Business Development and Investing in Kazakhstan, Vienna, Austria, on April 19, 2012 Lawyers of “Linkage&Mind” Law firm: Ms. Aizhan Karzhaubayeva and Ms. Aigerim Seifullina will take part in Business forum on “Business Development and Investing in Kazakhstan” speaking on the topic: “M&A deals in Kazakhstan”, which takes place in Vienna (Austria) on April 19, 2012 and organized by the Commercial Section of the Austrian Embassy in Kazakhstan.

1. *Game Changers

2. I. INTRODUCTION
I. Forms
II. Comparison of forms
III. Stages of M&A transaction
II. LIMITATIONS
III. NEGOTIATIONS
IV. STATE PERMISSIONS
V. DUE DILIGENCE
VI. CLOSING M&A DEALS
*
VII.TAXATION
VIII.DISPUTES
IX. ABOUT LINKAGE & MIND
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4. *
*
Share deal - purchase of the stock/shares/equity in a
company.
Asset deal - purchase of the assets/property of the
company.
JV –incorporation of a new company by two and
more companies.
Reorganization – mergers (A+B=C) and takeovers
(A+b=A).
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5. Criteria Purchase of Purchase of Founding JV
shares assets
Basis A Sale and Purchase SPA is required. Re- JVs in Kazakhstan is
Agreement (SPA) of registration in the a form of legal
the shares of the justice bodies is entities when some
company shall be necessary, if the part of the
concluded. asset is real estate. shares/equity
The company should Foreign investors belongs to a foreign
be re-registered in cannot be the owners investor.
the bodies of justice. of the real estate
(only through a
subsidiary).
Management Approval of Approval of the JVs may be formed
shareholders/particip authorized bodies of in the form of Joint
ants to sell the the corporation is Stock Companies
interest is required. required. (JSC) or Limited
Liability
Partnerships (LLP).
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6. Labour issues Work permits for Work permits for Work permits for
expatriates are expatriates are expatriates are
required, except for required, except required, except
CEOs of for CEOs of for CEOs of
branches/representa branches/represen branches/represen
tive offices. tative offices. tative offices.
Licenses & No need to re- It is necessary to It is necessary to
Permissions register obtain them again obtain them again
Tax issues In general, dividends No taxes for VAT – 12%;
are taxed at 15 % investors during CIT/WHT – 20%;
rate for legal sale-purchase branch tax on net
entities; phase, then usual income – 15%;
5% - for physical income tax & taxes dividends on non-
persons. on capital gains at residents – 15%,
the exit. etc.
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7. *
1. SHARE DEAL vs ASSET DEAL vs JV
2. NEGOTIATIONS
3. OBTAINING STATE PERMISSIONS
4. DUE DILIGENCE OF M&A DEALS
5. CLOSING OF M&A DEALS
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8. *

9. Activity Limitations for foreign investors
Civil aviation Share of foreigners shall not be more than 49% in the
charter capital of an aviation company
Mass media Prohibition on possession/usage/disposition/control
of more than 20% of stocks/shares
Telecommunication Prohibition on possession/usage/disposition/control
of more than 49% of interest in any form
Trunk communications Prohibition on control and operation of trunk
line communications lines
Security guard activity Prohibition on carrying out of security guard
activities in Kazakhstan, participation in security
guard organizations
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10. Insurance activity Prohibition on possession/usage/disposition of shares for
offshore companies and their participants
Banking activity Prohibition on possession/usage/disposition of shares for
offshore companies
Saving funds * Specified ranking of rating agency is required for
participation
* Prohibition on possession/usage/disposition of shares for
offshore companies and their participants
* Overall share capital of foreign saving funds shall not be
more that 25% of all saving funds
Incorporated Offshore companies cannot be founders/shareholders of
investment fund the investment funds
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11. • Protection of trademarks, service marks,
inventions, industrial designs, utility models
• Objects protection subject to state protection
• Plant protection
• Forest management
• Protection of selection achievements
*
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12.  Mandatory forms of legal
entities
 Restricting rule “one-in-one” for
LLPs
*
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13. MANDATORY FORMS OF LEGAL JSC LLP
ENTITES
Financial organization (bank, insurance company, Х
saving fund, professional participant of the
security market)
Special financial company Х Х
Aviation company Х
Stock exchange Х
Financial agency Х
Organization of over-the-counter securities market Х
Incorporated investment fund Х
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14. MANDATORY FORMS OF LEGAL JSC LLP
ENTITES
Guarantors of deposits (when Х
mandatory)
Audit organizations Х
Security broker Х Х
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49% 50/50 > 51% 75%
If the investor acquires Decisions of participants Investor has majority of Investor has qualified
49% of the shares, then (the investor and the votes and can take majority and can
another participant will another participant) decisions requiring take decisions not
have a simple majority. should be made simple majority. only on questions,
Both can take decision unanimously. which require simple
on the general meeting In such situations none majority, but also on
on issues requiring of the participants will those which require
simple majority (for have a simple majority. qualified majority,
instance, formation of In such cases the with certain
an executive body and shareholders’ exception like change
early termination of its agreement should of charger capital,
activity, the approval of contain provisions on reorganization and
annual financial voting and deadlock liquidation, pledge of
reporting, distribution situations. all the property, etc.
of net profit).
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17. 1. Managing bodies (structure and
authorities)
2. Board of directors
3. Signature rights
4. Control over financial matters
*
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18. *

19. 1. Disposition of strategic assets
2. State priority right over subsoil rights and
permission to transfer them
3. Economic concentration
4. Approvals for financial organizations
5. Approval for natural monopolies
*
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20. *Government of the Republic of Kazakhstan
sets up the list of the strategic assets
*State has the priority right to acquire the
strategic assets
*Permissions are required for encumbrance or
their alienation
*
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21. *"Right of the first night" - the state has a
priority right to purchase the subsoil use
rights/objects
*Permission to transfer subsoil use
rights/objects
*
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22. PRIOR PERMISSIONS ARE RUQUIRED FOR:
- M&A and the acquisition of more than 25% of the interest in
the company
- Acquisition of assets which value exceeds 10% of the book
value of the "seller"
- Obtaining the control over the company
- Participation of the same individuals in several companies
IF:
1. A member of the transaction (including group of persons) is a
dominant / monopoly;
2. Total book value of assets / sales (including group of persons)
during the last year exceeds more than 2 million MCI (~ 21
million USD).
*
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23. *Incorporation the organization
*Principal participant of the organization/
holding company
*Creation, acquisition of a subsidiary
*Significant participation in the charter capital
of another legal entity
*Changing the foundation documents
*Voluntary reorganization
*Voluntary liquidation
*
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24. *(Re)registration of natural monopoly &
registration of termination of an activity
*Transactions with property which value
exceeds 0.05% of the book value of assets
*Purchase of goods/works/services not for
their own consumption
*Acquisition of shares in commercial
companies
*Acquisition of more than 10% of shares in the
charter capital of the natural monopoly
*Reorganization and liquidation
*
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25. *

26. 1. Identifying legal risks, for example, ownership
rights of a seller, its authorities, etc.
2. Minimization of risks
3. Providing the buyer with current structure and
activities of the target
4. Identifying the necessity to obtain required
approvals
*
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27. Seller Buyer
• Preparation for the sale • Target evaluation
(elimination of risks & • Ground for negotiations
compliance)
• Getting the expected
• Structuring the
transaction
results in due time
• Assurance and • Identifying the necessary
guarantees
conditions of the deal
• Pricing • Identifying of measures
on minimization of risks
*
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28. *
 Target of M&A deal
 Specifics of the target's activities
 Legal form of the company
 Cost of the deal
 Strategic purposes
 Risks for the buyer
 Professional consultants
 Budget
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29. Ownership rights Essential disputes
Corporate matters Employment issues
Licenses & permissions Taxation
Significant assets Customs regulation
Obligations and debt Insurance
Intellectual property Anti-trust regulation
Suppliers & consumers
*
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30. 1) Deficiencies in the corporate matters
2) Absence of unified database on current legal
proceedings in Kazakhstan: DD is always
limited by letters of guarantee provided by
the Company
3) No proof that the target has provided us
with all current contracts
4) Deficiencies in the registration of titles
5) Problems with identification of assets which
can be not recorded in balance sheets
*
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31. *

32. 1. Obtaining all permissions
2. Providing with assurance and
guarantees, conditions precedent
3. Signing SPA
4. Payment to the seller
5. Re-registration
*
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33. APPLICABLE LAW
DISPUTES
DEADLINES
*
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34. *

35. There is a Double Tax Treaty between Austrian and Kazakhstan made
in December 10, 2004, applicable to:
In Kazakhstan:
- Income tax (corporate & individual)
- Property tax
In Austria:
- Income tax (corporate & individual)
- Land tax
- Tax on agricultural and forest entities
- Tax on the value of free plot of land
*
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36. SHARE DEAL: capital gain tax (a
tax to be paid by the Seller,
however, the duty to withhold it
rests with the Buyer)
ASSET DEAL: CIT & VAT
*
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37. *

38. DISPUTE RESOLUTION DEPENDS ON
APPLICABLE LAW
IT IS POSSIBLE TO AGREE ON APPLICABLE
LAW IN THE SALE & PURCHASE AGREEMENTS
*
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39. *Established in 2005
*Offices: Almaty, Astana, New York
*Qualified lawyers with LL.M., MBA, PhD
*Working languages: English, Russian and Kazakh
*Partnership with leading legal firms from 43
countries
*Awarded as the best Public-Private Partnership
firm and Corporate Tax Law firm in 2011
*Game Changers

40. ASTANA
7 Imanova Street
010000, Kazakhstan
T + 7 7172 200 701, 200 703
F + 7 7172 200 705
info@linkagemind.com
AIZHAN KARZHAUBAYEVA ALMATY
Senior associate 188 Dostyk avenue
050000, Kazakhstan
T + 7 7272 596 260, 597 560
F + 7 7272 596 260
info@linkagemind.com
AIGERIM SEIFULLINA, LLM
Associate
*
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