- Doing Business in Armenia
Relationships connected with the companies are governed by the Civil Code, the Law “On Joint Stock Companies”, the Law “On Limited Liability Companies” and the Law “On State Registration of Legal Entities, State Record of Legal Entities’ Separate Subdivisions, Institutions and of Private Entrepreneurs”. A foreigner can register his/her company as an Armenian legal entity (limited liability company, joint stock company, etc.), or to register as a private entrepreneur. For some activities an appropriate license may be required.
Different forms of companies, branches and representations
Aliens are suggested various forms of investments to be made in the Republic of Armenia, including:
- in the territory of the Republic of Armenia foundation of companies with 100% foreign capital, or acquisition of any Armenian company;
- creation of joint ventures with participation of Armenian enterprises or private entrepreneurs, or purchase of shares of any Armenian company;
- other forms based on joint cooperation or agreements with Armenian companies or citizens.
There are different types of companies in Armenia. Below we present only the types most frequently used by aliens:
Joint Stock Companies
A joint stock company is a legal entity, the charter capital of which is distributed into a certain number of shares, defining the rights and obligations of its shareholder in relation to the company. There are two types of joint stock companies: joint stock companies of open type and joint stock companies of closed type. Open Joint Stock Company may, without restrictions, issue shares and sell them to public. Every shareholder has the right to sell shares without consent of the other shareholders. In closed joint stock companies shares are distributed only among its shareholders (including founders) or pre-decided persons, and the number of shareholders is restrained (maximum envisaged by the law: 49 shareholders).
Limited Liability Companies
A limited liability company is an economic entity, the charter capital of which is divided into shares the number of which is determined by its charter. The participants of the company are not liable for the obligations of the company and within the values of their contributions shall bear responsibility for the risks of losses related to the activity of the company.
Supplementary Liability Company
A supplementary liability company is a company founded by one or several entities, the charter capital of which is divided into shares envisaged by the charter. Besides, the company participants shall bear subsidiary liability for the obligations of the company with their property in the same value (for all participants) of their contributions set forth by the charter of the company. In case of bankruptcy of any of the participants, his/her/its responsibility for the obligations of the company is shared among other participants.
In Armenia it is easier and less costly to establish a branch rather than a daughter company. Founding a branch does not require any capital investments. A branch of any foreign company must be registered in the RA State Register of Legal Entities. For this the company must submit the following documents: application of the head of the executive body of the founder company or the authorized person of the founder company or the head of the branch containing data on the founder company and the head of the branch, the founding documents of the founder company, including extract from the commercial registry proving that the founder company is registered in the manner established by the legislation of its country of origin, the decision taken by the authorized body of the founder company on opening the branch and appointing the head of the latter, the charter of the branch executed by the authorized person of the founder company, as well as the receipt certifying payment of the state duty (12,000 AMD).
Representation is very similar to a branch. It should be noted that, like a branch, it is also located and operates beyond the place of the founder company and does not have a status of a legal entity. Finally, like a branch, it acts in accordance with the powers delegated by the founder company. The registration process of a representation is similar to that of the branch described above.
There is however some difference between a branch and a representation. The latter is entitled to represent and defend the interests of the founder company, while a branch can implement all those functions, which the founder company can
perform, on top of that, it can perform all functions of the representation.
The company is deemed established upon the registration within the RA State Register of Legal Entities. Upon the registration the given company will be deemed automatically recorded with the tax body and will be awarded a Taxpayer Identification Number. The founding (governing) document of the company is its charter. The charter determines the size of the entity’s statutory capital, the composition and competencies of the governing bodies and the rules for decision-making, the rights and obligations of the participants/ shareholders/ partners, the rules for exit and the transfer of shares of a participant to another person. The incorporation of a company takes 2 working days once correct documents are filed.
The creation of a company consists of two stages:
- elaboration and collection of documents envisaged by the law;
- submission of documents to the RA State Register of Legal Entities required for state registration.
For registration of a company, it will be necessary to provide the RA State Register of Legal Entities with the following documents envisaged by the RA Law “On State Registration of Legal Entities, State Record of Legal Entities’ Separate Subdivisions, Institutions and of Private Entrepreneurs”:
- the application of the founder(s) or the head of the executive body or the authorized person of the founder(s) of the company;
- the decision on the creation of the company or the minutes of the constituent assembly of the company (if the latter is founded by more than one person (in case one of the founders of the company is a legal entity, decision of the authorized body of the latter should also be submitted));
- the copies of the charter of the company (at least two copies, for each additional copy a state duty shall be paid in the amount of 2,000 AMD);
- the passport details of the head of the executive body (a copy of his/her passport, and in case with an alien - a translated and certified copy of the passport);
- statement about actual beneficiaries.
If the founder or one of the founders is a foreign legal entity, then the following documents should be also submitted with notarized translations into Armenian:
- extract from the commercial registry of the country of origin of the founder company, containing information on organizational form of the latter and its legal status;
- founding documents of the foreign founder company, for instance, the charter of the latter or other equivalent documents;
- decision of the authorized body of the foreign legal entity on founding the company.
These documents should contain the following information on:
- the legal status and organizational form of the founder company;
- the registration date in the country of residence;
- the juridical name of the founder company;
- the place of residence of the founder company;
- the competences of the managing bodies of the founder company (Assembly of the founders, Board, Executive body,);
- the managing body, competent to make decisions on the foundation of the given company.
In case the founder or one of the founders is a foreign physical entity, the notarized translation of his/her passport shall be submitted together with the generally required documents.
It is worth noting that as a result of revision of the law regulating the state registration process of legal entities, it has become possible to electronically carry out the whole registration procedure.