A limited liability company (LLC) stands as the most common organizational and legal structure among commercial entities in numerous countries, including Russia, Georgia, and Armenia. This popularity stems from several key factors:
- A clear distinction of responsibilities between the company and its members, along with the absence of mutual responsibility for obligations towards one another.
- The use of simpler legal procedures for the registration and administration of an LLC, among other advantages.
Registering a Foreign Limited Liability Company in Russia, Georgia, and Armenia
The documentation required for registering an LLC remains consistent across various legal frameworks, as outlined in the Law of the Russian Federation “On State Registration of Legal Entities and Individual Entrepreneurs” (Article 12), the Law of Georgia “On Entrepreneurs” (Article 9), and the Law of Armenia “On State Registration of Legal Entities, Separate Divisions, institutions of legal entities and state registration of individual entrepreneurs” (Part 1 of Article 34).
The list of essential documents includes:
- Application for the registration of a legal entity
- The decision of the founder/founders regarding the establishment of the legal entity or the minutes of the constituent assembly
- The charter of the LLC
- A document to verify the state fee payment
Unlike the Georgian, the legal frameworks of Armenia and Russia do not require LLCs to have the legal right to use real estate at the company’s legal address.
In Armenia, several companies can be registered at the same legal address. Such a practice is based solely on the information regarding the address provided during the document registration process. This mechanism helps to avoid effectively the costs associated with the real estate acquisition. It also eliminates several other difficulties.
Yet, it is crucial to note that any official notices intended for the company will be sent to the specified legal address. Therefore, when registering a company, it is important to provide an accurate address where the company can receive them.
MB Legal is ready to help you!
Our team of experienced professionals offers comprehensive legal advice and assistance throughout the entire process of company registration in Armenia:
- We provide tailored advice to meet your specific business needs, whether you’re looking to establish a start-up or expand an existing company.
- Equipped with in-depth knowledge of Armenian tax law, our experts are ready optimize your company’s financial performance.
- Beyond initial company registration, our firm offers ongoing legal services to support your business operations, including contract review, compliance checks, and representation in legal matters.
State Fees for LLC Registration
According to the Tax Code of the Russian Federation (part 1 of Article 333.33), a state fee of RUB 4,000 is required for company registration.
In Georgia, the fee structure is unique, with charges ranging from GEL 60 to 110 depending on the requested registration period. Furthermore, additional payments might be necessary, such as a fee of GEL 25 for the issuance of a registration certificate in English.
Under Armenian legislation, despite the requirement to provide a document confirming payment of the state fee, the specific fee for LLC registration is not established. Consequently, in practice, when registering a Limited Liability Company, there is no need to provide such a document.
LLC Registration Terms
According to the legislation of the Russian Federation on the state registration of legal entities and individual entrepreneurs (Part 1 of Article 8), an LLC must be registered with the relevant registration authority within 5 working days following the submission of the required documents.
In Georgia, as per local regulations, it is necessary to pay GEL 60 to register a company on the next business day. Whereas for same-day registration, the state fee will be GEL 110.
The legislation of Armenia on state registration of legal entities, state registration of separate subdivisions, institutions of legal entities, and individual entrepreneurs (Parts 2 and 2.1 of Article 35) the registering authority is obliged to complete the state registration no later than one working day after the submission of all necessary documents. However, if there is a legal entity among the LLC founder, registration must be completed within two working days after submitting the required documents to the agency.
The Minimum Amount of Authorized Capital
According to the legislation of the Russian Federation on limited liability companies (part 1 of Article 14), the minimum amount of authorized capital is set at RUB 10,000.
The legislations of Armenia and Georgia do not impose a minimum amount of authorized capital. This means that the participant(s) of the company have the freedom to determine the authorized capital amount at their discretion, without facing any legal restrictions.
Members of the LLC
According to the legislation of Russia, Georgia, and Armenia, both individuals and legal entities are eligible to become members of a Limited Liability Company (LLC), irrespective of their place of residence. The formation of an LLC requires at least one participant.
However, Russian law on limited liability companies (Part 2 of Article 7) specifies that another LLC cannot be a participant if there is only one person as the sole participant.
The laws of Armenia and Russia on LLCs (Article 12 in the Law of Armenia and Article 8 in the Law of Russia) define the rights of LLC participants almost equally.
Thus, the LLC participants have the right to:
- Participation in the company’s management
- Access information regarding the company’s activities
- Receive the legally established part of the profit
- Sell or transfer a share (part of it) to other participants or third parties
- Leave the company
- In the event of company liquidation, receive a share of the remaining property
Regarding the legislation of Georgia, although there is no specific article outlining the rights of an LLC participant, these rights are governed by various articles regulating individual issues.
Nevertheless, it is important to note that while the rights of an LLC participant may seem similar in Russia, Georgia, and Armenia, there are numerous substantial differences in their practical implementation as stipulated by the respective laws of these countries.
The Right to Leave the Company
The right of an LLC participant to withdraw from the company varies significantly across the legislation we are discussing today.
According to the Russian law on limited liability companies (Part 1 of Article 26), an LLC member possesses the right to withdraw from the company by selling their share without taking into account the consent of other members (provided this is specified in the charter).
Under the Law of Georgia on Entrepreneurs (Part 1 of Article 144), a participant has the right to leave a company under conditions outlined in the charter or the law. Moreover, they can also leave if the actions of the governing bodies or other participants significantly harm others’ interests.
In contrast, according to the Law of the Republic of Armenia “On Limited Liability Companies” (Article 21), an LLC participant can withdraw from the company at any time, without the company’s and other member’s consent. Notably, the company’s charter cannot impose restrictions on this right.
Legislations of Russia and Georgia limit the right of an LLC participant to exit the company without the consent of other participants and the LLC itself. Conversely, Armenian legislation grants participants the exclusive right to withdraw from the LLC at will, an aspect that cannot be restricted even by the charter.
This variance in legal provisions suggests a more adaptable approach in Armenia, where participants have greater flexibility in withdrawing from an LLC. For founders seeking more stable business management relationships, it is advisable to consider registering the company in Armenia as a joint-stock company rather than a limited liability company.
Administrative Bodies of LLC
As outlined in the Law of Armenia “On Limited Liability Companies” (Article 35), the Law of Russia “On Limited Liability Companies” (Article 32), and the Law of Georgia “On Entrepreneurs” (Articles 124 and 125), the administrative bodies of an LLC consist of the general assembly, the executive body, and the Board of Participants.
Both Armenian and Russian laws clearly designate the general assembly of participants as the supreme body governing the company. Although the law of Georgia does not explicitly state this, it can be inferred from the articles governing the activities of the executive body and the general assembly.
Neither Armenian nor Russian legislation requires the creation of a board of directors, leaving it to the discretion of the company’s participants to include this provision in the articles. While the Law of Georgia “On Entrepreneurs” does not enforce a mandatory requirement for a board of directors, the option for its formation may be implied by the law.
All three countries legislatively establish that the executive body of a company is responsible for its day-to-day management. However, there are differences in the composition of the executive body among these countries.
In Russia, it is mandatory to have a sole executive body. Conversely, in Georgia, the executive body can be either sole or collegial. Armenia, on the other hand, does not provide for the formation of a collegial executive body.
Furthermore, Armenia and Russia allow for the possibility of forming an audit commission, but with varying requirements. In Russia, this is the right of the company, whereas in Armenia, it is permissible until the number of participants exceeds twenty. Once the participant count surpasses this threshold, establishing an audit commission becomes mandatory. In Georgia, the law does not provide for the possibility or obligation to establish an audit commission.
The Advantages of Opening a Foreign Limited Liability Company in Armenia
To sum up, the Armenian legislation governing Limited Liability Companies offers several advantages compared to the laws of Russia and Georgia:
- No requirements regarding ownership of real estate at the company’s legal address.
- Absence of a state fee for company registration.
- Quick company registration process without additional costs.
- Lack of a minimum required authorized capital.
- Participation opportunities for both individuals and legal entities, irrespective of their place of residence.
- A flexible mechanism for LLC participants to exit the company.
- The strategic advantage of allowing foreign individuals and legal entities to establish an LLC in Armenia, even in the absence of physical presence, through a representative.
These advantages collectively make Armenian legislation regarding LLCs more favorable for entrepreneurs and businesses compared to the legal frameworks in Russia and Georgia.
When establishing an LLC with a foreign legal entity as the founder, the following additional documents are required for state registration:
- An extract from the commercial register of the relevant country or a similar document verifying the legal status.
- Constituent documents that are notarized and translated into Armenian.
For a foreign natural person-founder, the additional documents required are:
- A notarized and translated into Armenian copy of a passport or other identity document.
- Authorization for the President of Armenia to submit registration documents to the registration authority. If the power of attorney is in Armenian or in languages with an Armenian version, notarization is not required. However, if it’s in other languages, the power of attorney must be notarized and translated into Armenian.
Conclusion
We believe it is crucial to highlight that establishing or acquiring a company in Armenia, in accordance with the legislation outlined in the Republic of Armenia “On Foreign Investments,” constitutes a form of foreign investment. This law offers several benefits that are essential for foreign investors contemplating investments in Armenia.
Additionally, it is noteworthy that Armenia is considered one of the most favorable locations globally for activities in the information technology sector, primarily due to extensive state support in the field of IT.
We emphasize the importance of considering several key issues when registering a company in Armenia, and our legal team is fully prepared to assist with all matters concerning the creation and ongoing maintenance of a legal entity in any organizational and legal form within Armenia.
Contact us today to get a professional free consultation and find out how we can help make your business dreams a reality!
