Increase and Decrease of the Charter Capital in LLC

Publication date: 10.07.2025

The charter capital (authorized fund) of a limited liability company (LLC) represents the aggregate of participants’ contributions, determining the minimum property base of a legal entity. Its size plays a key role in establishing the confidence of creditors and partners in the company and serves as an indicator of financial stability. The Law of the Republic of Uzbekistan “On Limited Liability Companies” establishes strict rules governing the procedure for increasing and decreasing charter capital, aimed at protecting the interests of participants, creditors, and the state.

INCREASE OF CHARTER CAPITAL

Legal Grounds

An increase is permitted only after the full payment of the existing capital. The decision is made by the General Meeting of Participants with a majority of at least two-thirds of votes (unless a higher threshold is provided by the Charter).

Sources of Increase

From the company’s own assets.
From additional contributions of participants.
From contributions of third parties (if not prohibited by the Charter).

Forms of Increase

From the Company’s Assets

The decision can be made only on the basis of financial statements for the previous year.
The increase cannot exceed the difference between the net asset value and the sum of the charter and reserve funds.
The nominal value of all participants’ shares is increased proportionally.

From Additional Contributions of Participants and Third Parties

The decision must specify the amount, procedure, and deadlines for contributions.
Contributions by third parties are allowed only with the unanimous consent of all participants.
The results must be approved and registered with the state.

Forms of Increasing Charter Capital in an LLC

Form of Increase	Legal Basis	Decision-Maker	Implementation Procedure	Restrictions and Conditions	Consequences for Participants
From the company’s assets	Art. 17 of the Law	General Meeting (≥ 2/3 votes)	Based on annual financial statements, only if net assets exceed the sum of capital and reserve funds	The increase amount ≤ difference between net assets and total of charter and reserve funds	Proportional increase in nominal value of all shares without changing their ratios
From additional contributions of participants	Art. 18 of the Law	General Meeting (≥ 2/3 votes)	Defines the total contribution value, size, and deadlines; after payment — approval and registration	A participant’s contribution cannot exceed his additional contribution; if unpaid — reduction or refund	Increase applies only to contributing participants; ownership structure changes
From contributions of third parties	Art. 18 of the Law	General Meeting (unanimous)	Third parties apply specifying size, method, and term; upon admission, participants’ composition changes	Charter must not prohibit new members; nominal value cannot exceed contribution	New participants appear; redistribution of shares and Charter amendment
Mixed (assets + contributions)	Art. 16 of the Law	General Meeting (≥ 2/3 or unanimous if third parties involved)	Combination of sources	State registration required; compliance with rules for each source	Respective adjustments in share proportions and ownership structure

Key Points

The increase is allowed only after full payment of the charter capital.
A third party’s contribution requires unanimous consent of all participants.
All amendments take effect only after state registration.
When increased from company assets, ownership ratios remain unchanged; when through contributions or new participants — they change.

DECREASE OF CHARTER CAPITAL

Legal Grounds

A decrease is allowed by the company’s decision or as required by law.

Forms of Decrease

Reduction of nominal share value.
Redemption (cancellation) of shares owned by the company.

Mandatory Cases

If the charter capital is not fully paid within one year from registration, the company must reduce it to the paid amount or be liquidated.
If the company’s net asset value at year-end is lower than the charter capital — it must be reduced to that level.

Creditor Protection

Creditors have the right, within 30 days from notification of the decrease, to demand early fulfillment of obligations or compensation for losses. Failure to reduce capital within legal deadlines entitles the registration authority to seek liquidation of the company through court.

Forms of Decreasing Charter Capital in an LLC

Form of Decrease	Legal Basis	Decision-Maker	Implementation Procedure	Restrictions and Conditions	Consequences for Participants and Creditors
Reduction of nominal value of shares	Art. 19 of the Law	General Meeting (≥ 2/3 votes unless higher threshold in Charter)	Proportional reduction of all shares’ nominal value; ownership ratios remain unchanged	Cannot fall below the statutory minimum capital	Ownership ratios preserved; formal adjustment for balance alignment
Redemption (cancellation) of company-owned shares	Arts. 19, 23 of the Law	General Meeting (unanimous if sale involved)	Shares acquired by the company (e.g., after participant withdrawal) must be redistributed, sold, or cancelled	Cancellation allowed only after one year of holding if not sold or redistributed	Decrease of total capital, redistribution of assets, potential increase in remaining shares
Adjustment to paid-in capital	Art. 19 of the Law	General Meeting (statutory obligation)	If not fully paid within one year after registration — reduced to actual paid-in amount or liquidated	Mandatory within one year; noncompliance leads to liquidation	Formal reduction; non-paying participants lose unpaid portions
Adjustment to net asset value	Art. 19 of the Law	Mandatory corporate decision	If net assets < charter capital — must be reduced accordingly	Mandatory; creditors notified; registration required	Creditors may demand early performance or damages
Partial return of contributions (via nominal reduction)	Art. 19 and related share distribution rules	General Meeting	Return of part of contributions upon share nominal reduction with participants’ consent and creditor notice	Allowed only while maintaining minimum capital; creditor rights must be protected	Participants receive part of funds back, reducing capital “safety buffer”

Key Takeaways

Creditor protection: Creditors may demand early repayment or compensation within 30 days of notification.
Mandatory reductions: Decrease is sometimes an obligation, not a right (e.g., unpaid capital, asset deficiency).
Registration: Any decrease takes effect only upon state registration of Charter amendments.

Comparative Analysis

Criterion	Increase of Charter Capital	Decrease of Charter Capital
Grounds	Decision of general meeting, full payment, financial results	Decision of company, unpaid capital, asset deficiency
Forms	From assets, participants’ or third-party contributions	Reduction of nominal shares, redemption of company shares
Decision-Making	≥ 2/3 votes (or higher, if Charter provides)	Majority of votes; mandatory in some cases
Restrictions	Only after full payment; proportionality	Cannot go below minimum; creditor protection required
Creditor Interests	Not affected — increase strengthens protection	Secured by right to demand early payment or compensation
Registration	Mandatory, effective upon state registration	Mandatory; noncompliance may lead to liquidation

Practical Significance

For participants: Increasing capital strengthens market standing and facilitates investment attraction; decreasing capital optimizes structure but carries legal risks.
For creditors: Increase enhances guarantee of obligations; decrease requires additional protective measures.
For the state: Regulation ensures balance between business freedom and creditor protection.