The Armenian government is initiating a reform of the legislation governing limited liability companies (LLCs) to streamline procedures for establishing and operating businesses. The need for these changes stems from the significant growth in the number of LLCs and their increasing role in the country's economy.
As of 2023, Armenia has over 91,000 registered LLCs, with total tax revenues from their activities reaching $1.2 billion.
The draft law, developed by the Ministry of Economy in collaboration with the European Bank for Reconstruction and Development (EBRD) and incorporating private sector input, introduces several substantial changes to the regulation of LLCs.
One key innovation is the elimination of the mandatory requirement to conclude a founding agreement when establishing an LLC, except in cases where real estate is contributed as a share. Additionally, the requirements for a company charter will be simplified, removing the need to include detailed participant information, which will instead be recorded in a registry.
A significant improvement is the establishment of a legal framework for agreements between LLC participants, enabling clearer regulation of share management and other aspects of their relationships. The procedures for pledging and enforcing shares will also be aligned with civil legislation to eliminate unnecessary restrictions.
The draft law provides for the continuation of company operations even with a negative balance of net assets, provided there is a reasonable assessment of the company’s prospects for restoring financial stability. Participants will also gain the ability to make decisions without convening a general meeting if there is unanimous consent among all members.
Special attention is given to simplifying the process of terminating the powers of the executive body while preserving necessary safeguards for employee rights.
