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LAW OF THE REPUBLIC OF ARMENIA

of October 27, 2001 No. ZR-232

About joint-stock companies

(as amended on 01-04-2020)

Accepted by National Assembly of the Republic of Armenia on September 25, 2001

Chapter I. General provisions

Article 1. Tasks and coverage of the Law

1. This Law according to the Civil code of the Republic of Armenia (further - the Code) establishes legal status of joint-stock companies, procedure for creation, implementation and termination of their activities, the right and obligation of shareholders, and also provides protection of the rights and legitimate interests of shareholders, creditors.

2. Operation of this Law extends to the joint-stock companies created or created in the Republic of Armenia.

3. Activities of joint-stock companies are regulated by the Code, this Law, other laws and legal acts.

4. Features of procedure for creation, reorganization, liquidation and legal status of joint-stock companies in fields of activity of banks, credit the organization, investing, insurance and other activities are established by other laws and legal acts.

4.1. Provisions of this Law extend to the relations connected with investment funds if other regulation is not provided by the Law of the Republic of Armenia "About investment funds".

4. 2) provisions of this Law extend to public TV companies and public radio companies if other adjustment is not provided by the Law of the Republic of Armenia "About television and radio".

5. Features of reorganization for the purpose of privatization of joint-stock companies with the shares belonging to the state on the property right, creations of societies, release of additional shares, bonds are established by the laws and other legal acts regulating privatization (privatization).

6. If international treaties of the Republic of Armenia establish other regulations regulating activities of joint-stock companies than those which are provided by this Law then are applied regulations of agreements.

7. In this Law the following basic concepts are used:

1) the shareholder nominee - the competent shareholder nominee specified regarding 1 article 197 of the Law of the Republic of Armenia "About the security market". If other is not provided in this Law, concept the shareholder nominee includes concepts the Armenian shareholder nominee and foreign shareholders nominees,

2) the Armenian shareholder nominee - the Armenian holder (shareholder nominee) specified regarding 3rd article 197 of the Law of the Republic of Armenia "About the security market"

3) the foreign shareholder nominee - the foreign holder (shareholder nominee) specified regarding 3rd article 197 of the Law of the Republic of Armenia "About the security market"

4) reestroved – person performing maintaining the shareholder register of the company (shareholders nominees) according to article 51 of this Law.

Article 2. Legal status of joint-stock company

1. Joint-stock company (further - society) the economic society which is the commercial organization which authorized capital is divided into certain number of the shares certifying liability law of shareholders in relation to society is considered.

2. Society is legal entity and has the property isolated from property of its shareholders, considered on separate balance.

Society has the right on its own behalf to acquire and perform the property and personal non-property rights, to perform duties, to appear in court as the claimant or the defendant.

3. Society can have the civil laws and perform the civil duties necessary for implementation of any types of activity which are not forbidden by the law.

Society can be engaged in separate types of activity which list is established by the law only based on the license.

4. Society is considered created from the moment of its state registration. It is created without restriction of term if other is not provided by the charter of society.

5. The company has the right in the procedure established by the law to open accounts in banks of the Republic of Armenia and foreign states, and the Company having more than 50 percent the state or municipal or state and municipal share (in total) and also the Company founded by the Company having more than 50 percent the state or municipal or state and municipal share (in total) can open accounts and in treasury of state body in the sphere of the management of public finances authorized by the Government of the Republic of Armenia (further – treasury).

6. Voided according to the Law of the Republic of Armenia of 06.04.2012 No. ZR-53

7. Society can have the stamps and forms containing its trade name, and also emblem and registered in the procedure established by the law commodity, commercial and other signs.

Article 3. Responsibility of society and other persons

1. Society bears responsibility according to the obligations all property belonging to it.

2. Society does not answer for obligations the shareholders.

3. Shareholders of society do not bear responsibility according to its obligations and within cost of the stocks owned by them bear the risk of losses connected with activities of society.

4. If activities (failure to act) of shareholders or other persons who have the right to instruct society obligatory for execution are the reason of insolvency (bankruptcy) of society or have opportunity to otherwise determine activities of society, then on these shareholders or other persons, in case of insufficiency of the property belonging to society, the accessorial (subsidiary) liability according to obligations of society can be conferred.

Actions (failure to act) of above-mentioned shareholders or other persons are considered as the reason of insolvency (bankruptcy) of society only if they used this right and the opportunities for the purpose of coercion of making or non-execution of certain actions by society, obviously knowing that for this reason society will fall into state of insolvency (bankruptcy).

5. The Republic of Armenia and municipalities do not bear responsibility according to obligations of society. Society in turn does not bear responsibility according to obligations of the Republic of Armenia and municipalities.

Article 4. Name and location of society

1. Society has trade name in Armenian which shall contain own, common and (or) other noun of distinctive value, and also include words "open joint stock company" or "private company".

The trade name of society may contain also the words characterizing activities of society, the name of the place of its stay, and also other data which society or its founders will count necessary.

2. Society can have the full trade name and (or) its abbreviation as well in other languages.

3. The order of registration, uses and legal protection of trade name of society is established by the law and other legal acts.

4. The location of society is the location of one of the executive bodies of its permanent body established by the charter. State registration of society is performed in the location of object.

5. Society can have the postal address to which with it it is possible to perform communication. Delivery of mail and other correspondence on the postal address and on the location of society is considered proper delivery.

Article 5. Branches and representative offices of society

1. Society according to the law and other legal acts has the right to create separate divisions - branches and representations.

Branch of society its separate division located out of the society location, performing all its functions or their part including representational functions is considered.

Its separate division located out of the society location, representing the interests of society and performing their protection is considered representative office of society.

Creation of separate divisions by society in foreign states is performed according to the laws and other legal acts of these countries if other is not provided by international treaties of the Republic of Armenia.

2. Decisions on organization of separate divisions of society are made by the board of directors (supervisory board) of society (further - council). The separate division of society is considered founded from the moment of adoption of the relevant decision.

3. Branches and representative offices of society are not legal entities and act on the basis of the provisions approved by society.

The property is provided to branches and representations by the society which created them. The property of branches and representations is considered both on their separate balances, and on balance of society.

Heads of branch and representation are appointed by society and act on the basis of the powers of attorney issued to the last.

4. The charter of society may contain data on its separate divisions.

5. Branches and representations act on behalf of the society which created them. Responsibility for activities of branches and representations bears the society which created them.

Article 6. Organizations of society

1. Society according to the law and other legal acts has the right to create organizations.

Organization of society the organization created by society for implementation of management, welfare, educational or other activity of non-commercial nature is considered.

Creation of organizations in foreign states is performed according to the laws and other legal acts of these states if other is not provided by international treaties of the Republic of Armenia.

2. Decisions on foundation of organizations of society are made by council. The organization of society is considered based from the moment of adoption of the relevant decision.

3. Organizations of society are not legal entities and act on the basis of the provisions approved by society.

The property is provided to organizations by the society which created them. The organization in the limits set by the law, according to the purposes of its activities, orders of society and purpose of the property assigned to it owns, uses and disposes of this property. The property of organization is considered both on its separate balance, and on balance of society.

Heads of organization are appointed by society.

4. The charter of society may contain data on organizations.

5. Organizations act on behalf of the society which created them. Responsibility for activities of organizations is born by the society which created them.

Article 7. Affiliated and dependent societies

1. Society has the right to have affiliated and dependent economic societies with the status of the legal entity. The organization in foreign states of affiliated or dependent societies or participation in them is performed according to the laws and other legal acts of these states if other is not provided by international treaties of the Republic of Armenia.

2. Society is considered affiliated if other (main) society or partnership owing to the prevailing participation in its authorized capital, or according to the agreement signed between them, or other method which is not forbidden by the law has opportunity to determine decisions of this society.

Society is considered dependent on other (main) society or partnership if another (prevailing, participating) society or partnership has more than twenty percent of voting shares of this society.

3. If society is considered affiliated or dependent on other society which in turn is affiliated or dependent on the third economic society or partnership, then the first society is recognized affiliated or dependent as well from third. This provision is applied to all cases of the subsequent relations arising subsequently between the main economic society (partnership) and affiliated or dependent society.

3.1. The subsidiary and dependent companies have no right to take the shares issued by the main company.

4. The subsidiary does not bear responsibility according to obligations of the main society (partnership).

The main society (partnership) which has the right to give to subsidiary obligatory instructions bears with it joint liability according to the bargains concluded according to its instructions.

The main society (partnership) is considered having the right to give to subsidiary obligatory instructions if this right is fixed in the agreement signed between them or arises in other form which is not forbidden by the law.

5. Shareholders (participants) of subsidiary have the right to require compensation by the main society (partnership) of the losses caused to subsidiary because of the last.

Losses are considered caused because of the main society (partnership) if they came owing to execution of obligatory instructions by subsidiary of the main society (partnership).

6. In case of insolvency (bankruptcy) of subsidiary because of the main society (partnership) the last bears subsidiary responsibility on its debts. Insolvency (bankruptcy) of subsidiary is considered occurred because of the main society (partnership) if it came owing to execution of obligatory instructions by subsidiary of the main society (partnership).

7. In the cases provided by Items 4-6 of this Article, the main society (partnership) bears responsibility if it knew or could know about emergence of the corresponding consequences.

8. Economic society or partnership which acquired more than twenty percent of the authorized capital of limited liability company or voting shares of joint-stock company shall publish data on it in the procedure established by the law.

Article 8. Types of society

1. Societies can be open and closed that shall be reflected in the charter and trade name of society.

2. Society is considered open if its shareholders have the right to alienate the stocks owned by them without the consent of other shareholders. Such society has the right to carry out open subscription to the shares issued by it and to perform their free sale under the terms, the established law and other legal acts. Open society can carry out as well the closed subscription to the shares issued by it.

The number of shareholders of open societies is not limited.

Open Society which has no the fixed capital and which capital is at any time equivalent costs of its net assets is considered Society with the variable capital. In form of business of Society with the variable capital only the open-end corporate investment fund can be created. Features of Society with the variable capital are established by the Law of the Republic of Armenia "About investment funds". The provisions of this Law concerning to change of the authorized capital of Society do not extend to Society with the variable capital.

3. Society is considered closed if shares of society are distributed only among its shareholders (including founders) or other in advance determined persons. The closed society has no right to carry out open subscription to the shares issued by it or to otherwise offer them for acquisition to any number of persons.

The closed society shall have no more than 49 shareholders. If the number of shareholders of society more 49, that society within one year owed be transformed or respectively reduce number of the shareholders. Otherwise it is subject to liquidation judicially.

The shareholder of the closed society has the privilege of share acquisition, sold by other shareholders of this society. If in the time established by the charter of society any of shareholders did not use the privilege, society has the right to acquire these shares at the price approved with the owner. In case of refusal societies from share acquisition or disagreement with their share price can be aloof to the third party. The decision on acquisition of shares by society or refusal of them takes out general meeting of shareholders of society (further - meeting) if other is not provided by the charter of society.

The procedure and terms of implementation of the privilege of share acquisition, sold by shareholders of the closed society, are established by the charter of society. The term of the privilege cannot be less than 30 and more than 60 days from the moment of the offer of shares to sale.

Chapter II. Creation, reorganization and liquidation of society

Article 9. Creation of society

Society can be created by organization of new society and reorganization of the existing legal entity (merge, separation, allocation, transformation).

Society is considered created from the moment of its state registration.

Article 10. Organization of society

1. Creation of society by organization is performed according to the solution of the constituent assembly of society.

Society can be created by one person or consist of one person in case of acquisition by the shareholder of all shares of society, data on it shall contain in the charter of society, to be registered and published. In case of organization of society one person the decision on its organization is (in writing) taken out by this person solely.

2. Founders of society sign the written agreement about creation of society which contains:

a) information about founders:

- for physical persons - name, passport data, the residence, phone and other means of communication;

- for legal entities - full trade name, data on state registration, the location (postal address), name of the head or representative of the legal entity, phone and other means of communication;

b) procedure for joint activities of founders for creation of society;

c) size of the authorized capital of society;

d) categories and types of the shares which are subject to placement among founders, the size and procedure for their payment;

e) the number of the shares acquired by each founder;

e) the rights and obligations of founders on creation of society;

g) name of physical person, representative to represent founders before carrying out the constituent assembly of society;

h) in case of recognition of society cancelled or disapproval of activities of founders by its constituent assembly - distribution between founders of responsibility concerning the obligations which arose in the course of creation of society owing to activities of founders;

i) in case of recognition of society cancelled or disapproval of activities of founders by its constituent assembly - procedure for return to founders of the payment brought by them for shares.

The agreement on creation of society is not the constituent document.

3. Under organization of society all its shares shall be placed among founders.

4. The organization of society with the shares belonging to the Republic of Armenia or municipality is performed according to the decision of the Government or according to the decision of the head of municipality, with the consent of local government board.

Article 11. Founders of society

1. The physical persons and legal entities which made the decision on its organization, except for persons whose participation in society is forbidden or limited to the law can be founders of society.

2. The Republic of Armenia and municipalities can be shareholders of society as equals with citizens and legal entities the bases.

State bodies or local government bodies have no right to act as shareholders of society.

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