Tajik President Emomali Rahmon signed amendments to laws on bankruptcy, joint stock companies and a new Law “On state registration of legal entities and individual entrepreneurs" that will significantly improve the processes of business registration and bankruptcy and provide enhanced shareholder investment protections. The new laws and amendments to existing legislation were the result of joint activities of the U.S. Agency for International Development (USAID) Business Environment Improvement Project, the Government of Tajikistan, private sector representatives, and other international donor organizations. The amendments went into effect after they were officially published on May 21, and the law will go into force on July 1.
Business in the Republic of Tajikistan has long been regarded as difficult. In its most recent “Doing Business” report, the World Bank ranked Tajikistan 168th in ease of starting a business, 150th for protection of investors, and 97th for ease of bankruptcy processes, out of 181 countries surveyed. The USAID Business Environment Improvement Project works with the Government of Tajikistan to assist it in simplifying and improving business regulation in these areas, among others, as part of the country’s Poverty Reduction Strategy and general response to current economic issues.
The law on state registration of legal entities and individual entrepreneurs is designed to implement streamlined, simplified processes for business entrepreneurship registration, improve transparency, and remove various barriers to create favorable conditions for business development. The new law is estimated to reduce the number of government bodies involved in registration from 4 to 1 through implementation of streamlined, “one-stop-shop” principles, reduce the time required for registration from 49 to 5 days, and decrease the number of documents required from 10 to 6. The new law also removes the requirement for companies to set aside charter capital funds before registration—a significant burden on small businesses—and instead permits such funds to be made available within one year of registration.
The changes and amendments to the laws on joint stock companies and bankruptcy provide improved mechanisms for company bankruptcy and increased investor protection in joint-stock companies. Minority shareholders in joint-stock companies will have enhanced rights in case of misconduct by company officials, including the right to file suit against company officials who have conflicts of interest in company transactions, protection of shareholders’ interests in court. Companies will be required to disclose information to minority shareholders about company transactions.
The changes to the law “On Bankruptcy” are expected to reduce the time required for closing a business from 3 years to 2, decrease the cost of bankruptcy from 9% to 2% of total asset values, and increase the ratio of funds recovered for investors from 25.4 cents to 35 cents per U.S. dollar, based on the formula used by the World Bank “Doing Business” report for recovery rates in bankruptcy.
The Business Environment Improvement Project is one of the many assistance projects made by the American people through the USAID. Since 1993 the American people through USAID have provided more than $300 million in programs that support democratic institutions, the social sector and economic growth in Tajikistan.
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