Corporate Governance Overview

Currently 1,060 open and closed joint stock companies are operating in the Republic of Tajikistan. 880 of these have been established by means of privatization of state-owned enterprises and only 180 have been created as joint-stock companies. Approximately 20% of all JSCs transformed from the state-owned enterprises have been restructured into limited liability companies.

The statistics show that JSCs are less attractive as an organizational-legal form for carrying out business activities in Tajikistan. The reasons for this situation are, as follows:

• non-availability of the securities market, which is a main motivation for the development of this form of business;
• less developed joint stock company legislation;
• top management may lack familiarity with the joint stock company structure and investors lack familiarity with the stock market;
• presence of mandatory legal procedures (registration of shares issuances, maintenance of the shareholders’ registry, holding the general meeting of shareholders, obligatory disclosure of information required for open JSCs), which may seem to be a burden to local businessmen.

In March 2007 in Tajikistan a new Law On Joint-Stock Companies was approved. While there is still room for improvement, it is more advanced compared to its predecessor law and includes some elements of corporate governance best practices, such as provisions on related party transactions and fiduciary responsibilities of JSC’s management bodies.

The improvement of the country’s investment climate and attraction of foreign capital are among the country’s most vital strategic issues. With these goals in mind, a number of measures are being taken regarding legislative improvement, IFRS implementation and corporate governance enhancement in Tajik companies. In particular, over the past year numerous Tajik companies have expressed their interest in implementing corporate governance principles. Local companies started to perceive the importance of adhering to corporate governance best practices in order to promote investment attractiveness and establish adequate controls and management processes.