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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

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VIPsight International

Welcome to VIPsight Asia - Uzbekistan


Zufar Ashurov  


27 December 2019

On 10 December 2019 Mr. Zufar Ashurov, an Acting Deputy Director and Senior Research Scientist of the Center for Research of Problems in Privatization, Development of Competition and Corporate Governance, Tashkent, Uzbekistan, and a country reporter of VIPsight International was awarded a PhD in Economic Sciences degree after successfully defending his PhD dissertation titled “Improvement of Organizational and Economic Mechanism of Corporate Governance in the Joint-Stock Enterprises” at the Scientific Council of Tashkent State University of Economics on 25 October 2019.

His PhD dissertation is aimed at developing the theoretical and methodological foundations of one of the topical issues of present time in Uzbekistan – corporate governance, at elaborating the proposals and recommendations for improving the organizational and economic mechanism of corporate governance in the joint-stock enterprises on the basis of modern international standards. The researches were carried out in the case of JSC Uzkimyosanoat and joint-stock companies of chemical industry incorporated in its structure.

The scientific results of the dissertation, which have the theoretical significance, are that there:

- worked out the general scientific methodology for research of corporate governance;

- formulated the definitions of the concept of “corporate governance” from economic, financial, legal, political, sociological and psychological points of view;

- methodologically disclosed in a new way the essence of the concepts of “corporate governance” and “corporate management”, and proved that they are distinct concepts from each other;

- revealed various characters for classification of corporate governance, and carried out a preliminarily scientific classification of corporate governance;

- concretized the concept of “joint-stock enterprise” which distinguishes in its individual specificity among other corporate structures;

- arranged in a sequence the categories widely used in the sphere of corporate governance, such as “corporate governance”, “corporate control”, “corporate culture”, “corporate stewardship”, “corporate social responsibility”, “corporate citizenship” by their influence on the corporation, and specified their position and significance in the entire corporate system;

- scientifically disclosed the essence and meaning of the organizational and economic mechanism of corporate governance, developed its conceptual model and proposed its practical implication.

The scientific results of the dissertation, which have the practical significance, are that there:

- investigated in a new way the specificities of legal and economic development of corporate governance system of Uzbekistan, identified the existing problems in corporate governance, and for solving these problems there worked out the proposals on improvement of normative-legal base of corporate governance system of Uzbekistan on the basis of international standard «G20/OECD Corporate Governance Principles» (these proposals were included in articles 12, 23, 57, 59, 62, 65, 68, 75, 83, 107 of the Law of the Republic of Uzbekistan «On Joint-Stock Companies and Protection of Shareholders’ Rights» adopted on 6 May 2014 in the new edition);

- elaborated the proposals on improvement of the Corporate Governance Code of Uzbekistan, including on applying long-term strategic planning in the activity of joint-stock companies, on introducing independent member to the structure of supervisory board, on determining remuneration for the members of supervisory board linking it with the performance of joint-stock company, on creating committees of supervisory board (these proposals were included in chapter 5, clauses 18, 19, 25 of the Corporate Governance Code of Uzbekistan adopted on 31 December 2015);

- developed “The Guidelines for Compliance with Some Provisions of the Corporate Governance Code” that includes the ways of effective adhering to the international principle of corporate governance «comply or explain» in joint-stock companies, to the approaches of elaborating the long-term development strategy, to the mechanisms of internal control and to the rules for protection of shareholders’ rights (these guidelines were deposited with the Agency on Intellectual Property of the Republic of Uzbekistan No.000886 as of 17.08.2018 and introduced by the State Competition Committee of the Republic of Uzbekistan in the managerial activity of joint-stock companies);

- developed the comprehensive proposals and recommendations on improving the organizational and economic mechanism of corporate governance in the joint-stock enterprises of the chemical industry (these proposals and recommendations were introduced in the managerial activity of JSC Uzkimyosanoat and JSC Navoiyazot, and as a result, this has enabled the government to make decision on selling the state blocks of shares to potential foreign investors, to develop the effective dividend policy, to enhance the effectiveness of corporate governance system of the enterprises);

- elaborated the methodology for rating-based assessing the effectiveness of the organizational and economic mechanism of corporate governance (this methodology was deposited with the Agency on Intellectual Property of the Republic of Uzbekistan No.000890 as of 27.08.2018);

- developed “The Guidelines for Conducting an Independent Assessment Procedure of the Corporate Governance System of Joint-Stock Company” (these guidelines were deposited with the Agency on Intellectual Property of the Republic of Uzbekistan No.000539 as of 22.08.2017);

- proposed new positions of executive officers, such as Chief Corporate Governance Officer, Chief Strategic Planning Officer, Chief Risk Management Officer, in order to bring the management structure of joint-stock companies in line with modern international standards (these positions were included in “The classifier of the main positions of employees and professions of workers” approved by the Resolution of Cabinet of Ministers of the Republic of Uzbekistan No.795 as of 04.10.2017).

The scientific novelties of Mr. Ashurov’s PhD dissertation were accepted for use in the Legislative Chamber of the Oliy Majlis of the Republic of Uzbekistan, State Competition Committee, Ministry of Employment and Labor Relations of the Republic of Uzbekistan, JSC Uzkimyosanoat, JSC Navoiyazot, National Center for Training of Specialists of New Markets, and the certificates on their implementation into practice were received.

Taking this opportunity, we wish Dr. Zufar Ashurov success in his future scientific works.


12 August 2019

Significant Changes Made in the Company Act of Uzbekistan

On March 2019 a number of significant amendments and additions were made in the Law “On Joint-Stock Companies and Protection of Shareholders’ Rights” (Company Act) in order to further improve the corporate governance and enhance the business climate in Uzbekistan in accordance with the World Bank’s annual “Doing Business” report.

Firstly, the requirement on mandatory presence of a share (at least 15%) of foreign investors in the joint-stock company was canceled. Previously, as it was required by the law, the joint-stock companies were forced to attract foreign investors whose share should make of not less than 15% of the company’s authorized capital. Since it was not easy to find such an investor, more than 100 joint-stock companies have transformed into other forms of ownership (e.g. limited liability company etc).

Secondly, the requirement on the minimum size of the company’s authorized capital was excluded from the law. Previously, when registering joint-stock company, its authorized capital could not be lower than the minimum established – a sum equivalent to the 400 thousands US dollars on the rate of the Central Bank of the Republic of Uzbekistan. Now, the founders of the company are free to determine the size of the authorized capital, there are no lower boundaries. 

Thirdly, when a company places shares and equity securities convertible into shares paid for in cash, the shareholders – owners of voting shares – have the preemptive right to acquire those shares. Earlier, the General Meeting of Shareholders, by a majority of votes of the holders of voting shares, could decide not to apply this preemptive right for a period not exceeding one year. Thus, if the shareholders owning a sufficient block of shares decided not to include in the company charter the provisions on the exercise of the preemptive right to purchase securities by existing shareholders, this would lead to a violation of the rights of minority shareholders whose share would decrease each time with an additional issue of shares. A new amendment to the law proposes to establish that during a public offering of shares, all shareholders have the opportunity to keep their stakes in the company’s authorized capital, regardless of the existence of this norm in the company charter.

Fourthly, the decision on determining the audit organization for the mandatory audit, on the maximum amount of payment for its services and on conclusion (termination) of agreement with it, is taken now by the General Meeting of Shareholders. These changes were made in order to improve the position of the Uzbekistan in the World Bank’s “Doing Business” report. Previously, a decision on conducting an audit was adopted by the Supervisory Board. Meanwhile, in world practice, the decision to approve an external audit organization and terminate the agreement with it, is taken by the General Meeting of Shareholders. Now, the Supervisory Board retained this authority only in terms of proactive audits.

 Fifthly, the procedure for disclosing information on holding a General Meeting of Shareholders has been adjusted. Now, a message about holding a General Meeting of Shareholders should be published on the Single Portal of Corporate Information (www.openinfo.uz), on the company’s official website and in the mass media, and be also sent to shareholders by e-mail no later than 21 days (earlier, it was 7 days), but no earlier than 30 days before the date of holding the general meeting.

Sixthly, creation of committees within the Supervisory Board has been legitimated. Thus, it is established by law that from among the members of the Supervisory Board, committees may be created to consider the most important issues and make recommendations to the Supervisory Board. Before, this requirement was only in the Code of Corporate Governance.

 Seventhly, the additional requirements have been established for the joint-stock companies whose shares are listed in the stock exchange:

a) in the company, without fail, there should be created an Audit Committee, consisting solely of members of the Supervisory Board. The internal audit service of the company (if any) is accountable to this committee in its activities;

b) it isobligatory to publish on the Single Portal of Corporate Information and on the company’s official website the information about the ownership of 5% or more of the shares (stakes) of other legal entities. Such information should be published within 72 hours from the date of acquisition of shares (stakes).

c)the Supervisory Board must have at least one independent member who can be re-elected annually. A person is acknowledged as an Independent Member of Supervisory Board who:

- has not worked at the company and/or at its affiliated organizations for the past three years;

- is not a shareholder of the company and/or a founder (shareholder, participant) of its affiliated organizations;

- does not have civil law relations with a major client and/or a major supplier of the company, and (or) of its affiliated persons/organizations;

- does not have any agreements with the company and/or its affiliated persons/organizations of the company, with the exception of those related to ensuring the performance of tasks and functions of a member of Supervisory Board;

- is not a spouse, parent (adoptive parent), child (adopted as a son/daughter), blood or half brother or sister of a person who is or has been, for the past three years, a member of the governing and internal control bodies of the company and/or of the affiliated persons/organizations of the company;

- is not an employee of a government body or of a state-owned enterprise.

Eighthly, the authority of a member of Supervisory Board, director or a member of Management Board of the company may be terminated by a court decision, with a ban on taking a managerial position in business companies for a period of at least 1 year, if the court admits their guilt in causing property damage to the company.

 These persons, as well as the investment assets management company, may be held liable for damage caused to the company as a result of providing misleading information or knowingly false information or a proposal to conclude and/or make decisions on the conclusion of a major transaction and/or transaction with affiliated persons/organizations for the purpose of obtaining by them or by their affiliate persons/organizations the profit (income).

Ninthly, the shareholders are guaranteed the right to receive from the company and from witnesses all documents that may be relevant to the case, except for state secrets or other secrets protected by law, during the consideration by the court of a lawsuit regarding the recognition of a major transaction or transactions with affiliated persons/organizations as invalid.


Zufar Ashurov

Acting Deputy Director & Senior Research Scientist

Center for Research of Problems in Privatization,

Development of Competition and Corporate Governance



13 March 2016

The Code of Corporate Governance adopted and introduced into practice in Uzbekistan

In February 2016 the Code of Corporate Governance was adopted and introduced into practice in Uzbekistan by the Commission for Enhancement of Performance of Joint-Stock Companies and Improvement of Corporate Governance. The current voluntary Code of Corporate Governance will be applied in the structure of joint-stock companies to enhance their performance and comprises recommendations which the joint-stock companies will voluntarily follow demonstrating their commitment to the honest and transparent business conduct.

A need for development of the Code of Corporate Governance, aimed at creation of favorable conditions, introduction of modern methods in the corporate governance system, intensification of a role of shareholders in strategic management of the company, is related with implementation of reforms in the country economy as well as with improvement of legislation in the sphere of corporate governance. In the process of developing the Uzbek Code of Corporate Governance there were studied the codes of corporate governance of Germany, the United Kingdom, Russian Federation, Ukraine and Kazakhstan.

For the purpose of this Code, the corporate governance is defined as a system of relationship between executive body of the joint-stock company, its supervisory board, shareholders, representatives of the employees and other stakeholders including creditors in order to attain the balance of interests of mentioned persons for providing effective organization of activity of the joint-stock company, modernization, technical and technological re-equipping of production capacities, for output of competitive products and their export to foreign markets.

Thus, the Uzbek Code of Corporate Governance consists of 42 clauses which are grouped into the following eleven chapters:

I. General Provisions
II. Ensuring Transparency of Activity
III. Introducing Mechanisms of Effective Internal Control
IV. Ensuring Implementation of Rights and Legal Interests of Shareholders
V. Specifying Development Strategy and Tasks for Long-Term Prospect
VI. Introducing Mechanisms of Effective Interaction of Executive Body with Shareholders and Investors
VII. Conflict of Interests
VIII. Introducing Standard Organizational Structure
IX. Publication of Information on the Basis of International Auditing and Financial Reporting Standards
X. Monitoring Adoption of Recommendations of the Code
XI. Final Provisions

By the decision of the aforementioned Commission, the public administrative authorities and local governmental authorities were entrusted to organize introduction of the Code in the joint-stock companies with prevailing state share in the equity capital where they serve as shareholders. The Code of Corporate Governance establishes that the joint-stock companies may  fulfill intracorporate actions on introduction of the Code taking into consideration their industrial specificity and functioning features. In case of impossibility of following certain recommendations of the Code, the joint-stock companies should disclose in detail the reasons in the mass media, following the international principle of “comply or explain”.

Some main features of the Uzbek Code of Corporate Governance:

- according to clause 18, the joint-stock companies should include no less than one independent member in the composition of supervisory board (but no less than 15% of a number of members of supervisory board stipulated in the articles of association);
- for ensuring the rights and legal interests of shareholders, the governing and control bodies of the joint-stock company should create, for shareholders who cannot attend in person the general meeting of shareholders, an opportunity and conditions to vote through e-mail (authenticated  with digital signature) or to hold general meeting of shareholders by means of videoconferencing;
- clause 25 sets that for introduction of mechanisms of effective interaction of the executive body with shareholders and investors, the company’s governing bodies should bring into service a position of corporate consultant; insure the company’s business risks and the responsibility of executive body; coordinate the amount of remuneration of the members of supervisory board with the results of independent evaluation of corporate governance system and financial results of company’s activity;
- according to chapter 10, in order to monitor introduction of recommendations of the Code, the joint-stock companies should evaluate their corporate governance system no less than one time per year, for implementation of which it is recommended to involve the independent organization.
We do believe that the Uzbek Code of Corporate Governance will enable to introduce high standards of transparent activity, strengthen responsibility of directors, raise a role of shareholders, including minority ones, in corporate governance, and regulate corporate disputes, attain greater effectiveness of the corporate governance system in Uzbekistan.


Zufar Ashurov
Researcher, Department of Corporate Governance
Tashkent State University of Economics



2 February 2016

Uzbekistan to Reform and Improve the Corporate Governance

Today Uzbekistan, one of the independent Central Asian countries, has headed for reforming and improvement of corporate governance system followed by the Presidential speech in the meeting of the Cabinet of Ministers dedicated to the outcomes of social and economic development of country in 2014 and the most important priority areas of economic agenda for 2015, where he specified corporate governance reforms as one of the main priority areas of economic development, and drew attention to radical changes of principles and approaches in the corporate governance system, to introduction of modern international standards of corporate management of production, foreign-economic and investment processes.

At present, a reform program, namely the Program for Radical Improvement of Corporate Governance System approved by the Presidential Decree as of 24 April 2015 “On Measures for Introduction of the Modern Methods of Corporate Governance in the Joint-Stock Companies” is being actively implemented in order to create favorable conditions for wide attraction of direct foreign investment, enhance performance of joint-stock companies, enhance openness and transparency of companies’ activity, provide their attractiveness for potential investors, including for foreign ones, introduce modern methods of corporate governance and strengthen the role of shareholders in strategic management of a company. Up to date, as a result of implementation of this Program there have been introduced significant improvements in the corporate governance system of Uzbekistan, including:

- a standard organizational structure for the joint-stock companies taking into account the new divisions and new C-suite positions (such as chief business development officer, chief investment officer, chief financial officer, chief marketing and sales officer, chief supply and logistics officer, chief procurement officer) were introduced into practice;

- there established a procedure according to which the decision on assigning company’s chief executive officer is made on the basis of competition where the foreign managers may also take part in;

- a word “state-owned” was struck out from the names of joint-stock companies, regardless of a share size of the government in their authorized capital;

- all joint-stock companies were urged to publish their annual financial reports and to conduct external audit in accordance with the International Standards on Auditing (ISA) and International Financial Reporting Standards (IFRS) during 2015-2018;

- regulation on criteria of evaluation of performance effectiveness of the joint-stock companies was developed and put into practice;

We need to note that corporate governance reforms in Uzbekistan were put in the economic agenda because of the fact that until recently, there were observed a number of unsolved problems in the system of corporate governance. Particularly, it concerned the joint-stock companies where the government was the main shareowner. In such companies the shareholders, especially minority ones, in fact were really torn away from the governance and decision making due to minor and scattered size of their shares. As a result, actual management of a company was carried out by directorate which was not interested in effective use of resources, diversification, reduction of production cost and increase of competitiveness of the products, and which had remained to be a follower of the old administrative-command style of management. Today, as of 1 January 2016 in Uzbekistan there functioning 714 joint-stock companies, the aggregate authorized capital of which makes up 16.4 trillion sums that is about 5.8 billion US dollars.

We believe that further implementation of the reform program will, undoubtedly, lead to significantly improvement of the quality of corporate governance in the Uzbek joint-stock companies. Yet, under this reform program Uzbekistan is about to develop and put into practice the Code of Corporate Governance of Uzbekistan which would provide for recommendations on adopting modern methods of corporate governance including determination of development strategy and tasks for long-term prospect, system of internal control and mechanisms of effective interaction of executive body with shareholders and investors, recommendation on enhancing transparency of companies’ activity, on publishing information on the basis of international standards of auditing and financial reporting.

Zufar Ashurov
Researcher, Department of Corporate Governance,
Tashkent State University of Economics, Uzbekistan