Closing deals is a key step in the transaction process when selling or acquiring a company. This step may coincide with the signing of a purchase and sale agreement for a participation interest (shares) in companies, and it often turns out to be vastly important for both parties engaged. In this article, we will focus on the comparison between the closing of share purchase transactions and transfer of participation interests in the Limited Liability Partnership (LLP) and the shares in the Joint Stock Company (JSC) in the context of Kazakh legislation. We will look at the similarities and differences between these processes, as well as identify the key issues that require special attention when closing the deals, and transactions; as well as aspects that may seek qualified legal assistance.
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Similarities for closing transactions between LLP and JSC
The first step of our analysis is to identify similarities between the procedures for closing transactions in the LLP and JSC. Often the following similarities are common for both cases :
1. Transfer of Internet banking (e-banking) keys: This step is necessary for replacing the access to funds and accounts of the companies.
2. Transfer of original permits and licenses: In case a company has appropriate permits and licenses, their transfer to the new owner is mandatory for the legal functioning of the company.
3. Transfer of subsoil use contracts and amendments to them: If a company has subsoil resources, the contracts for their use shall be transferred to the new owner by current legislation.
4. Transfer of the company seal: The company seal is an important attribute of its legal activities and must be transferred to the new owner.
Secondly, we review the differences in closing transactions in LLP and JSC.
Differences in closing transactions in LLP and JSC
LLP:
1. Transfer of the old charter and adoption of the charter in a new edition of the: Closing LLP transactions often require changes to the company’s bylaws to accommodate the new owner or the terms of the transaction.
2. Concluding an accession note to the foundation agreement or concluding a new one: This step is necessary if the company has a foundation agreement (often referred to as a memorandum of association). If LLP consists of a single participant, a foundation agreement memorandum of association is not required.
3. Re-registration with the National Agency for Registration of Rights to Real Estate and Transactions associated with them (Non-Commercial Joint-Stock Company): When closing transactions in an LLP, it is necessary to re-register the company under the new owner or transaction structure.
JSC:
1. Registration of transactions in the central depository: After closing transactions in JSC it is required to register the changes in the central depository to confirm the transfer of shares to the new owner.
2. Additional features of closing transactions in LLP and JSC: Closing transactions in a JSC may require additional specific procedures that are unique to joint stock companies and may depend on the structure of the transaction.
Furthermore, we will look into the features of mergers, acquisitions, and purchases of participation in LLPs and shares in JSCs.
Features of mergers, acquisitions, and purchase of shares in LLPs and JSC
Merger:
LLP: The merger process in an LLP includes the development and approval of a merger plan, holding general meetings of organization participants, as well as registration of changes with the registration authorities. Approval of a merger may also require approval from the antimonopoly authority.
JSC: The merger process of JSC is similar to LLP, however in the case of a JSC it’s important to note the additional requirements related to the circulation of shares, notification of shareholders, and coordination with securities market regulators.
Acquisition:
LLP: The LLP acquisition process also includes the development and approval of an acquisition plan, holding general meetings of participants, registration of changes with the registration authorities, and, potentially, confirmation of the antimonopoly authority.
JSC: The acquisition of a JSC may be more complex, given additional requirements for the circulation of shares, protecting the interests of minority shareholders, and coordination with securities market regulators.
Equity purchase:
LLP: The purchase of a participation interest in an LLP can be carried out by concluding a sale-purchase agreement for the participation interest between the participants of the LLP or between a participant and a third party. Additionally, the transaction may require registration and notification of the registration authorities.
JSC: Purchasing shares in a joint stock company also requires the conclusion of a share sale-purchase agreement, registration of the transaction, and approval from securities market regulators.
Additionally, we discuss the aspects of antimonopoly regulation and foreign involvement when closing transactions in LLP and JSC.
Anti Monopoly Regulation
In both scenarios for LLP and JSC, antimonopoly regulation may require preliminary approval of the transaction during a merger or acquisition, especially if this will lead to a significant increase in market shares. This is important to take into account when planning and conducting transactions to avoid potential obstacles coming from antimonopoly authorities.
Foreign Involvement
When merging, acquiring, or purchasing shares in LLP or JSC with foreign involvement, restrictions or additional requirements may be applied related to the participation of foreign investors in certain sectors of the economy or the protection of national interests. This may demand extra time and resources to complete the transaction taking into account the requirements of foreign investment legislation.
Conclusion
It’s important to take into account all the similarities and differences in the process of closing transactions in LLP and JSC when planning and conducting transactions. Professional assistance from lawyers who have experience in the given area of expertise can significantly ease the process and help avoid potential problems and unexpected costs.
This is only a brief overview of the comparison of closing transactions in LLP and JSC, but it does provide an idea of the key aspects that should be considered when completing such transactions.
