GRATA International

The legislation of the Republic of Armenia establishes multiple legal frameworks for the formation of business entities, ensuring flexibility for entrepreneurs in selecting the most appropriate structure for their operations. Among the primary forms are Limited Liability Companies (LLCs) and Joint-Stock Companies (JSCs). Joint-stock companies, in turn, are categorized into Open Joint-Stock Companies (OJSCs) and Closed Joint-Stock Companies (CJSCs), each governed by specific regulatory and operational principles. Entrepreneurs intending to engage in economic activities in Armenia often face the challenge of choosing the most suitable organizational and legal form for their business, as this decision has significant implications for corporate governance, financial liability, investment opportunities, and regulatory compliance. To provide a clearer understanding of these legal structures, we will examine the key characteristics, advantages, and disadvantages of each form. A well-informed choice at the outset of business development can facilitate efficient operations, risk mitigation, and long-term sustainability.   Feature LLC OJSC CJSC Charter capital Participants and shares Stockholder/shareholder and stocks/shares Stockholder/shareholder and stocks/shares Stocks Not applicable Can issue shares/stocks Can issue shares/stocks Who can be shareholder/Participant Every physical and legal entity Every physical and legal entity Every physical and legal entity Liabillity of the shareholders/ Whitin the framework of the shares Whitin the framework of the shares Whitin the framework of the shares Number of shareholders Maximum 49 participants Number of shareholders is not limited Maximum 49 shareholders. Branches/Representaition Might have both Additionally, might establish daughter and depending companies. Additionally, might establish daughter and depending companies. Preemptive rights in case of sale of shares of other shareholders A participant is entitled to the preemptive right to purchase shares sold by other participant of that Company. No such right is provided for the shareholders A shareholder is entitled to the preemptive right to purchase shares sold by other shareholders of that Company. Preemptive right to new shares placed by the Company Not applicable The shareholders of the company shall have the preemptive right to purchase new shares in proportion to their shares in the equity capital during the period specified in the charter. The meeting of the company is entitled to decide not to apply (suspend) the preemptive right of the holders of the voting shares, as well as to set the validity period of that decision if the voting shares are distributed through an open subscription, and payment for the distributed shares is made in cash. The shareholders of the company have the preemptive right to purchase new shares in proportion to their shares in the equity capital during the period specified in the charter. Subscription of shares The General Meeting may decide to increase the company's charter capital, based on the application of a third party. A company has the right to conduct an open subscription for its placed shares and freely sell them under the conditions established by law and other legal acts. Additionally, it may also conduct a closed subscription for its placed shares. A company is not permitted to conduct an open subscription for its placed shares or otherwise offer them for acquisition to an unlimited number of persons. Increase of equity capital The General Meeting may decide to increase the company's charter capital through additional contributions from the company's participants. The company may make a decision on the distribution of additional shares only within the limits of the number of shares announced in the charter and only if the previously distributed shares are fully paid. There is no such limitation set for the company. Shares granted to employees N/A The company is entitled to acquire the employee's shares subject to alienation at the market price, but not less than the nominal value of the given shares, if the possibility of managing the shares or derivative financial instruments distributed (provided) among the employees was limited under the charter or the employee share ownership plan. In case of forced alienation of the employee's shares in the cases provided by law, the company has the preemptive right to acquire the employee's shares to be alienated at the market price of the given shares, but not less than the nominal value. Convening of the general meeting The company shall notify its participants about the convening of the meeting at least 20 days before the day of convening the meeting, unless other period is stipulated by the Charter. The company shall notify its shareholders about the convening of the meeting at least 21 days before the day of convening the meeting. The deadlines for notifying the shareholders about the convening of the meeting are defined by the charter. Requirements set for board members No such restriction applies. The company, at least one-third of the board members must be independent. Additionally, the roles of the chairman of the board and the director (general director) cannot be held by the same person. No such restriction applies. Request to form an audit committee by the board of directors N/A In open joint-stock companies an audit committee by the board is formed. The members are board members. N/A Request to form a Control Committee If the number of participants exceeds 20, establishing a control committee is mandatory; otherwise, it is optional. A control committee is elected. A control committee may be elected  

The Law “On protection of personal data” of RA (Law) guarantees the rights of natural persons (data subjects) and imposes mandatory requirements on personal data processors, authorised persons, and third parties. In the scope of the Law: “Personal data” shall mean any information relating to a natural person, which allows or may allow for direct or indirect identification of a person's identity; “Processor of personal data” shall mean a state administration or local self-government body, state or community institution or organisation, legal or natural person, which organise and/or carries out processing of personal data; “Data subject” shall mean a natural person to whom the personal data relate. The Law defines personal data processing. Processing includes any operation or set of operations, regardless of the form and mode of implementation (automated, with or without use of technical means), related to personal data including: Collection Input Systematization Organization Storage Use Alteration Restoration Transfer Rectification Blocking Deletion The Law also establishes the basic principles on which the personal data should be processed. These are: Principle of lawfulness (The processor of personal data shall be obliged to follow and ensure that the data are processed in observance of the requirements of the Law. Personal data shall be processed for legitimate and specified purposes and may not be used for other purposes without the data subject's consent). Principle of proportionality (The processing of data must pursue a legitimate purpose, measures to achieve it must be suitable, necessary and moderate. The processor of personal data shall be obliged to process the minimum volume of personal data that are necessary for achieving legitimate purposes. The processing of personal data that are not necessary for the purpose of processing of data or are incompatible with it shall be prohibited. The processing of personal data shall be prohibited where the purpose of processing of data is possible to achieve in a depersonalised manner. Personal data must be stored in such a way as to exclude the identification thereof with the data subject for a period longer than is necessary for achieving predetermined purposes). Principle of reliability (The personal data being processed must be complete, accurate, simple and, where necessary, kept up to date). Principle of minimum engagement of subjects (The processing of personal data shall be carried out under the principle of minimum engagement of subjects. Where the state administration or local self-government body, the notary are able to obtain the personal data from other body through a uniform electronic information system, personal data subject shall not be required to submit personal data necessary for certain operations. In case of a written consent of the personal data subject, natural or legal persons considered as a processor of personal data may obtain from a state or local self-government body personal data necessary for a certain operation and directly specified in the written consent of a personal data subject. The procedure for the transfer of personal data through an electronic information system shall be prescribed by the Government of the Republic of Armenia). In Armenia, personal data processing is deemed lawful if: The data subject has consented to the processing, except in cases provided by law, the processed data is obtained from a publicly available source. Before processing the data, the Law requires the data subject’s consent for lawful processing, except where the personal data is publicly available. The data subject must give consent in writing or electronically, validated by an electronic digital signature. Verbal consent may suffice if it obviously attests to the data subject’s consent to the use of the subject’s personal data. To obtain the data subject’s written consent before processing personal data, a processor or authorized person must notify the data subject of its intention to process the subject’s data. Before processing personal data, the data processor also may notify the Armenian Personal Data Protection Agency (PDPA) of its intention to process data. A processor must notify the PDPA if: The PDPA requests notice. The processor intends to process biometric or special category personal data. The Law does not guarantee publicly available personal data to be protected, such as information that either: Becomes publicly available to certain persons or the public either with the data subject’s consent, or through the data subject’s conscious actions to make the information public, Constitutes publicly available information by law (such as a person’s name, surname, year, month and day of birth, and place of birth). The Law defines special category personal data as information relating to a person’s race, national identity or ethnic origin, political views, religious or philosophical beliefs, trade union membership, health, and sex life. The Law also defines biometric personal data as information relating to a person’s physical, physiological, and biological characteristics.   The Law recognizes a data subject’s right to: Obtain information on his or her personal data, processing of data, grounds and purposes for processing, processor of data, the registered office thereof, as well as the scope of persons to whom personal data may be transferred. Get familiarised with his or her personal data, require from the processor to rectify, block or destruct his or her personal data, where the personal data are not complete or accurate or are outdated or has been obtained unlawfully or are not necessary for achieving the purposes of the processing. In case of doubts with regard to the rectification, blocking or destruction of personal data by the processor, to apply to the authorised body for the protection of personal data to make clear the fact of his or her personal data being rectified, blocked or destructed and by the request to be provided with information. Appeal actions or inaction of the processor before an authorised state body for the protection of personal data or through judicial procedure.   The Law also defines the obligations of personal data processor: To provide information to the data subject at the request of the data subject. To explain to the data subject in writing the consequences for failure to provide personal data, including the rights of personal data subject. In case of incomplete, inaccurate, outdated, unlawfully obtained personal data or those unnecessary for achieving the purposes of the processing, to carry out necessary operations for making them complete, keeping up to date, rectifying or destructing. To destruct or block personal data that are not necessary for achieving the legitimate purpose. To use encryption keys to ensure the protection of information systems containing personal data against accidental loss, unauthorised access to information systems, unlawful use, recording, destructing, altering, blocking, copying, disseminating personal data and other interference. To prevent the access of appropriate technologies for processing personal data for persons not having a right thereto and ensure that only data, subject to processing by him or her, are accessed by the lawful user of these systems and the data which are allowed to be used. To maintain confidentiality both in the course of performing official or employment duties concerning the processing of personal data and after completing thereof.   The Law does not clearly specify its jurisdictional scope. For example, the Law does not specify which rules apply to a foreign company’s collection and transfer of Armenian citizens’ or foreign citizens’ personal data outside Armenia, or to an Armenian company that uses collection and processing technology located outside Armenia. However, a person who collects and processes personal data in Armenia, and transfers that data outside Armenia, likely must meet the Law’s requirements.