Doing Business in Uzbekistan: Choosing the Right Legal Structure

1. Introduction: Why Legal Form Matters in Uzbekistan

Uzbekistan, the most populous country in Central Asia, is rapidly emerging as an attractive destination for foreign investment. Economic liberalization, improved international relations, and its strategic location between East and West have opened up substantial opportunities in sectors such as manufacturing, logistics, energy, construction industry and IT.

For international companies entering this market, selecting the appropriate legal structure is a foundational decision. It affects taxation, liability, corporate governance, and compliance obligations. This article outlines the available legal forms for foreign investors and highlights key considerations such as governance requirements and audit obligations.

2. Common Legal Forms for Businesses in Uzbekistan

The most commonly used legal form is the Limited Liability Company (LLC). It offers a balanced mix of operational flexibility and legal protection. LLCs can be fully foreign owned (100%). Individuals and legal entities can establish an LLC. The participants are not liable for the LLC’s liabilities and their risk of company’s losses is limited to their contributions to the charter capital.

The Joint Stock Company (JSC) is generally suited for larger operations, particularly those aiming to raise capital through share issuance. It offers a formal corporate structure with stricter governance, disclosure, and transparency requirements. As a rule, JSC’s shareholders are not liable for the JSC’s liabilities.

Representative offices and branches of foreign legal entities are not considered separate legal entities. A representative office (RO) is a structural subdivision of a foreign business legal entity that is established at a different location from that of the legal entity and carries on its activities. Since an RO does not constitute a legal entity, all rights and obligations are assumed by the foreign legal entity that established the RO. The law explicitly states that an RO cannot conduct commercial activities.

Uzbekistan’s law does not explicitly restrict/prohibit the establishment of branches in Uzbekistan by foreign entities. However, there are no regulations governing the registration of branches of foreign companies.
Sole proprietorships are permitted to be established only by Uzbek citizens, foreign citizens and stateless individuals who are permanent residents in Uzbekistan pursuant to the Civil Code of the Republic of Uzbekistan.

3. Key Factors to Consider for Foreign Investors

Capital Requirements

There is no statutory minimum share capital for LLCs, though in practice, contributions of around UZS 1 million (approximately USD 80-100) are common. Generally, there is no minimum charter capital requirement for a JSC. However, regulations governing certain activities normally subject to licensing (e.g., banking and insurance activities) set out minimum capital requirements for JSCs.

Liability and Risk Exposure

In both LLCs and JSCs, liability of shareholders/participants is limited to the amount of capital contributed. In contrast, the parent company of a representative office remains fully liable for the operations of these subdivisions.

Taxation

Corporate Income Tax (CIT) currently stands at 15% for both LLCs and JSCs. Non-commercial representative offices are generally exempt from CIT. Businesses must also consider other applicable taxes such as VAT, payroll taxes, and municipal levies. Uzbekistan has concluded double taxation treaties (DTTs) with 55 countries, and various tax incentives are available to foreign investors, depending on the sector and investment type.

Administrative Burden

LLCs face moderate compliance and reporting obligations. JSCs are subject to more complex governance and disclosure requirements. Representative offices have the lowest administrative burden, but their scope of permissible activities is limited.

4. Corporate Governance Requirements

In an LLC, corporate governance can be structured with considerable flexibility. A General Director or another form of Executive Body usually manages day-to-day operations. While a supervisory board is not required by law, it can be established voluntarily. Key decisions are made at the General Meeting of Participants, and governance can be customized based on founders’ agreements and internal policies.

JSCs, however, must follow a more formal mandatory corporate governance structure. This includes a General Shareholders’ Meeting, a mandatory Supervisory Board to oversee management, and an Executive Body, which may be either an individual or a collegial body. Larger JSCs are also required to have an Internal Audit Service, a Corporate Secretary, and a Corporate Advisor. Annual general meetings and detailed protocols are mandatory, reflecting the higher degree of regulatory oversight. This structure makes JSCs more appropriate for businesses with complex ownership structures, investor relations, or ambitions for IPOs or M&A activity.

5. Audit Requirements

LLCs are only subject to mandatory external audits if they exceed certain thresholds relating to turnover, employee count, or sector-specific regulation. Many small and medium-sized LLCs are exempt but may still choose to undergo voluntary audits. Regardless of audit requirements, annual financial statements must be filed with the tax authorities.
In contrast, all JSCs must undergo annual external audits, regardless of size. These audits must be carried out by licensed auditing firms within Uzbekistan. Audit reports must be shared with shareholders and regulatory bodies and, in some cases, made publicly available. Public JSCs – those with a large number of shareholders or those listed on a stock exchange – face even stricter disclosure and reporting obligations.

Representative offices and branches are generally not required to undergo statutory audits. However, internal controls and financial reporting to the parent company are typically expected.

6. Recommended Legal Structures for Foreign Businesses

For most foreign investors, establishing an LLC is the most practical option. It is well-suited to both small and large companies that prefer full foreign ownership and require a flexible management structure while keeping compliance obligations manageable.

The JSC is a better fit for multi-investor companies that intend to raise capital through public or private share placements. Furthermore, it is best suited for regulated sectors such as finance, telecom.

 A representative office is ideal for companies at the pre-investment stage, interested in conducting market research, building networks, and gaining local experience without engaging in commercial transactions. This form keeps costs and obligations low but also limits operational scope.

7. Steps to Establish a Business Entity in Uzbekistan

Setting up a business entity in Uzbekistan is increasingly streamlined, especially following recent administrative reforms. The general process includes:

1. Selecting the legal form and reserving a company name
2. Preparing founding documents such as the charter and founders’ resolution
3. Registering the business through the Public Services Center or via the official online portal
4. Obtaining a Tax Identification Number (TIN)
5. Opening a corporate bank account
6. Registering with the Social Fund and Employment Authority
7. Applying for a business license if the activity falls under a regulated sector
8. Commencing operations

In most cases, an LLC can be registered within 1–3 business days, demonstrating Uzbekistan’s efforts to foster a business-friendly environment.

8. Start with the Right Structure

Uzbekistan presents growing opportunities for foreign investors. However, success in this market begins with choosing the right legal structure – one that aligns with your strategic goals, regulatory obligations, and future growth plans.

For many companies, a Limited Liability Company (LLC) offers the most suitable foundation. It strikes a balance between ease of formation, operational flexibility, and manageable compliance. For larger ventures or those involving multiple investors, a Joint Stock Company (JSC) may be more appropriate. Meanwhile, a Representative Office provides a cost-effective way to explore the market before making a full commitment.
Understanding the legal, governance, and audit obligations tied to each form is crucial. By making informed decisions early, foreign businesses can navigate the Uzbek market with greater confidence and long-term success.

At Lexminster, we advise clients on corporate structuring, compliance, taxation, and market entry throughout Uzbekistan and Central Asia. If you’re considering doing business in Uzbekistan, our team is ready to guide you through the legal landscape with clarity and confidence.

Authors:
Dr. Zurab Simonishvili – Partner
Ruslan Kholmatov, LL.M. (Penn) – Senior Associate
Email: info@lexminster.com
Website: lexminster.com