Management in a Limited Liability Company

Management in a Limited Liability Company (hereinafter – LLC) is one of the key areas of corporate law. The effective functioning of management bodies determines the stability of the company, its ability to attract investment, and to ensure the balance of interests among participants, the state, and counterparties. The Law of the Republic of Uzbekistan “On Limited Liability Companies” establishes a clear system of management bodies, their powers, procedures for formation, and liability.

System of Management Bodies

According to the law, management in an LLC is based on a multi-level structure, which includes:

• The Supreme Body – the General Meeting of Participants;
• The Supervisory Board (may be established by the Charter);
• The Executive Bodies – a sole executive body (Director) or a collegial body (Management Board or Directorate).

1. General Meeting of Participants

The General Meeting is the supreme governing body vested with exclusive powers, including:

• defining the main directions of the company’s activities;
• amending the Charter and share capital;
• electing executive bodies, the audit commission, and the supervisory board;
• approving reports and distributing profits;
• deciding on reorganization or liquidation of the company.

2. Supervisory Board

The Supervisory Board is formed at the discretion of the participants and performs strategic control functions. In companies with more than 50% state ownership, an independent member of the board is mandatory, which strengthens corporate governance principles and reduces the risk of conflicts of interest.

3. Executive Bodies

The Sole Executive Body (Director) acts on behalf of the company without a power of attorney, concludes transactions, manages personnel, and bears personal liability for losses.

The Collegial Executive Body (Management Board or Directorate) may be established if necessary and makes decisions on matters delegated by the Charter.

Executive bodies are accountable to the General Meeting of Participants and, if applicable, the Supervisory Board.

Decision-Making Mechanisms

Regular meetings are held at least once a year. Extraordinary meetings may be convened at the request of participants (holding at least 10% of shares), the audit commission, or the supervisory board.

Forms of voting include: personal attendance, proxy representation, and absentee voting (by written polling) using communication means.

Quorum and voting procedures depend on the nature of the issues:

• amendments to the Charter and reorganization require unanimity or a qualified majority (2/3 of votes);
• other decisions are adopted by a simple majority.

Control and Liability

Decisions of management bodies may be appealed in court if they infringe upon participants’ rights. Members of the Supervisory Board and executive bodies must act in good faith and reasonably; otherwise, they are liable for damages caused to the company.

If the rules for concluding major or related-party transactions are violated, the Director and the Management Board bear subsidiary liability.

Comparative Table of Management Bodies

Body	Formation	Powers	Liability	Special Features
General Meeting	All participants	Strategic decisions, approval of reports, reorganization	Decisions may be appealed in court	Supreme governing body
Supervisory Board	As per Charter	Control, formation of executive bodies, approval of major transactions	Collective liability	Independent member required if state share >50%
Sole Executive Body (Director)	Elected by meeting	Representation, transactions, HR management	Personal and subsidiary liability	May be an external person
Collegial Executive Body	As per Charter	Collective management of current operations	Joint (solidary) liability	Usually Management Board or Directorate

Powers of the General Meeting of Participants and Required Number of Votes

Category	Specific Issues	Required Votes	Notes
Strategic Decisions	Defining main business directions; Participation in associations of commercial entities	Simple majority	Decision adopted by majority of total votes
Constitutive Documents	Amending the Charter and Foundation Agreement	Unanimous or 2/3	Generally 2/3, but some require unanimity
Charter Capital	Increase or decrease of authorized capital	2/3	Charter may require higher threshold
Formation of Management Bodies	Election/dismissal of Director, members of collegial executive body, audit commission, supervisory board	Simple majority	Exclusive competence of the meeting
Financial Issues	Approval of annual reports and balance sheets; Distribution of net profit (dividends)	Simple majority	Dividends paid proportionally to shares
Corporate Regulation	Approval of internal documents (regulations, bylaws)	Simple majority	Charter may stipulate qualified majority
Audit and Control	Appointment of auditor; Determination of remuneration	Simple majority	Charter may define special procedure
Creation and Reorganization	Establishment of branches or subsidiaries; Reorganization (merger, split, transformation)	2/3 or unanimous	Liquidation/reorganization require stricter voting
Liquidation	Decision on liquidation; Appointment of liquidator; Approval of liquidation balances	Unanimous	Exclusive competence of the meeting
Other Issues	Issues directly provided by law or Charter	Depends on issue nature	Major deals may require 2/3 or unanimity

General voting rules:

• Simple majority — unless otherwise provided by law or Charter;
• 2/3 majority — for key matters (capital change, reorganization, etc.);
• Unanimity — for fundamental issues (Charter amendments, liquidation, special provisions).

Powers of the Supervisory Board

Category	Specific Issues	Required Votes	Notes
Formation of Management Bodies	Appointment/dismissal of executive bodies	Internal decision (simple majority)	If provided by Charter
Control and Oversight	Creation of internal audit service; Appointment of its staff	Simple majority	Strengthens internal control
Company Transactions	Approval of major transactions (Art. 44); Related-party transactions	2/3 or as per Charter	Limited by law
Preparation and Convening of Meetings	Organizing and convening General Meetings	Simple majority	Can be explicitly provided in Charter
Liquidation Oversight	Recommendations to General Meeting on liquidation/reorganization	Advisory function	Final decision by General Meeting
Financial Matters	Review of annual reports; Oversight of profit distribution	Simple majority	Control and preparatory role
Other Powers	As provided by law or Charter	As per Charter	Varies by company

Features of the Supervisory Board:

• Formation: Elected by General Meeting; inclusion of an independent member mandatory if state share >50%.
• Restrictions: The Director and members of the Management Board cannot serve on the Board.
• Liability: Members must act in good faith and reasonably; jointly liable for damages caused by their actions or omissions.
• Remuneration: May receive remuneration and expense reimbursement by decision of the General Meeting.
• Advisory Rights: May attend General Meetings with consultative voting rights.

Powers of the Executive Body (Director / Collegial Body)

Category	Specific Functions	Required Votes	Notes
Representation and Transactions	Acts without power of attorney; Represents the company; Concludes contracts and agreements	Solely (Director) or majority (Collegial Body)	Limited by law and Charter
Interaction with State Authorities	Issues powers of attorney; Signs official documents	Solely / Collegially	—
Personnel Matters	Hires and dismisses employees; Applies incentives or sanctions	Solely (Director)	Cannot be delegated
Operational Management	Organizes company operations; Implements decisions of General Meeting and Supervisory Board; Ensures accounting and statistics	Solely / Collegially	Accountable to higher bodies
Financial and Economic Activity	Manages assets; Conducts settlements and credit operations; Determines contract terms	As per internal rules	Major deals require approval
Internal Documents	Issues internal orders, directives, and instructions not reserved for higher bodies	Solely / Collegially	—
Meeting Organization	Convenes regular or extraordinary General Meetings	Decision of body	Must consider requests within 3 days
Records and Documentation	Maintains meeting minutes and company records; Provides information to participants	Solely / Collegially	—
Special Delegation Powers	May transfer powers to another commercial entity (trust manager)	By decision of General Meeting	Conditions approved by Board or Meeting

Executive Body Features:

• Forms: Sole (Director) or Collegial (Management Board, Directorate);
• Appointment: Elected by the General Meeting of Participants;
• Accountability: To the General Meeting and Supervisory Board (if any);
• Liability: Must act in good faith and reasonably; bears property and subsidiary liability for losses, including violations in major transactions.