March 1, 2022

Management of LLP

  1. Bodies of LLP
  2. The executive body of the LLP
  3. Conflict of interests of members of the executive body and LLP
  4. Supervisory Board of LLP
  5. Audit Commission (auditor)

 

In the civil legislation of the Republic of Kazakhstan, one of the most common organizational and legal forms of a legal entity is a limited liability partnership.  A limited liability partnership (hereinafter referred to as an LLP) is a partnership established by one or more persons whose authorized capital is divided into shares of the sizes determined by the constituent documents. The members of the LLP are not liable for its obligations and bear the risk of losses related to the activities of the partnership, within the value of the contributions they have made. Exceptions to this rule may be provided by the Civil Code and legislative acts.

A legal entity acquires civil rights and assumes responsibilities only through its bodies acting in accordance with legislative acts and constituent documents. The types, procedure for appointing or electing bodies of a legal entity and their powers are determined by legislative acts and constituent documents.

  1. The bodies of the LLP are
  • the supreme body of the partnership – the general meeting of its participants (general meeting);
  • the executive body of the partnership (collegial and (or) sole).

Also, the charter of the LLP may provide for the creation of:

  • a supervisory board and (or)
  • an audit commission (auditor).

The competence of the bodies, as well as the procedure for their decision-making or speaking on behalf of the LLP are determined by the legislation of the Republic of Kazakhstan and the charter.

The number of participants of the LLP is not limited. The executive body (collegial and (or) sole) carries out the current management of its activities and is accountable to the general meeting of its participants. The sole governing body may not be elected from among its members.

The General Meeting elects members of the executive body, members of the Supervisory Board, the audit commission (or the sole auditor) LLP for a fixed period of no more than five years.

The specifics and procedure for making decisions of the supreme body of the partnership can be found at this link.

Members of the executive body who are not members of the partnership may participate in the general meeting with the right of advisory vote, unless otherwise provided by the charter of the partnership.

The Executive body has the right to convene an extraordinary general meeting of participants along with the supervisory board or the audit commission (auditor), if they are present in the LLP, and the participants of the LLP who collectively have more than 10% of the total number of votes.

  1. The executive body of the LLP

The officials of the partnership are members of its executive body or a person acting alone as an executive body, as well as members of the supervisory board.

The competence of the executive body includes:

  • all issues of ensuring the activities of the partnership that are not within the competence of the general meeting or supervisory bodies, defined by Law, the charter of the partnership or the rules and other documents adopted by the general meeting;
  • also the powers of the general meeting, not related to its exclusive competence, transferred to the executive body;
  • establishment of the amount of payment for the services of an audit organization determined by the general meeting of participants for the audit of the annual financial statements of the partnership.

The sole executive body of the LLP (director, manager, etc.):

  • acts on behalf of the partnership without a power of attorney;
  • issues powers of attorney for the right to represent the partnership, including powers of attorney with the right of transfer;
  • in relation to employees of the partnership, issues orders on their appointment, transfer and dismissal, determines remuneration systems, sets the size of official salaries and personal allowances, resolves bonus issues, takes incentive measures and imposes disciplinary penalties;

If, in accordance with the charter of an LLP, the management of its affairs is entrusted simultaneously to two or more directors (managers, etc.) who are not united in a collegial executive body, then each of such directors (managers, etc.) has the right to act on behalf of the partnership without a power of attorney.

Collegial executive body of LLP

If the charter provides for the formation of a collegial executive body (directorate, management board, etc.), such a body is elected by the general meeting of the participants of the partnership in the number of no more than seven members, unless otherwise established by legislative acts or the charter of the partnership.

The head of the collegial executive body is elected by the general meeting of the partnership, unless the charter of the partnership provides for his election by the collegial body itself. Such a leader ensures the functioning of this body and directs its meetings. He has the rights that belong to the sole executive body of the partnership.

  1. Conflict of interests of members of the executive body and the LLP

Members of the executive body of the partnership are prohibited:

  • without the consent of the general meeting, conclude transactions with the partnership aimed at obtaining property benefits from it (including gift agreements, loans, gratuitous use, purchase and sale, etc.)•
  • receive commission both from the partnership itself and from third parties for transactions concluded by the partnership with third parties;
  • act on behalf of or in the interests of third parties in their relations with the partnership;
  • to carry out business activities that compete with the activities of the partnership.
  • The charter of the partnership may provide for other prohibitions for members of its executive body.

Some of these restrictions also apply to the spouse, all direct descending and ascending relatives, as well as siblings of members of the executive body.

  1. Supervisory Board of a limited liability partnership

To exercise control over the activities of the executive body, the charter of the partnership may provide for the establishment of a supervisory board in the partnership.

Only an individual can act as a member of the Supervisory Board. It cannot be a member of the executive body of the partnership at the same time.

When voting in the supervisory Board, each member of the board has one vote.

If the charter does not provide for the election of an audit commission (auditor), the supervisory board of the partnership has all the rights that, in accordance with the Law, belong to the audit commission

  1. Audit Commission (auditor) of a limited liability partnership

To exercise control over the financial and economic activities of the executive body of the partnership, an audit commission may be formed from among the participants of the partnership or their representatives.

The audit commission is formed consisting of no more than five people, if a larger number of its members is not provided for by the charter of the partnership.

The performance of the functions of the audit commission may be entrusted to one of the participants of the partnership or its representative as the sole auditor.

Members of the audit commission (auditor) may not simultaneously be members of the executive body of the LLP itself.

The Audit Commission (auditor) has the right at any time to carry out inspections of the financial and economic activities of the executive body. The Audit Commission (auditor) has for this purpose the right of unconditional access to all documentation of the partnership. At the request of the audit commission (auditor), members of the executive body are required to provide the necessary explanations orally or in writing.

The Audit Commission (auditor) necessarily checks the financial statements of the partnership before their approval by the general meeting of participants. The General Meeting is not entitled to approve financial statements without the conclusion of the Audit Commission (auditor) or the audit report.