Foreign investors are permitted to create any type of company defined under the Civil Code of Armenia, the law “On Joint Stock Companies”, the law “On Limited Liability Companies”, and the law “On State Registration of Legal Entities, their Subdivisions, Enterprises and Sole Proprietors”. The following types of companies are defined by legislation:
- Limited liability companies,
- Joint-stock companies (open and closed)
- Business partnership (full partnership, limited partnership)
A limited liability company (LLC) is founded by one or more persons with capital divided into ownership shares, with nominal value determined by the charter. The participants in a limited liability company are not liable for its obligations, but they bear the risk of losses connected with the activity of the company within the limits of the value of their initial investment. The founders share profit according to the investment share ratio. The LLC and its founders are taxed separately.
A joint-stock company is a business entity whose equity is split into a specified number of shares defining the rights and obligations of its shareholder towards the company. Only joint-stock companies have the right to issue shares of stock. The stockholders in a joint-stock company are not liable for its obligations, but bear the risk of losses within the limits of the value of their shares of stock. A joint-stock company may be created by a single individual, and its ownership may consist of one person in the case of acquisition by that person of all the shares of stock of the company. The charter of the company should be registered and published. Armenian legislation defines two types of joint-stock companies – open and closed.
The open joint-stock company has an open subscription for shares. The stocks are sold to the public without the consent of other stockholders, and the number of shareholders in these types of companies is not limited.
In closed joint-stock companies the stocks are distributed only among its founders or a pre-determined group of persons or entities. A closed company may not hold an open subscription for its shares or otherwise offer them to an unlimited number of purchasers. A closed joint-stock company should have no more than 49 shareholders. A closed joint-stock company may create separated subdivisions, branches and representative offices, in accordance with applicable laws and regulations.
A business partnership is an association of two or more people or organizations who manage a profit-making business as owners. The partners personally participate in the management of the partnership. An individual is not permitted to be a partner in more than one partnership. Business partnerships may be created as a full or limited partnership.
A full partnership is a legal entity that may be established by at least two persons (general partners) who represent the business entity and act as the owners of the company. The partners jointly bear full liability for the company’s debts and obligations. An individual may be a general partner in only one partnership.
A limited (trust) partnership is also formed by two or more persons who are the owners or contributors to the partnership. The main difference between this and a full partnership is the liability status of the partners. A limited partnership has two types of partners – general and limited. The general partner has the right to manage the company, and also bears full liability for the partnerships’ debts and obligations with all their property. Limited partners bear limited liability up to the limit of their contribution to the partnership’s capital.
The law allows for the establishment of supplementary liability companies and cooperatives as legal entities, but such vehicles are not widely used.
Representative offices and branches. Foreign companies may operate in Armenia without establishing a new legal entity by registering as a representative office or a branch of a foreign legal entity. Representative offices and branches do not have the status of an independent legal entity, and they are governed by the rules and regulations of the foreign legal entity. The approved activities of a representative office are to represent and protect the interests of the home office, but they may not conduct independent business activities. Nonetheless the permitted scope of activities of a branch is wide, in that it is allowed to perform all necessary business functions and activities on behalf of the home office.
*Acknowledgement – this content is provided from Investment Guide Armenia 2013 upon approval. – Full report here