The text of the draft law is available on the website koomtalkuu.gov.kg.
What new proposals are being made?
The legislative project proposes the introduction of a mechanism for subsidiary liability for the founders of limited liability companies regarding the tax obligations of the society in certain cases defined by law. This will help eliminate the practice of creating fictitious legal entities and ensure the actual fulfillment of obligations to the state budget.It is also planned to strengthen the personal involvement of founders in the management of the society during the initial stages of its operation.
In particular, for two years after state registration, the sole executive body of the limited liability company must remain the founder himself. If the company is created by several founders, one of them is appointed as the director by their mutual agreement.
During this period, if the same individuals create new companies, the functions of the executive body will also be performed by the original founders. If a third party is appointed after the specified time, it is required to confirm the actual economic activity of the company.
Additionally, the draft law introduces mandatory disqualification of company executives recognized as bankrupt for a period of one to three years for the first violation and up to ten years for a repeat violation, taking into account the degree of guilt and losses of creditors. This measure aims to prevent intentional bankruptcies and to exclude unscrupulous executives from management.
Goals of the initiative
The authors of the draft law emphasize that the main goal is to create a transparent and responsible business environment, to prevent the abuse of the organizational and legal form of limited liability companies, and to ensure the fulfillment of tax obligations, which will contribute to balancing private and public interests in accordance with the current legislation of Kyrgyzstan."There is a persistent practice of abusing limited liability companies in the country. According to civil legislation, participants in limited liability companies are not liable for the obligations of the society, which creates risks for the budget. This structure, although intended to support entrepreneurial initiative, is used in practice to evade tax obligations. It is not uncommon for limited liability companies to be created without the intention of conducting real activities, leading to their cessation of operations and liquidation, while obligations to the budget remain unfulfilled," the justification states.
Furthermore, the possibility of creating limited liability companies by other limited liability companies leads to the formation of complex corporate structures, where the actual beneficiary has no direct legal connection to the final company. This complicates tax administration and the application of liability measures.
The Ministry reminds that according to the Constitution, every citizen is obliged to pay taxes and fees in accordance with the law; however, the current model of regulating limited liability companies does not include a mechanism that ensures this requirement.
"By creating a limited liability company, the founder exercises the right to entrepreneurial activity and enters into legal relations with the state, therefore, the legislation has the right to provide additional guarantees for the fulfillment of tax payment obligations to protect the interests of both the private and public sectors," the Ministry of Economy added.
During inspections, cases of registering legal entities using the passport data of citizens without a permanent residence, as well as individuals in vulnerable positions who do not actually manage the created enterprises, are identified. These citizens are often listed as executives but do not participate in real activities and are unaware of actions taken in their name.
