Scientific Research Institute of Private Law of the Caspian Social University (Almaty, Kazakhstan), scientific fellow

The notion of corporate law is a kind of novelty to Kazakhstan law that arose after the proclamation of independence of the Republic with the transition from a planned economy to an open market.

During the Soviet-time period, including so called "epoch of the developed socialism," the use of corporate forms and structures for economic activities was limited by law (including the Civil Code of the RSFSR of 1922 and the Civil Code of the Kazakh SSR of 1963). In any case, in that period regulation of forms of economic activity was based on concepts which were quite remote from correct understanding the legal nature of a private corporation. It did not correspond to the content of corporate law typical for the law of those states which recognize private property to the means of production, ensure protection of the private ownership and possibilities of its use for the purpose of private entrepreneurship.

With the beginning of the revision "at the sunset of the USSR" of the state ideology on economic development and the national economy’s governance the restoration of Civil Law started based on the principles now enshrined in the Civil Code of the Republic of Kazakhstan. The Fundamentals of Civil Legislation of the USSR and union republics adopted on May 31, 1991 (the “Fundamentals of Civil Law”) provided for the establishment of economic partnerships and companies as organizational forms for business activity on the basis of consolidation of the property of their members, as well as for the establishment of non-commercial organizations based on membership.

Starting from 2001certain measures focused on creation of modern systems for corporate governance and risk management (first - in the banking sector) became carried out based on relevant methodological recommendations, and later - instructions of the National Bank of Kazakhstan. Later, in 2005, existing Law "On Joint Stock Companies" (as amended) (the “Company Law”) was added with the exclusive competence of the general meeting of shareholders to approve (at the discretion of a JSC) a code of corporate governance.

According to the subsequent changes introduced to the Company Law in 2007 adoption of such codes of corporate governance has become mandatory for public joint-stock companies.

At the same time in 2007 the Company Law was also amended with provisions regulating status of a corporate secretary of a joint-stock company. Currently, all joint-stock companies, including national holdings and companies, have corporate secretaries and, often, their own staff.

In accordance with the Law dated July 05, 2008 the concept of corporate disputes has been introduced to Kazakhstan’s legislation, which had been extended to all disputes involving most types of commercial and some forms of non-profit organizations concerning their establishment, operation, management, reorganization and liquidation. 

In addition to the General Part of the Civil Code of the Republic of Kazakhstan dated December 27, 1994 and the Company Law there are separate laws regulating status of general and limited partnerships, partnerships with limited and extra liability, production cooperatives, and forms of non-profit organizations.

On the basis of these and other laws there is a large number of by-laws aimed at the development of corporate relations now produced to legislation of Kazakhstan.

Thus, we can note the development and expansion of legislative regulation of corporate relations.

However, currently in Kazakhstan in legal and academic communities, as well as in the business environment and at the governmental level there is no clear understanding of what is the area of corporate relationships to be regulated by law. In addition, there are no generally accepted notion of a corporation and content of corporate law worked out yet. Such uncertainty leads to imperfection of corporate legislation of Kazakhstan and produces perceptible obstacles to its improvement and modernization. 

At the same time, there is no doubt that historically (until the state became to use actively corporate forms for the state business activity) corporate relationships existed and were regulated solely by private law and its institution of legal entities. The very concept of a corporation is the concept of the civil law institution of a legal entity and the larger institution of persons (which is historically the one of the central institutions of civil law).

And I think that at current stage corporate relationships in their nature are civil-law relations, and, namely, they shall be attributed to property relations. They emerge in connection with establishment and operation of private corporations set up based on consolidation of cash and/or in-kind contributions (and sometimes - also efforts) by their members and operate primarily as a source of property income for those members. And attempts to allocate any “organizational” or other (non-proprietary) relations within the structure / content of corporate relations do not seem particularly promising.

At the core of these discussions about nature and content of corporate relations there is a debate as to what constitutes a corporation from the standpoint of civil law. From my point of view it seems to be the most appropriate defining the corporation in such a way as to reflect a form and legal significance of transfer of property to the corporation by its founders (in exchange for them to acquire membership or corporate rights in the corporation), as well as the nature of the rights of the members of the corporation in respect of the corporations assets (but not in respect to the corporation itself).

Such understanding allows to clearly determining peculiarities of legal regulation of various forms of business organizations based on membership. A well-defined distinction of legal characteristics allows to separate corporations from legal forms of state economic activity, as well as it forms conditions necessary for the proper regulation of organizational structure of corporations and their corporate governance, for the establishment of the full-fledged legal status of directors, managers and members of corporations and for the effective regulation of many other important aspects of corporate law.

It should be noted that the allocation corporate organization is not a theoretical innovation, and legal classification of legal entities to corporate and unitary organization is based on the traditional theory of civil law.

Currently it appears to be that it is the most correct to view the corporate law as a branch of legislation aimed at regulating the status and activities of private corporations established in the form of companies and economic partnerships in all their diversity of types, as well as in form of the production cooperative.