Shareholder’s Agreements In Kazakhstan

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When a foreign investor wants to invest in Kazakh partner’s startup project, a joint venture is created. The first thing to take care of in such case is the shareholders’ agreement. [1]

The shareholders’ agreement is the main document that can protect the foreign investor from any possible risks and losses. Thus, we believe that the shareholders’ agreement should have the main focus and attention in the beginning of the cooperation.

Kazakhstan law does not have limitations regarding the structure and volume of the shareholders’ agreement and the shareholders’ agreement may include any provision that does not contradict the law.[2]

But in Kazakhstan practice, the shareholders usually conclude standard shareholders’ agreement with the general mandatory rules mentioned below [3]:

1. Resolutions on LLC incorporation;

2. List of shareholders’ with their details;

3. Procedure of LLC establishment;

4. Charter capital amount;

5. Procedure of shareholders’ contributions to the charter capital;

6. Shareholders’ shares amount in LLC, procedure of shares transfer;

7. Approval of LLC’s Charter;

8. Profit distribution procedure

Such standard shareholders’ agreements do not cover a lot of risks and matters. Therefore, at the time of a dispute, it could be very hard to resolve issues.
In this article you may find general and brief information on the shareholders’ agreement possibilities in Kazakhstan.

Decision-making and voting rights

One of the key aspects in the shareholders’ agreement is the distribution of decision-making powers, i.e. the voting rights. Despite the fact that most important decisions are usually made by the general meeting of shareholders [4] , the shareholders’ agreement may specify that certain issues are resolved exclusively by one shareholder. For example, we had a case where only an investor could decide who to hire as the company's chief accountant.

Preliminary agreements

There could be cases when a foreign investor and Kazakh partner indicate main points and conditions at the beginning of their cooperation in framework documents, such as term-sheets. [5] Or the preliminary conditions could be discussed orally during the negotiations.

All of these preliminary agreements can be incorporated in the shareholders’ agreement.

We had a case when the Kazakh company invested in the individual’s startup project. The only document they had in the beginning of the cooperation was the term-sheet with general framework agreements. We represented the investor’s interests and drafted shareholders’ agreement on the basis of the term-sheet, carefully reviewing and analyzing any possible risks for the investor.


Often, the shareholders include particular restrictions and limitations in the shareholders’ agreements. For example, limits regarding the share transfer. [6]

We had a case, where Shareholder-A was restricted from transferring or disposing his shares in any way during 5 years from the date of signing the agreement. At the same time, the Shareholder-B did not have any such limitation. Thus, the limitations could only be applied to one shareholder, and not apply to others.

The most common limitation specified in the shareholders' agreement is that a shareholder must obtain other shareholder’s consent to transfer the shares to third parties.[7]

Approvals, consents and pre-emptive rights

Alternatively to the restrictions, the shareholders’ agreement may specify parties’ prior consents and approvals for any particular operation.

For example, Kazakh legislation provides pre-emptive rights to shareholders. If one shareholder wishes to sell his shares to a third party, the other shareholders have pre-emptive right to purchase such shares. [8] In the shareholders’ agreement, a shareholder can waive such pre-emptive right in advance.

Intellectual property

The most valuable asset of a startup could be its intellectual property. Thus, it is very important to outline in the beginning who will be the owner of the intellectual property rights. This could be indicated in the shareholders’ agreement.

Mostly in practice the shareholders indicate that all intellectual property would belong to the joint-venture itself.

Deadlock situations

There is always a risk in business that something could go wrong. So there is always a risk of the deadlock situations when the two shareholders with equal 50% voting rights completely disagree on some particular issues.

The shareholders can outline ways of resolving such deadlock situations in the shareholders’ agreements. These ways could include special clauses, like the repurchase of shares by other shareholder or the Russian roulette clause, exiting the partnership, the arbitral clause, the liquidation clause, and etc.


Usually the investors want to have the right to exit the project at any time they deem convenient. Such exiting right could be outlined in the shareholders’ agreement. There are no particular restrictions on this matter. [9]

For example, an investor could exit the partnership in the following ways:

1. The investor could transfer his shares to the third parties with the standard procedure of transferring the shares. In this case it’s important to consider the pre-emptive rights and the necessary approvals.[10],[11]

2. The investor could sell his shares to the other shareholder. In this case, the shareholders’ agreement should outline the other shareholder’s obligation to purchase such shares.[12]

3. The price of shares could also be agreed in advance. For example, in one of our cases, the price of shares depended on the shares’ market value at the date of transfer.

4. The investor could use any other option, not contradicting the law.

We note that, to avoid any potential disputes, it is important to precisely outline the procedure of exiting the partnership considering all the crucial aspects of the shareholders’ agreement.

Arbitral clause

We believe that the disputes relating to the shareholders’ agreements are best resolved through the arbitration rather than through the ordinary courts for following reasons:

1. the arbitration hearings are held behind closed doors, which is very important for maintaining the reputation of shareholders;

2. there can be up to three arbitrators, which would make it less likely to challenge the arbitral decision.

Kazakhstan law does not provide any restrictions on arbitral clauses in shareholders’ agreements. Thus the arbitration clauses may be applied in the shareholder agreements.[13] In Kazakhstan there are two arbitrages: Kazakhstani International Arbitrage, which is more private, and the pro-governmental arbitrage financed by the government. We usually specify the arbitrage depending on the possible amounts of the claim.


This article includes only general and brief information on some of the shareholders’ agreements possibilities in Kazakhstan.

As mentioned above, the shareholders’ agreements in Kazakhstan do not have particular restrictions or limits in terms of their structure or volume. However we note that each case is different. There could be any kinds of situations and provisions. The shareholders’ agreement is the main document that covers shareholders’ relationships in regards to the company, so it is very important to check every step with the professional lawyers.


[1] Article 14.1 of the Law of the Republic of Kazakhstan dated April 22, 1998 № 220-I "On partnerships with limited and additional liability" (with changes and additions as of 21.01.2019) (hereinafter – the Law on LLC )Law on LLC

[2] Article 380 of the Kazakhstan Civil Code (General part), adopted by Kazakhstan Supreme Council on 27 December 1994 (as amended on 02.04.2019).) (hereinafter – the Civil Code)

[3] Article 14.2 of the Law on LLC

[4] Article 43.2 of the Law on LLC

[5] Article 390 of the Civil Code

[6] Article 32.1 of the Law on LLC

[7] Article 30.2 of the Law on LLC

[8] Article 31.1 of the Law on LLC

[9] Article 67.1 of the Civil Code

[10] Article 30.1 of the Law on LLC

[11] Normative resolution of the Kazakhstan Supreme Court dated July 10, 2008 № 2 "On some issues of application of the legislation on limited and additional liability partnerships" (with amendments and additions as of 29.06.2018.)

[12] Article 29.2 of the Law on LLC

[13] Article 9 of the Law of the Republic of Kazakhstan from April 8, 2016 No. 488-IV "On arbitration" (with changes and additions as of 21.01.2019)


By Ms. Symbat Tursyngali

Associate, Synergy Partners Law Firm LLC



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