Reorganization and Liquidation of a Joint-Stock Company

Publication date: 01.09.2025

Reorganization and liquidation of a joint-stock company (JSC) are key institutions of corporate law that regulate the termination or transformation of a company’s activities. In a market economy, these processes play an important role in protecting the interests of shareholders, creditors, and the state, as well as ensuring the stability of business operations.

According to the Law of the Republic of Uzbekistan “On Joint-Stock Companies and Protection of Shareholders’ Rights”, reorganization of a joint-stock company may take the following forms: merger, accession, division, separation, and transformation.

Merger involves combining two or more companies into one, with the termination of the previously existing companies.
Accession means that one company joins another, with all rights and obligations transferred to the successor.
Division results in the termination of a company’s activities and the creation of new JSCs to which assets and liabilities are transferred.
Separation entails the creation of a new company without terminating the activity of the main company.
Transformation occurs when the legal form of the company changes (for example, from a JSC to an LLC).

Each form requires a resolution of the general meeting of shareholders, execution of a transfer deed or separation balance sheet, and state registration.

Legal Safeguards in Reorganization

The law mandates that the interests of creditors and shareholders must be protected. In particular:

Creditors have the right to demand early fulfillment of obligations or compensation for losses.
Shareholders are entitled to receive an equivalent share in the charter capital of the new company or compensation.
In mergers or accessions, the continuity of all property and non-property rights is preserved.

Liquidation of a Joint-Stock Company

Liquidation represents the complete termination of a legal entity’s activity without succession. It can be carried out:

Voluntarily — by resolution of the general meeting of shareholders;
Compulsorily — by court decision in cases of legal violations, insolvency (bankruptcy), or claims from state authorities.

The liquidation procedure includes:

Establishing a liquidation commission;
Publishing a notice for creditors;
Inventory and valuation of property;
Settling creditors’ claims in the prescribed order;
Distributing the remaining assets among shareholders proportionally to their shares.

Protection of Shareholders’ and Creditors’ Rights

Special attention is paid to the protection of shareholders’ rights, especially minority shareholders, who are entitled to receive their share of assets after all creditor claims are settled. The law also defines the order of priority for satisfying creditors’ claims:

Claims of individuals for damages;
Wage obligations;
Tax payments and state duties;
Other creditors.

Reorganization and liquidation provide flexibility in corporate relations, allowing companies to adapt to economic changes, prevent crises, and efficiently terminate activities when further operation is impossible.

Thus, reorganization and liquidation of a JSC under Uzbek law are legally detailed procedures aimed at balancing the interests of shareholders, creditors, and the state. Their proper application enhances legal protection and ensures market stability.

Comparative Table: Reorganization vs. Liquidation of a JSC

Criterion	Reorganization (Merger, Accession, Division, Separation, Transformation)	Liquidation
Legal Nature	Transformation of a legal entity with succession	Complete termination without succession
Grounds	Resolution of the general meeting of shareholders, regulatory requirement, or economic expediency	Resolution of shareholders (voluntary), court decision (compulsory), bankruptcy
Role of Shareholders	Retain their rights in the reorganized company or receive equivalent shares/compensation	Receive remaining property after creditors are paid
Rights of Creditors	May demand early repayment or compensation	Claims satisfied in statutory order
Documents	Transfer deed (merger, accession, transformation), separation balance sheet (division, separation)	Interim and final liquidation balance sheet
Decision-Making Body	General meeting of shareholders or authorized state body	General meeting or court
Registration	Mandatory state registration of the reorganized entity	State registration of the legal entity’s termination
Legal Consequences	Transfer of all rights and obligations to the successor	Termination of the legal entity and all obligations
State Interest	Supervision of antimonopoly compliance and shareholder rights	Supervision of debt settlement and fair asset distribution
Result	Continuation of activity in a modified form	Complete termination of activity

Rights and Obligations of Shareholders in Reorganization

Shareholders’ Rights

Right to Participate in Decision-Making. Reorganization is approved by the general meeting of shareholders. Each shareholder votes in proportion to the number of shares owned.
Right to Information. Shareholders must be notified in advance and given access to key documents: draft charters, transfer deeds, separation balance sheets, and auditor reports.
Right to Retain or Receive Compensation for Shares
- In mergers or accessions: shareholders receive shares of the new or acquiring company equivalent to their previous holdings.
- In divisions or separations: shareholders receive shares of the new entities.
- In transformations: shareholders receive proportional shares or units in the new entity.
Right to Demand Share Buyback. A shareholder who disagrees with the reorganization may demand that the company repurchase his shares at a fair (market) price.
Right to Judicial Protection. Shareholders may challenge the decision of the general meeting if it violates the law or infringes upon their rights.

Shareholders’ Obligations

Comply with Decisions of the General Meeting – once duly adopted, shareholders must execute them (e.g., exchange shares).
Provide Accurate Information – shareholders must timely provide updated personal data for the shareholder registry.
Fully Pay for Shares – any unpaid shares must be settled before completion of reorganization.
Cooperate in Rights Transfer – shareholders must not obstruct the transfer of rights and obligations to the successor.

Reorganization thus ensures a balance between shareholders’ protection and corporate flexibility — shareholders safeguard their investments and participation rights, while the company can change its structure legally and transparently.

Rights and Obligations of Minority Shareholders

Minority Shareholders’ Rights

Participation in the General Meeting — have voting rights proportional to shares owned.
Right to Information — must be informed of upcoming reorganization and have access to:
- Draft charters of the new company;
- Transfer deed or separation balance sheet;
- Auditor and independent expert reports.
Right to Demand Share Buyback — a fundamental protection mechanism enabling exit at fair value if the shareholder disagrees with reorganization.
Right to Receive Equivalent Shares — in mergers, accessions, divisions, or separations, minority shareholders receive equivalent shares in successor entities.
Right to Judicial Protection — may contest reorganization decisions made in violation of law, without proper disclosure, or infringing their rights.
Right to Association — minorities may form committees or enter shareholder agreements to defend common interests.

Minority Shareholders’ Obligations

Comply with lawfully adopted decisions of the general meeting;
Submit share buyback requests within prescribed deadlines;
Provide accurate data for the shareholder registry;
Avoid hindering the rights transfer procedure.

The law thus guarantees minority shareholders the right to exit (through buyback) and to access information — key tools ensuring they are not disadvantaged by majority decisions.

Comparison: Minority vs. Majority Shareholders in Reorganization

Criterion	Minority Shareholders	Majority Shareholders
Participation in Decision-Making	Have voting rights but cannot independently influence outcomes	Control decision-making due to voting majority
Right to Information	Guaranteed access to all key documents and reports	Have same rights but greater practical influence
Right to Demand Share Buyback	Key protection mechanism allowing exit at fair value	Rarely used, as they initiate and support reorganization
Right to Receive New Shares	Receive equivalent shares in successor company	Retain or strengthen controlling position
Judicial Protection	Can challenge unlawful or unfair decisions	May litigate but usually act as initiators
Strategic Influence	Limited	Substantial – define reorganization strategy
Obligations	Timely file buyback demands, provide accurate registry data, comply with decisions	Initiate and ensure lawful process, protect minority rights
Summary	Protected mainly through buyback, disclosure, and judicial recourse	Hold real power but bear higher responsibility for legality and fairness

Conclusion:

Minority shareholders are primarily protected through the right to share buyback, access to information, and judicial remedies.
Majority shareholders, while possessing decisive power, bear enhanced responsibility to ensure legality, transparency, and protection of minority interests during reorganization and liquidation.