Kazakhstan: Entrepreneurial Code Of The Republic Of Kazakhstan: Key Novelties

Last Updated: 23 December 2015
Article by Kanat Skakov and Rahim Shimarov

On 29 October 2015, the RK Entrepreneurial Code was passed. It will be effective (except for some provisions) as of 1 January 2016.

Consolidation

The Entrepreneurial Code consolidated the laws regulating business activity as a whole. Industry types of business activities (such as subsurface use, banking, insurance, etc.) will continue to be regulated by special laws.

In view of the above, the Entrepreneurial Code actually consolidated the provisions of the following six laws that will cease to be in force as independent normative legal acts as of 1 January 2016:

  • Law "On Peasant or Farm Household"
  • Law "On Investments"
  • Law "On Private Entrepreneurship"
  • Law "On Competition"
  • Law "On State Control and Supervision in the Republic of Kazakhstan"
  • Law "On State Support of Industrial and Innovation Activities"

It should be noted that the inclusion in the Entrepreneurial Code of the Law "On State Control and Supervision in the Republic of Kazakhstan," which applied not only to business entities, but also to all legal entities and individuals, as well as state authorities, is based on the principle of the prevalence of regulated public relations, as the said Law extended its effect mainly on businesses. Therefore, such consolidation within the Entrepreneurial Code of the provisions related to the organization and conduct of state control and supervision of the inspected entities does not narrow the scope of the state control and supervision.

Harmonization of legislation

Along with the enactment of the Entrepreneurial Code, the Law on Amendments to Some Legislative Acts of Kazakhstan on Issues of Entrepreneurship was also passed (the Law introduces amendments to 11 codes and 99 laws). In spite of the amendments to such an impressive number of laws, it should be noted that a significant part of such amendments is of a technical nature and is aimed at harmonizing the legislation in connection with the enactment of the Entrepreneurial Code.

One of the big fears in connection with the enactment of the Entrepreneurial Code—and the amendments to the legislation accompanying it—was that a conflict between the provisions of the Entrepreneurial Code and, above all, of the Civil Code will arise. However, the legislator has tried to address this point and to minimize the risks of this kind. Paragraph 2 of Article 1 of the Entrepreneurial Code provides that "Commodity-money and other property relations based on equality of the participants, as well as personal non-property relations related to property relations shall be governed by the civil legislation of the Republic of Kazakhstan."

Code structure

The Entrepreneurial Code consists of seven sections, 31 chapters and 324 articles.

  • The general provisions of the Code establish the legal basis for interaction between business entities and the state.

Such important principles as, inter alia, encouragement by the state of social responsibility of business, limiting state involvement in business activities, development of self-regulation in the area of entrepreneurship should be noted.

  • A separate section on the interaction of businesses and the state has been included.

The interaction of business entities and the state will be carried out through implementation of such institutions as participation of businesses in rule-making, public-private partnership, social responsibility, state regulation of business and government support of private entrepreneurship.

  • The forms and means of state regulation of business have been systematized.

In particular, those include economic competition, permits and notifications, technical regulation, state regulation of prices, mandatory insurance, state control and supervision.

  • The forms and methods of protection of the rights of business entities have been systematized.

The Entrepreneurial Code reflects all possible ways of out of court and pre-trial settlement of disputes, establishes the general provisions of the investment ombudsman who is authorized to protect the rights of entrepreneurs. It should be noted, among other things, that the Entrepreneurial Code provides for strengthening of the institute of business ombudsman to protect the interests of entrepreneurs. In particular, it establishes the authority of the Head of the State to appoint the business ombudsman for a term of four years.

As one of the forms of protection of the rights of business entities, the Entrepreneurial Code provides for appeal by business entities against actions and acts of state authorities.

  • The main directions of state support of small and medium businesses, agribusiness and non-agricultural types of business activities in rural areas, industrial innovation activity and investment activity are set out in a consistent manner.

    • The Entrepreneurial Code contains a section on liability for breach of legislation in the area of entrepreneurship. In particular, it provides for liability of state bodies and their officers for failure to perform or improper performance of their duties.

Some changes in the legislation in connection with the enactment of the Entrepreneurial Code

In connection with the enactment of the Entrepreneurial Code and the Law on Amendments to Some Legislative Acts of Kazakhstan on Issues of Entrepreneurship, legal regulation of a number of issues in various areas has changed. In particular, this concerns the following issues.

Changes in the area of economic concentration

For example, the provisions concerning matters of economic competition have undergone a number of fundamental changes. Please see the main changes set out below:

  • From 1 January 2016, the Registry of dominants will be limited to the participants of the regulated market. Small businesses will most likely be excluded from the Registry. At the same time, full cancellation of the Registry from 1 January 2017 is expected.
  • Prohibitions on anti-competitive agreements extend to agreements entered into verbally. The previous version of the Law "On Competition" was equivocal.
  • The dominant position of a market entity will now be set only when the established thresholds are exceeded, taking into account at the same time the existence of facts supporting its decisive influence on the market.
  • The institute of conciliation commission under the antimonopoly authority has been introduced to review the files of the cases of violations in the area of competition (i.e., before the final decision is made by the antimonopoly authority).
  • Full abolition of price regulation and its replacement with tools of antimonopoly regulation is expected from 1 January 2017.

As we can see, the provision on protection of consumers' rights has been excluded from the qualifying elements of violations of antimonopoly legislation. In practice, it has been very long discussed that infringement of individual interests of individuals unrelated to the restriction of competition and entrepreneurial activities, should not be classified among qualifying elements of violation of antimonopoly legislation.

More details about the changes in the area of competition law can be found in our newsletter "What events await us in the area of competition law in the near future" of 9 October 2015.

Inspections

Compared to the provisions of the Law on State Control and Supervision, the Entrepreneurial Code provides for a new basis for an unscheduled inspection - it is "the result of the sampling and sanitary-epidemiological examination of products in cases of detection of violations of the requirements of the legislation of the Republic of Kazakhstan."

Ban on advertising on foreign and radio channels

On 1 January 2016, a ban on the distribution of advertising on foreign television and radio channels, rebroadcasted in the territory of Kazakhstan will be introduced. The responsibility for the violation of this ban is imposed on Kazakhstan broadcasting operators. There is no provision for the liability of foreign TV and radio companies.

The consequence of the ban for foreign TV and radio companies may only be giving up the rebroadcasting of their channels on the territory of Kazakhstan by the RK TV and radio broadcasting operators.

On this topic, please see our alertabout the amendments to the Kazakhstan legislation on TV and radio broadcasting, which can be found here.

Unfortunately, the format of thisalert does not allow us to reflect all changes in such a large number of laws. We will send you the relevant newsletters with regard to the most relevant and interesting changes in the legislation related to the enactment of the normative legal acts under consideration – the Entrepreneurial Code and the Law on Amendments to Some Legislative Acts of Kazakhstan on Issues of Entrepreneurship.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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