Rights and Obligations of Shareholders

The institution of joint-stock companies (JSCs) is a key element of the modern market economy. In Uzbekistan, the legal regulation of the activities of joint-stock companies and the protection of shareholders’ rights is based on the Law “On Joint-Stock Companies and Protection of Shareholders’ Rights” (new edition of 2014). The central issue in this regulation is the balance between shareholders’ rights and obligations, ensuring the alignment of interests of all participants in corporate relations.

Shareholders’ Rights

Legislation establishes a wide range of shareholders’ rights, which can be conventionally divided into property, non-property, and corporate rights.

Property Rights:

• The right to receive dividends in proportion to the number of shares owned;
• The right to receive a portion of the company’s assets upon its liquidation;
• The right to freely dispose of shares, including selling or transferring them to others (except where restrictions are established by law).

Corporate Rights:

• Participation in the management of the company through the general meeting of shareholders;
• Voting rights in decision-making (for holders of ordinary shares — on all matters within the competence of the general meeting; for holders of preferred shares — on specific matters related to their rights);
• Access to reliable information about the company’s financial and economic activities;
• The ability to unite in associations and unions to protect shareholders’ interests.

Right to Protection:

• Judicial protection of violated rights;
• The right to claim compensation for damages;
• The possibility to conclude a shareholders’ (corporate) agreement to coordinate the exercise of rights.

Shareholders’ Obligations

Alongside rights, shareholders are subject to a number of obligations ensuring the stability of corporate relations:

• Payment for Shares. Shareholders must pay for acquired shares in full and on time. Otherwise, they bear joint liability within the unpaid portion.
• Compliance with the Company’s Charter. Shareholders must act within the framework of the charter and not violate the rights of other shareholders.
• Prohibition of Abuse of Rights. The exercise of shareholder rights must not harm the company or other shareholders.
• Liability of Controlling Shareholders. If a shareholder’s binding instructions lead the company to insolvency, they may bear subsidiary liability.

Balance of Rights and Obligations

A fundamental principle is the equality of shareholders: one share of the same type grants the same set of rights, and restrictions on share disposition cannot deprive a shareholder of participation in management or receipt of dividends.

Preferred shareholders have guarantees of receiving a fixed dividend and priority in claims during the liquidation of the company. At the same time, their participation in management is limited, balancing the interests of majority and minority shareholders.

Practical Significance

The rights and obligations of shareholders form the foundation of corporate stability. Their clear regulation allows to:

• Ensure transparency and predictability of company management;
• Reduce the risk of corporate conflicts;
• Protect minority shareholders from potential abuses by majority owners.

The legal framework governing shareholders’ rights and obligations in Uzbekistan aims to balance the interests of all participants in a joint-stock company. Compliance with both rights and obligations is a necessary condition for the effective functioning of the corporate sector and the development of a market economy.

Comparative Table of Shareholders’ Rights and Obligations

Category	Ordinary Shareholders	Preferred Shareholders
Property Rights	- Receive dividends (based on company results). - Receive part of assets upon liquidation proportionally to shares.	- Receive fixed dividends regardless of profits. - Priority right to receive assets upon liquidation.
Corporate Rights	- Participate in general meetings with full voting rights. - Elect and be elected to management bodies. - Submit proposals to the meeting agenda.	- Usually no voting rights. - Exception: may vote on matters of reorganization, liquidation, or changes affecting preferred shares.
Right to Information	- Access to financial and economic information. - Obtain copies of the charter and amendments.	- Similar access to information as established by law and charter.
Protective Rights	- Appeal management decisions in court. - Claim damages. - Enter into shareholders’ agreements.	- Same judicial and compensation rights.
Obligations	- Full and timely payment for shares. - Compliance with the charter. - No abuse of corporate rights.	- Full and timely payment for shares. - Compliance with the charter.- No abuses.
Liability	- No liability for company obligations, except for unpaid shares. - Controlling shareholders may bear subsidiary liability if their actions cause insolvency.	- Same liability rules apply.

 

Liability for Violation of Shareholders’ Rights and Obligations

1. Liability for Non-Payment of Shares

A shareholder must pay for shares within the timeframe and procedure established by the charter and law. In case of non-payment or partial payment:

• The shareholder bears joint liability for company obligations within the unpaid amount;
• Penalties (fines, interest) may be applied as provided in the charter.

2. Liability of Controlling Shareholders

Special liability applies to shareholders with the right to issue binding instructions. If such instructions cause insolvency, the shareholder may be held subsidiarily liable for the company’s debts. The court assesses whether the shareholder knew their instructions could lead to bankruptcy.

3. Liability for Abuse of Rights

Shareholders must not use their rights to the detriment of the company or others. Abuses (e.g., blocking decisions, manipulating mergers, or violating pre-emptive rights) may be challenged in court. The violator must compensate damages and lost profits to the company or other shareholders.

4. Liability for Violation of Pre-Emptive Rights

If a shareholder sells shares without observing the pre-emptive rights of other shareholders or the company, the transaction may be challenged in court. In such cases, shares can be transferred to the rightful buyer, and the violator must compensate losses.

5. Company’s Liability to Shareholders

The company is liable for violating shareholders’ rights, including:

• Late payment of dividends;
• Denial of access to information;
• Violation of meeting procedures. Shareholders may file lawsuits seeking compensation for damages.

6. Liability for Violation of Minority Shareholders’ Rights

Majority shareholders (those with controlling stakes) may be held liable if they infringe minority rights — e.g., by restricting access to meetings, information, or imposing harmful transactions. Courts may invalidate such actions and order compensation.

7. Liability of Management Bodies

Although management bodies are not shareholders, their actions directly affect shareholder protection. Directors, supervisory board members, and executives bear personal liability for damages caused by improper performance of duties. Shareholders may sue for damages.

Types of Liability of Shareholders and the Company

№	Violation	Liable Party	Consequences (Measures of Liability)
1	Non-payment or partial payment for shares	Shareholder	- Joint liability within unpaid portion. - Penalty (fine, interest) under the charter.
2	Binding instructions leading to bankruptcy	Controlling shareholder	- Subsidiary liability for company debts. - Judicial recovery of damages.
3	Abuse of rights (blocking decisions, vote manipulation)	Shareholder	- Compensation for damages to company or other shareholders. - Court challenge of decisions.
4	Sale of shares violating pre-emptive rights	Selling shareholder	- Court annulment of transaction. - Transfer of shares to rightful holder. - Compensation for losses.
5	Violation of minority rights (restricted access, exclusion)	Majority shareholders, management bodies	- Judicial protection of minority rights. - Damages recovery. - Invalidation of meeting decisions.
6	Late dividend payment	Company	- Court-ordered payment with interest. - Compensation for losses.
7	Refusal to provide information	Company, officials	- Court order to disclose information. - Administrative liability of officials.
8	Violation of meeting procedures	Company (board, executive body)	- Invalidation of meeting decisions. - Liability of officials.
9	Damage caused by management actions	Directors, board members	- Personal financial liability for damages. - Court-ordered recovery of losses.

Thus, the system of liability in joint-stock companies in Uzbekistan aims to ensure a balance of interests:

• Shareholders are responsible for their obligations to the company and other shareholders;
• The company and its management bodies are responsible for protecting shareholders’ rights;
• Judicial mechanisms play a key role in safeguarding rights and restoring fairness.