Shareholders’ Agreement in Uzbekistan

Publication date: 08.06.2026

Modern corporate law is gradually moving away from an exclusively mandatory model of regulating business companies and allows for more flexible contractual regulation of relations between participants. In the classical model of a limited liability company, the main documents were the charter and the foundation agreement. However, in practice, these instruments are often insufficient for detailed regulation of voting matters, exit from business, sale of participation interests, resolution of deadlock situations, financing of the company, allocation of control, and protection of investments.

This is precisely the function performed by a shareholders’ agreement. Its purpose is not to replace the charter, but to create an additional contractual mechanism through which the company’s participants agree on the procedure for exercising their corporate rights.

The new Law of Uzbekistan “On Limited Liability Companies” dated 21 April 2026 expressly establishes the right of company participants to enter into shareholders’ agreements in the manner prescribed by the Civil Code of the Republic of Uzbekistan. In particular, among the rights of LLC participants, the law specifies the right to enter into shareholders’ agreements between founders or participants concerning the exercise of their rights.

Concept and Legal Nature of a Shareholders’ Agreement

A shareholders’ agreement is an agreement between participants of a business company under which they undertake to exercise their corporate rights in a certain manner or to refrain from exercising them in an agreed manner.

Article 358¹ of the Civil Code of the Republic of Uzbekistan is dedicated to shareholders’ agreements. According to this provision, a shareholders’ agreement must be concluded in writing and is binding on its parties.

Accordingly, a shareholders’ agreement has a dual legal nature:

Corporate, because it is connected with participation in the company, voting, disposal of participation interests, management of the company, and exercise of participant rights.
Contractual, because it creates rights and obligations only between the parties to the agreement and is performed as a civil-law obligation.

A shareholders’ agreement is not a constituent document of the company. It does not replace the charter, is not subject to state registration as a charter, and does not directly change the legal status of third parties. Its main effect is directed at the internal relations between the participants who have signed the agreement.

Shareholders’ Agreement and LLC Charter

The LLC charter is the principal local corporate act of the company. The new LLC Law provides that the charter must contain information on the composition and powers of the company’s bodies, the procedure for adopting decisions, the amount of the charter fund, the size and nominal value of participants’ participation interests, the rights and obligations of participants, the procedure for withdrawal of a participant, transfer of participation interests, storage of documents, and provision of information.

A shareholders’ agreement, unlike the charter, regulates not the status of the company as a legal entity, but the conduct of its participants. Therefore, it has a more flexible and confidential nature.

Criterion	LLC Charter	Shareholders’ Agreement
Legal nature	Constituent document of the company	Civil-law agreement between participants
Binding force	Binding on the company, participants, and third parties within the limits established by law	Binding only on the parties to the agreement
State registration	Subject to registration upon establishment of the company and upon amendments	Not subject to registration as a constituent document
Disclosure of content	The content of the charter is available to participants, the auditor, and interested persons in the manner prescribed by law	The content of the agreement does not have to be disclosed to the company
Main subject matter	Structure of the company, bodies, charter fund, rights and obligations of participants	Procedure for exercising corporate rights by the parties
Confidentiality	Limited	Higher
Breach	May affect corporate decisions and the legal status of the company	Entails contractual liability of the breaching party

It is particularly important that under Article 358¹ of the Civil Code, the parties to a shareholders’ agreement are obliged to notify the business company in writing of the conclusion of the shareholders’ agreement no later than 15 days after its conclusion, but the content of the agreement does not have to be disclosed. If this obligation is breached, company participants who are not parties to the agreement may claim compensation for damages caused to them.

Permissible Content of a Shareholders’ Agreement

A shareholders’ agreement may cover a wide range of matters related to the exercise of the rights of company participants. In practice, it is advisable to include the following blocks.

1. Agreed Voting

The parties may agree to vote in a certain manner on pre-determined matters: approval of the budget, appointment of the director, approval of major transactions, distribution of profits, amendment of the charter, increase of the charter fund, and attraction of an investor.

However, a shareholders’ agreement must not become an instrument for subordinating participants to the company’s bodies. The Civil Code expressly prohibits the inclusion in a shareholders’ agreement of terms requiring company participants to vote in accordance with instructions of the company’s bodies. Such terms are null and void.

2. Restrictions on Disposal of Participation Interests

A shareholders’ agreement may provide for:

a prohibition on selling a participation interest for a certain period;
an obligation to first offer the participation interest to other participants;
a procedure for determining the price of the participation interest;
conditions for joint sale of participation interests;
tag-along and drag-along mechanisms;
consequences of selling a participation interest in breach of the agreement.

Such provisions are particularly important for joint ventures, family companies, startups, and companies with several strategic partners.

3. Financing of the Company

The participants may agree on the procedure for additional financing of the company: making contributions, granting loans, capitalization of profits, allocation of investment obligations, and consequences of refusal to provide financing.

This is important because charter regulation is often limited to the formal amount of the charter fund, whereas actual business activity requires continuous financing.

4. Distribution of Profits

The law grants participants the right to participate in the distribution of profits. The new LLC Law expressly establishes this right among the basic rights of company participants.

A shareholders’ agreement may additionally define the company’s economic policy: when profits are distributed, what portion remains in reserve, under what financial indicators dividends are not paid, and which expenses require prior approval.

5. Deadlock Mechanisms

One of the key functions of a shareholders’ agreement is to prevent deadlock situations where participants cannot adopt a decision due to equal distribution of participation interests or an irreconcilable conflict.

The new LLC Law provides that where it is impossible to reach agreement on company management matters due to irreconcilable disagreements among participants, the disputed situation shall be resolved by a court or, if provided for in the constituent documents, through mediation or arbitration.

A shareholders’ agreement may provide in advance for contractual mechanisms to resolve a deadlock situation:

Mechanism	Description
Mediation	Mandatory attempt to resolve the dispute with a mediator
Escalation	Referral of the matter to the level of owners or an independent expert
Russian roulette	One participant proposes a price, and the other chooses whether to buy or sell; a contractual mechanism for exiting a corporate deadlock
Texas shoot-out	The parties submit sealed bids, and the higher price wins; a corporate deadlock resolution mechanism under which participants submit sealed price offers to buy each other’s participation interest
Put option	The right of one participant to demand the buyout of its participation interest
Call option	The right of one participant to buy out the participation interest of another participant upon the occurrence of certain conditions
Liquidation mechanism	An agreed procedure for terminating the joint business

Limits of Freedom of a Shareholders’ Agreement

A shareholders’ agreement is not an absolutely free instrument. Its content is limited by mandatory provisions of law, the rights of other participants, public interests, and the legal nature of a legal entity.

Article 358¹ of the Civil Code establishes two important prohibitions:

It is prohibited to include terms requiring participants to vote in accordance with instructions of the company’s bodies.
It is prohibited to determine the structure of the company’s bodies and their powers by a shareholders’ agreement.

This means that the structure of LLC bodies must be determined by law and the charter, not by a closed agreement of individual participants. A shareholders’ agreement may coordinate the conduct of participants, but it must not replace the publicly significant corporate order.

For example, it is permissible to provide that participants undertake to vote for a specific candidate for the position of director. However, it is impermissible to provide that the director must vote or act exclusively on the instructions of participants if this violates the competence of the company’s bodies or contradicts the law.

Shareholders’ Agreement as a Means of Protecting Minority Participants

A shareholders’ agreement is of particular importance for minority participants. In an LLC, a minority participant often has limited influence over company decisions, especially where the controlling participant is able to independently shape the agenda, appoint the executive body, and determine the company’s economic policy.

Through a shareholders’ agreement, a minority participant may obtain additional contractual guarantees:

Minority Participant’s Risk	Contractual Protection Mechanism
Dilution of participation interest	Prohibition on increasing the charter fund without the minority participant’s consent
Appointment of a controlled director	Approval of the director’s candidacy
Asset stripping	Prohibition on transactions with affiliated persons without the minority participant’s consent
Non-distribution of profits	Minimum dividend policy
Sale of the business without participation of the minority participant	Tag-along right, meaning the right of a minority participant to join the sale of a participation interest if the majority participant sells its participation interest to a third party
Forced blocking of information	Expanded procedure for disclosure of reports
Corporate conflict	Mediation, buy-sell mechanism, put option

Thus, a shareholders’ agreement serves not only as an instrument of contractual autonomy, but also as a mechanism for reallocating corporate risks.

Shareholders’ Agreement and Transactions with Participation Interests

A shareholders’ agreement is particularly important for regulating the circulation of participation interests. The new LLC Law regulates in detail the transfer of participation interests, pre-emptive purchase right, sale of participation interests to third parties, consent of participants or the company, state registration of the transfer of participation interests, and consequences of breach of the pre-emptive right.

At the same time, a shareholders’ agreement may supplement the law with the following terms:

procedure for valuation of the participation interest;
formula for determining the price;
obligation to disclose a potential buyer;
prohibition on sale to a competitor;
prohibition on splitting a participation interest;
right of joint sale;
obligation of a new participant to accede to the shareholders’ agreement;
liability for disposal of a participation interest in breach of contractual restrictions.

A provision requiring the purchaser of a participation interest to accede to the shareholders’ agreement is of particular importance. Without such a provision, the agreement may lose its practical effectiveness after a change in the composition of participants.

Liability for Breach of a Shareholders’ Agreement

Breach of a shareholders’ agreement does not always automatically entail invalidity of a corporate decision of the company. This is explained by the fact that a shareholders’ agreement operates primarily between its parties. Therefore, the main consequences of breach are civil-law liability measures.

Possible sanctions include:

Breach	Possible Consequence
Voting contrary to the agreement	Penalty, compensation for damages
Sale of a participation interest in breach of restrictions	Fine, obligation to transfer the participation interest, compensation for damages
Refusal to finance the company	Interest, fine, dilution mechanism in respect of the participant’s participation interest
Breach of confidentiality	Compensation for damages, fine
Breach of tag-along / drag-along	Obligation to complete the transaction, compensation for losses
Failure to notify the company of the conclusion of the agreement	Compensation for damages to participants who are not parties to the agreement, if damages were caused

In practice, it is important to provide for predetermined sanctions in the shareholders’ agreement. A simple reference to compensation for damages may be insufficient, because in corporate disputes the amount of damages is often difficult to prove.

Importance of a Shareholders’ Agreement for Corporate Governance

A shareholders’ agreement increases the predictability of corporate relations. It is particularly useful in the following cases:

A 50/50 joint venture of two partners. The agreement allows the parties to determine in advance the procedure for resolving deadlock situations.
An investment project. The investor may receive guarantees regarding management, reporting, financing, and exit from the project.
A family business. The agreement helps regulate inheritance of participation interests, the procedure for participation of relatives in management, and sale of participation interests to third parties.
A startup. The agreement may provide for vesting, lock-up, prohibition on exit of key participants, and the procedure for attracting investments.
Protection of a minority participant. The agreement may grant additional veto rights and information rights.

Problematic Issues of Law Enforcement

Despite the high practical value of a shareholders’ agreement, the following problems may arise in law enforcement practice:

Correlation between the agreement and the charter. If a shareholders’ agreement contradicts the charter, the question of priority arises. With respect to third parties and the corporate status of the company, the charter should prevail. A shareholders’ agreement may create obligations between the parties, but it must not change the publicly registered provisions of the charter.
Enforceability of obligations to vote in a certain manner. Theoretically, a participant may breach the agreement and vote differently. In such a case, it is important to provide contractual liability in advance. However, the question of whether a company decision may be invalidated solely because of breach of a shareholders’ agreement requires a cautious approach.
Confidentiality and interests of the company. The law allows the content of a shareholders’ agreement not to be disclosed to the company, but requires the company to be notified of the fact of its conclusion. This balance protects the confidentiality of participants while also allowing the company to know about the existence of contractual coordination between participants.
Accession of new participants. If a new participant acquires a participation interest but does not accede to the shareholders’ agreement, the system of contractual restrictions may be disrupted. Therefore, it is advisable to provide in the agreement and the charter a mechanism for mandatory accession of the purchaser of a participation interest to the shareholders’ agreement.