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

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Welcome to VIPsight Asia - Uzbekistan


Zufar Ashurov  


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