaction. Such transactions require mandatory approval, and all interested persons must disclose their interest. Violation of the procedure may lead to the transaction being declared invalid.

Procedure for Concluding Transactions

The process of concluding transactions in a JSC includes several stages:

1. Preparation and initiation – the executive body drafts the transaction proposal.
2. Consideration by management bodies – the supervisory board or the general meeting approves the transaction.
3. Conclusion of the transaction – the contract is signed on behalf of the company.
4. Registration (in specific cases) – transactions involving real estate or issuance of securities are subject to state registration.
5. Informing shareholders – in cases prescribed by law, the company must disclose information about the transaction.

Liability for Violations

Violation of the transaction procedure may result in:

• The transaction being declared invalid at the request of shareholders or state authorities;
• Material liability of officials toward the company and shareholders;
• Subsidiary liability of interested shareholders in case of damages to the company.

Types of JSC Transactions and Their Legal Regulation

Type of Transaction	Description	Competent Body for Approval	Procedural Features	Consequences of Violations
Ordinary Transactions	Current business and management contracts (sale, lease, services, etc.)	Executive body (director, management board)	Concluded within powers set by charter and shareholders’ decisions	Remain valid unless other grounds for invalidity exist
Major Transactions	Contracts involving property of significant value	Supervisory board or general meeting (depending on size)	Approval required before signing; may be referred to the general meeting	May be declared invalid; management may be held liable
Interested-Party Transactions	Transactions involving interested shareholders, board members, or affiliates	General meeting or supervisory board (depending on charter and ownership share)	Interested persons must disclose interest; without approval, transaction is unlawful	Transaction invalid; damages recoverable from responsible persons
Securities Transactions	Issuance and placement of shares, bonds, and other securities	General meeting or supervisory board (if delegated)	Requires state registration and information disclosure	Invalidity of transaction; potential regulatory sanctions
Real Estate Transactions	Sale, mortgage, or lease of immovable property	Executive body, or general meeting if considered major	Mandatory state registration	Invalid if form or registration requirements violated

 

Approval Procedure for JSC Transactions

1. Ordinary Transactions

• Approved by: Executive body (director or management board).
• Legal basis: Charter and shareholders’ resolutions defining authority limits.
• Features: Routine business activity; does not require special shareholder approval.
• Example: Leasing an office or purchasing equipment within the approved budget.

2. Major Transactions

• Definition: Transactions involving acquisition or disposal of property representing a substantial share of company assets (threshold set by law or charter).
• Approved by:
  • Supervisory board – if transaction value does not exceed the threshold;
  • General meeting – if value exceeds the limit.
• Procedure:
  1. Executive body proposes the transaction;
  2. Supervisory board reviews and decides;
  3. If limit exceeded, issue submitted to general meeting;
  4. Decision adopted by majority vote (unless charter requires higher quorum).
• Consequences: Transaction may be invalidated by court; officials bear material liability.

3. Interested-Party Transactions

• Definition: Transactions involving shareholders, board members, or affiliates (e.g., director contracting with their own firm).
• Approved by:
  • Supervisory board;
  • General meeting – if required by law or charter.
• Procedure:
  • Interested person must disclose the interest;
  • They are excluded from voting;
  • Decision made by majority of disinterested members.
• Consequences: Transaction may be challenged and invalidated; liable persons must compensate damages.

4. Securities Transactions

• Type: Issuance, placement, and circulation of shares, bonds, and other securities.
• Approved by:
  • General meeting (as a rule);
  • Supervisory board (if delegated).
• Procedure:
  1. Adoption of issuance resolution;
  2. State registration of the issue;
  3. Public or private placement;
  4. Mandatory disclosure to shareholders and the market.
• Consequences: Issue or transaction is void; possible sanctions by regulator.

5. Real Estate Transactions

• Type: Sale, mortgage, lease, or disposal of buildings and land plots.
• Approved by:
  • Executive body (if within limit);
  • Supervisory board or general meeting – if major.
• Procedure:
  • Written contract;
  • Mandatory state registration (e.g., in real estate cadastre);
  • Prior shareholder approval for major transactions.
• Consequences: Nullity for non-compliance with form or registration.

The approval system for JSC transactions is based on the principle of significance differentiation:

• Minor transactions – executive body;
• Major and high-risk transactions – supervisory board or general meeting;
• Conflict-of-interest transactions – only “clean” voting without interested persons.

The conclusion of transactions by a joint-stock company is a complex legal process combining civil and corporate law norms. Uzbek legislation establishes a system of safeguards to prevent abuse and protect shareholder rights. Proper compliance with transaction approval procedures ensures corporate governance stability, transparency, and investor confidence.