Charter Fund of LLC in Uzbekistan

The charter fund, or charter capital, of a limited liability company is a property value established in the company’s charter and consisting of the nominal value of the participants’ shares. The new Law of Uzbekistan “On Limited Liability Companies” dated 21 April 2026 No. ZRU-1137 expressly provides that the charter fund is determined by the company’s charter and consists of the nominal value of the participants’ shares. At the same time, a participant’s share may be expressed as a percentage or as a fraction, and its size must correspond to the ratio of the nominal value of the share to the total amount of the company’s charter fund.

The legal nature of the charter fund is dual.

On the one hand, the charter fund performs a property function, since it records the minimum property base of the company formed through the participants’ contributions. On the other hand, it performs a corporate function, since the size of a share determines the scope of a participant’s rights: participation in management, distribution of profits, receipt of a liquidation quota, and the ability to influence decision-making.

It is important to distinguish the charter fund from all property of the company. The charter fund is not necessarily the entire aggregate of the company’s assets, but a legally fixed value reflected in the charter. The company’s property may be significantly higher or lower than the charter fund depending on business activity, profits, losses, liabilities, and the value of net assets.

The charter fund of an LLC has several key legal functions.

First, it determines the initial property basis of the company. Without determining the amount of the charter fund, it is impossible to create a complete LLC structure, since participants’ shares are formed precisely through the charter fund.

Second, the charter fund serves as a measure of corporate participation. A participant’s share in the charter fund determines his or her economic and managerial interest in the company.

Third, the charter fund performs a guarantee function for creditors. Although participants of the company, as a general rule, are not liable for the company’s obligations, the company itself is liable for its obligations with all property belonging to it. Therefore, the amount of the charter fund, the procedure for its payment, and the rules for its reduction are important for assessing the company’s financial stability.

Fourth, the charter fund is an instrument of corporate control. An increase or decrease in the charter fund may change the ratio of participants’ shares, admit new participants, or affect the scope of corporate influence of existing participants.

Composition of the Charter Fund and Types of Contributions

A contribution to the charter fund of an LLC may consist of:

1. cash;
2. securities;
3. things;
4. property rights;
5. other transferable rights having monetary value.

Thus, the law permits both monetary and non-monetary contributions. This has important practical significance, since an LLC may be formed not only through money, but also through equipment, real estate, vehicles, rights of use, exclusive rights, property claims, and other assets having economic value.

At the same time, non-monetary contributions require special legal control. The Law provides that non-monetary contributions whose value exceeds ten thousand base calculation values must be valued by an appraisal organization, and their value may not exceed the appraised value.

This approach is aimed at preventing the overvaluation of contributions. Overvaluation of a non-monetary contribution may violate the interests of creditors and other participants, since formally the charter fund will appear larger than the actual property base of the company.

Minimum Amount of the Charter Fund

The new Law on LLCs does not establish a universal minimum amount of the charter fund for all companies. At the same time, it allows the minimum amount of the charter fund to be provided for by licensing requirements.

This means that for ordinary types of business activity, an LLC may be established without a special increased capital barrier, unless otherwise provided by legislation. However, for certain regulated sectors — for example, financial, insurance, microfinance, banking, payment, security, pharmaceutical, or other licensed activities — the minimum amount of the charter fund may be determined by special regulatory acts.

This approach is flexible: it does not create excessive obstacles for small and medium-sized businesses, while at the same time allowing the state to establish increased property requirements for sensitive or socially significant sectors.

Participant’s Share in the Charter Fund

A participant’s share is a central category of corporate relations in an LLC. It expresses the scope of participation of a specific person in the company’s charter fund.

The Law distinguishes the following:

Category	Content
Nominal value of the share	The value of the share determined on the basis of the amount of the contribution and the charter fund
Size of the share	The percentage or fractional ratio of a participant’s share to the charter fund
Actual value of the share	A part of the value of the company’s net assets proportional to the size of the participant’s share

The distinction between the nominal and actual value of a share is of particular importance.

The nominal value is fixed in the charter and is linked to the charter fund. The actual value depends on the real financial condition of the company, that is, on the value of its net assets. The Law expressly states that the actual value of a participant’s share corresponds to the part of the value of the company’s net assets proportional to the size of his or her share.

For example, if the company’s charter fund amounts to UZS 100,000,000 and a participant owns a 30% share, the nominal value of his or her share is UZS 30,000,000. However, if the company’s net assets amount to UZS 500,000,000, the actual value of his or her share will be UZS 150,000,000.

Terms and Procedure for Making Contributions

Each participant is obliged to make his or her contribution to the charter fund in the procedure, amount, manner, and within the terms provided by law and the founding documents. The Law establishes that each participant must fully make his or her contribution to the charter fund within the term established by the founding documents, but not later than one year from the date of state registration of the company.

A special rule is provided for credit organizations: each participant must make at least 30% of his or her contribution before the state registration of the company as a credit organization.

Failure to make a contribution within the established term entails serious legal consequences. If a participant has not made a contribution and this prevents the company’s activities or substantially hinders them, such participant may be excluded from the company by court order upon an application of the executive body on the basis of a resolution of the general meeting of participants, unless otherwise provided by the founding documents.

Thus, the obligation to make a contribution is not a formal but a real corporate obligation. Its breach may entail both property-related and corporate legal consequences.

Increase of the Charter Fund of an LLC

An increase of the charter fund is permitted only after it has been fully paid. This rule is of fundamental importance: the company may not increase its capital if the previous capital has not yet been formed.

A resolution to increase the charter fund is adopted by the general meeting of participants by a majority of at least two-thirds of the total number of votes of the participants, unless the charter provides for a larger number of votes.

The Law provides for several sources for increasing the charter fund:

Source of increase	Legal characteristics
Property of the company	Increase at the expense of the company’s own assets
Retained earnings	Capitalization of profits without making new contributions
Additional contributions of participants	Participants make new contributions
Contributions of third parties	New persons are admitted as participants, unless this is prohibited by the charter

An increase of the charter fund at the expense of the company’s property, including retained earnings, is possible only on the basis of financial statements for the year preceding the year in which the resolution is adopted, confirmed by an external audit report. At the same time, the amount of the increase must not exceed the difference between the value of the company’s net assets and the sum of the charter fund and the reserve fund.

This rule protects the company from a fictitious increase of capital. The charter fund may be increased at the expense of the company’s property only within the limits of actually available net assets.

Increase of the Charter Fund Through Additional Contributions

An increase of the charter fund through additional contributions of participants or contributions of third parties is of particular importance.

If the increase is carried out through additional contributions of all participants, the resolution of the general meeting must determine:

Mandatory condition	Content
Total value of additional contributions	Aggregate amount of the increase of the charter fund
Amount of the additional contribution of each participant	Specific amount or value of the contribution
Term for making contributions	Period within which the contributions must be fully made

If the increase is carried out upon an application of a participant or a third party, the application must specify the procedure, amount, method, and term for making the contribution, as well as the size of the share that the person wishes to receive in the charter fund.

The Law also requires that, after the expiry of the term for making additional contributions, the general meeting must, not later than within one month, approve the results of making the contributions and adopt the relevant resolutions on changing the charter fund, the nominal value of shares, and the composition of participants.

If the established terms are not complied with, or the additional contributions are not fully made and no resolution is adopted to adjust the amount of the increase, the increase of the charter fund is deemed not to have taken place. In such case, the company is obliged to return the monetary contributions made within ten days.

Reduction of the Charter Fund of an LLC

A reduction of the charter fund may be voluntary or mandatory.

A voluntary reduction is carried out by resolution of the company. A mandatory reduction occurs in cases expressly provided by law. The Law establishes that the company is obliged to reduce the charter fund by reducing the nominal value of the participants’ shares and/or by paying for the shares owned by the company in cases provided by law.

The main cases of mandatory reduction are as follows:

Ground	Legal consequence
The charter fund has not been fully paid within one year after state registration	The company must reduce the charter fund to the actually paid amount or adopt a resolution on liquidation
At the end of the second and each subsequent financial year, the value of net assets is lower than the charter fund	The company is obliged to reduce the charter fund to an amount not exceeding the value of net assets
A share has passed to the company and has not been distributed or sold within the established term	The charter fund is reduced by the corresponding amount

When the charter fund is reduced by reducing the nominal value of all participants’ shares, the sizes of the shares must be preserved. This means that the reduction must not change the proportions of participation if it is carried out evenly for all participants.

The Law also provides for creditor protection: creditors have the right, within thirty days from the date when they became aware of the reduction of the charter fund, to demand early termination or performance of the company’s obligations and compensation for losses.

Charter Fund and Protection of Creditors

The charter fund is not an absolute guarantee of satisfaction of creditors’ claims. However, it performs an important informational and protective function.

Creditors assess the company as an independent participant in civil turnover. Since participants of an LLC, as a general rule, are not liable for the company’s obligations, it is important for creditors to understand how well the company is capitalized and whether its charter fund corresponds to the real amount of net assets.

That is why the Law provides for:

1. the obligation to fully pay the charter fund;
2. the restriction on increasing the charter fund until it has been fully paid;
3. the valuation of major non-monetary contributions;
4. the obligation to reduce the charter fund in the event of insufficiency of net assets;
5. the right of creditors to demand early performance of obligations when the charter fund is reduced;
6. the possibility of liquidation of the company if it does not adopt the necessary decisions on capital reduction or liquidation.

Thus, the charter fund serves as an element of the system of corporate discipline and protection of civil turnover.

Charter Fund and Corporate Control

The charter fund is closely connected with the issue of corporate control. The size of a participant’s share affects the scope of his or her votes, the ability to block decisions, initiate corporate procedures, participate in the distribution of profits, and demand protection of his or her rights.

For example, participants whose aggregate shares amount to at least 10% of the charter fund have the right to demand in court the exclusion of a participant who fails to perform the obligations provided for by the charter or, by his or her actions or inaction, prevents the company’s activities or substantially hinders them.

In addition, the charter may provide for:

Possibility of regulation by the charter	Significance
Maximum size of a participant’s share	Prevention of concentration of control
Restriction on changes in the ratio of shares	Protection of the balance of participants’ interests
Prohibition or restriction on the entry of third parties	Preservation of the closed nature of the LLC
Special procedure for exercising the pre-emptive right	Protection of participants against undesirable changes in the composition of the company

The Law allows the charter to restrict the maximum size of a participant’s share, as well as the possibility of changing the ratio of participants’ shares. Such restrictions may not be established selectively in relation to individual participants and must apply to all participants on an equal basis.

Charter Fund and Transfer of Shares

The charter fund is closely connected with the circulation of shares. A participant has the right to transfer his or her share or part of the share to other participants of the company. Unless otherwise provided by the charter, the consent of the company or other participants to such transaction is not required.

The transfer of a share to a third party is permitted unless it is prohibited by the charter. At the same time, the participants of the company have a pre-emptive right to purchase the share before third parties.

The right to the share passes to the acquirer from the moment the relevant entry is made in the Unified State Register of Business Entities. This rule strengthens the public reliability of the company’s corporate composition and reduces the risk of disputes as to who is a participant of the LLC.

Until a share is fully paid, it may be alienated only in the paid part. This is logical, since the unpaid part of the share has not yet been secured by the relevant contribution and cannot be freely transferred as a full-fledged corporate asset.

Problematic Issues in the Legal Regulation of the Charter Fund

Despite sufficiently developed regulation, the institution of the charter fund of an LLC gives rise to a number of practical issues.

1. Formal nature of the charter fund. In many cases, the charter fund may be minimal and may not reflect the company’s real solvency. Therefore, creditors should not rely solely on the amount of the charter fund; it is necessary to analyze financial statements, net assets, the availability of property, debt burden, and the company’s business history.
2. Valuation of non-monetary contributions. In practice, disputes may arise regarding the real value of property contributed as a contribution. This is especially relevant to intellectual property, property rights, equipment, real estate, and rights of use. Therefore, the valuation of such contributions must be transparent, documented, and economically justified.
3. Dilution of participants’ shares. An increase of the charter fund through additional contributions or the admission of third parties may lead to a change in the ratio of shares. If a minority participant does not participate in additional financing, his or her share may decrease. Therefore, the charter and corporate agreement should regulate in advance the procedure for making additional contributions, protection against dilution, the pre-emptive right to participate in a capital increase, and the procedure for valuing new contributions.
4. Insufficiency of net assets. If the value of the company’s net assets becomes lower than the charter fund, an obligation arises to reduce the charter fund. In practice, this may be a sign of the company’s financial problems. Failure to comply with this obligation creates risks for management bodies, participants, and creditors.

Practical Recommendations for the Charter of an LLC

For high-quality corporate regulation, it is advisable to set out the following provisions in detail in the charter of an LLC:

Issue	Recommended regulation
Amount of the charter fund	Indicate the exact amount and currency of expression
Size of shares	Indicate the shares of each participant as a percentage and in nominal value
Terms for making contributions	Establish specific terms not exceeding the statutory limit
Liability for late contribution	Provide for a penalty, losses, and consequences of non-payment
Non-monetary contributions	Establish the procedure for valuation, transfer, and confirmation of ownership
Additional contributions	Determine the procedure, terms, and consequences of failure to make contributions
Protection against dilution	Establish a pre-emptive right to participate in a capital increase
Entry of third parties	Establish the need for consent of participants or the company
Restriction on the maximum share	If necessary, establish a limit on the concentration of control
Reduction of the charter fund	Provide for the procedure for notifying participants and creditors
Corporate agreement	Recommend entering into a separate agreement between participants