Exercising Control over the Activities of a Joint Stock Company in Uzbekistan

Control over the activities of joint stock companies (JSCs) is a key element of corporate governance. It aims to ensure legality, transparency, and efficiency in the operation of management bodies, as well as to protect the rights and lawful interests of shareholders. In Uzbekistan, the legal regulation of this institution is based on the Law of the Republic of Uzbekistan “On Joint Stock Companies and Protection of Shareholders’ Rights” as amended in 2014 (Law No. ZRU-370).

1. Legal Basis of Control

The legislation establishes a system of management bodies within which control activities are carried out. The key provisions include:

• ensuring shareholders’ rights to participate in company management and to obtain reliable information about its activities;
• establishing the obligations of executive bodies to provide regular reporting;
• forming the supervisory board and audit commission (auditor), which are vested with special control powers.

Thus, control is integrated into the overall corporate governance system, where maintaining a balance between the interests of majority and minority shareholders is of particular importance.

2. Control Bodies in a Joint Stock Company

2.1. General Meeting of Shareholders

The supreme governing body — the general meeting of shareholders — possesses exclusive powers, including: approval of annual reports, distribution of profits, and election of members of the supervisory board and audit commission. Through the meeting, shareholders exercise control over key decisions of the company.

2.2. Supervisory Board

The supervisory board represents shareholders’ interests between general meetings. Its tasks include:

• strategic management of the company’s activities;
• supervision of the executive body;
• approval of major transactions and transactions with affiliated persons.

Hence, the supervisory board serves as a safeguard against potential abuses by management.

2.3. Executive Body

The executive body (a sole director or collegial management board) performs the day-to-day management of the company. In terms of control, it is accountable to the supervisory board and the general meeting. The executive body must provide full and accurate information about the company’s financial and economic activities.

2.4. Audit Commission (Auditor)

The audit commission (or auditor) is an internal financial control body. It verifies the accuracy of accounting, the legality of transactions and financial operations, and the reliability of annual reports. Upon completion of audits, the commission must inform the general meeting of shareholders.

2.5. External Audit

According to the law, a JSC must engage an independent auditor to verify its annual financial statements. External audit complements the internal control system and ensures objectivity in assessing the company’s performance.

3. Mechanisms for Protecting Shareholders’ Rights

Control in a joint stock company is not limited to the activities of management bodies. The law provides a range of mechanisms for the protection of shareholders’ rights, including:

• the right to demand the convening of an extraordinary general meeting;
• access to information on the company’s financial results and transactions;
• the right to challenge management decisions in court;
• the use of shareholder agreements to coordinate the interests of shareholders.

Special importance is attached to guarantees for minority shareholders, as they are most vulnerable to violations of their rights by majority shareholders.

4. State Control

State authorities exercise supervision over the activities of joint stock companies. State control is manifested through:

• regulation of the issuance and circulation of securities;
• verification of compliance with corporate governance laws;
• protection of investors’ interests and prevention of unfair practices.

Thus, state control complements internal mechanisms and ensures a unified legal order in the market.

Control Bodies and Their Powers in a Joint Stock Company

Control Body	Composition and Formation	Main Control Functions	Powers	Significance for Shareholders
General Meeting of Shareholders	All shareholders of the company	Supreme body of control over the JSC’s activities	- Approves annual report and balance sheet; - Distributes profits and dividends; - Elects supervisory board and audit commission; - Approves major transactions	Realization of shareholders’ rights to participate in management
Supervisory Board	Elected by the general meeting	Strategic control and supervision of the executive body	- Approves related-party transactions; - Oversees management; - Develops company strategy	Protection of shareholders’ interests between meetings
Executive Body (Director/Management Board)	Appointed by the meeting or board	Operational control through reporting	- Manages business operations; - Reports to board and meeting; - Executes their decisions	Ensures transparency of ongoing activities
Audit Commission (Auditor)	Elected by the general meeting	Internal financial control	- Reviews accounting; - Audits legality of transactions; - Controls reporting; - Informs shareholders	Independent verification of reporting accuracy
Internal Audit Service	Established by the supervisory board; head reports to the board	Continuous monitoring of financial and business activities	- Detects violations; - Assesses risks; - Provides recommendations; - Monitors implementation of decisions	Independent assessment and loss prevention
Corporate Consultant	Individual or legal entity under contract with the JSC	External expert control over corporate governance	- Advises on legislation; - Ensures information disclosure; - Supports board and shareholders; - Protects minority shareholders	Increases transparency, reduces conflicts, strengthens investor protection
External Audit	Independent auditing organization	External control of financial statements	- Verifies annual statements; - Issues an opinion on balance sheet accuracy	Provides objective evaluation and investor confidence
State Authorities	Competent regulatory bodies	Oversight of legal compliance	- Control over issuance and circulation of securities; - Investor protection;- Sanctions for violations	Ensures legal order and protection of minority shareholders

Control over the activities of a joint stock company in Uzbekistan represents a multi-level system that includes both internal bodies (general meeting, supervisory board, audit commission) and external mechanisms (audit, state supervision). Its purpose is to ensure a balance of interests among corporate participants, promote sustainable development of joint stock companies, and protect shareholders’ rights.

Improving the control system is linked to further harmonization of national legislation with international corporate governance standards and to strengthening guarantees for minority investors.