Comparative analysis of company liquidation procedures in the Republic of Kazakhstan and the Astana International Financial Centre (Tair Kulteleev Partner, Head of Registrations AEQUITAS Law Firm)

General jurisdiction of Kazakhstan

AIFC

Grounds for liquidation

Article 49 of the Civil Code establishes the grounds on which a legal entity may be liquidated, dividing them into voluntary liquidation and compulsory liquidation through the court.

Section 23 of the AIFC Insolvency Regulations similarly provides that a company may be liquidated either voluntarily (voluntary winding up) or compulsorily by the court (winding up by the Court).

In relation to the liquidation procedure, the term «winding up» is used, which refers to the cessation of a company’s operations and its liquidation.

Voluntary winding up

A legal entity may be liquidated by decision of the owner of its property or an authorized body, as well as by a governing body of the legal entity, if such authority is granted by its founding documents. In this case, liquidation may be carried out on any grounds determined by the entity itself (para. 1, Art. 49 of the Civil Code).

However, if the value of the property of a legal entity, in respect of which a decision on liquidation has been made in accordance with para. 1 of Art. 49 of the Civil Code of the RK, is insufficient to satisfy the claims of creditors, the liquidation commission is obligated to file a petition with the court for the recognition of such legal entity as bankrupt, in order to initiate bankruptcy proceedings under the procedure established by law (para. 4 of Art. 4, para. 2 of Art. 11 of the Bankruptcy Law).

This requirement is also contained in para. 4 of Art. 49 of the Civil Code of the RK. However, an overall analysis of this article suggests that liquidation is still possible in the presence of creditors. For instance, if the liquidated legal entity lacks sufficient funds to satisfy creditors’ claims, the liquidation commission must sell the company’s assets through public auction (para. 5, Art. 50 of the Civil Code). Once settlements with creditors are completed, the liquidation commission prepares a liquidation balance sheet, which is then approved by the owner of the legal entity’s property or the body that made the decision to liquidate (para. 7, Art. 50 of the Civil Code).

In practice, it is often observed that if the participants decide to voluntarily liquidate a company and the company’s assets are insufficient, they provide additional funding to avoid the lengthy and burdensome bankruptcy process. For example, if the assets of a liquidated legal entity are insufficient to fully cover tax liabilities, the remaining tax debt is paid by the participants of the liquidated entity (para. 7, Art. 58 of the Tax Code).

Voluntary liquidation is divided into two types:

1) Voluntary winding up:

o in the cases (if any) specified in the company’s articles of association; or

o if the company resolves to undergo voluntary winding up; or

o if the company resolves that it cannot continue its business due to its liabilities and that it is advisable to wind up (section 26 of the AIFC Insolvency Regulations).

2) Creditors voluntary winding up.

First, before initiating a voluntary winding-up process, the company’s directors must make a declaration of solvency stating that the company will be able to fully pay its debts within 12 months (section 31(1) of the AIFC Insolvency Regulations).

This means that voluntary winding up is generally permissible even if the company has certain outstanding debts, provided that the directors declare the company will be able to settle them in full.

For example, the AIFC regulations may establish procedures and conditions under which participants, former participants, directors, former directors, and other persons may be required to contribute funds to the assets of a company undergoing liquidation (section 24 of the AIFC Insolvency Regulations).

Secondly, if the liquidator forms the opinion that the company will not be able to fully pay its debts within the period stated in the declaration of solvency (section 31), they are required to convene a meeting of creditors — no later than 28 days from the date on which that opinion was formed (section 35(1) of the AIFC Insolvency Regulations).

In simple terms, even if the company’s liquidation was initiated by a resolution of its participants, it is treated as a creditors' voluntary winding up if the directors did not confirm the company's solvency or if a creditors’ meeting was held due to the company's insolvency (section 36 of the AIFC Insolvency Regulations).

Beginning of liquidation

Using the example of a limited liability partnership (LLP), which is the most common legal form of legal entities under the general jurisdiction of Kazakhstan, the decision to liquidate the LLP, appoint a liquidation commission, and approve the liquidation balance sheets falls within the competence of the supreme governing body (subparas. 7-8 of para. 2, Art. 43 of the Law on LLPs).

Decisions on these matters are made by a qualified majority - not less than three-quarters of the votes of the participants present or represented at the meeting, unless otherwise provided by the charter (para. 2, Art. 48).

In the AIFC, using the example of private companies, which represent the most common legal form of legal entities in this jurisdiction, the decision to liquidate the company and appoint a liquidator also falls within the competence of the supreme governing body (section 32 of the AIFC Insolvency Regulations).

Decisions on these matters are made by a simple majority of the votes of the company’s participants, unless otherwise provided by the articles of association (para. 1, p. 14 of the Manual).

However, the adoption of a liquidation resolution must be preceded by a Declaration of Solvency, which must be made by the company’s directors:

(a) within the five weeks immediately prior to the date of the resolution to wind up; or

(b) on the date of the resolution to wind up, but before the resolution is actually voted on at the relevant meeting (section 31(2) of the AIFC Insolvency Regulations).

The governing body of a legal entity that has adopted a decision on its liquidation is required to immediately notify the registering authority and the state revenue authority at the place of registration (para. 1, Art. 50 of the Civil Code).

The relevant governing body of the legal entity must also submit written notice of the liquidation decision to the tax authority at its location within three working days from the date the decision was made (para. 1, Art. 58 of the Tax Code).

The company must immediately notify the AIFC Registrar of Companies by submitting the resolution on voluntary winding up along with the Declaration of Solvency (List of accompanying documents to the Notice[22] and para. 1, p. 14 of the Manual).

If the company resolves to proceed with a voluntary winding up, it is required to publish a notice of this resolution within 14 calendar days from the date the resolution was adopted, in accordance with the applicable rules (section 27 of the AIFC Insolvency Regulations).

The company must immediately notify the AIFC Registrar of Companies by submitting the resolution on voluntary winding up along with the Declaration of Solvency (List of accompanying documents to the Notice and para. 1, p. 14 of the Manual).

If the company resolves to proceed with a voluntary winding up, it is required to publish a notice of this resolution within 14 calendar days from the date the resolution was adopted, in accordance with the applicable rules (section 27 of the AIFC Insolvency Regulations).

The AIFC acts do not specify the content of such a notice or the media in which it must be published. We believe that the notice may be published by the liquidator either in Appointed Publications, or, following the general rules, in periodicals distributed throughout the territory of Kazakhstan (para. 3, Art. 50 of the Civil Code), for example, in the Yuridicheskaya Gazeta (Legal Newspaper).

Furthermore, under paragraph 1 of Article 4 of the Constitutional Law on the AIFC[23], the applicable laws of the Republic of Kazakhstan will govern matters not expressly regulated by the AIFC acts. For instance, regarding the fulfillment of tax obligations by a liquidated legal entity, the Tax Code of Kazakhstan will apply. Accordingly, the requirement to notify the tax authority will also be applicable.

After the decision on liquidation is adopted, the legal entity ceases its business activities, employment contracts and agreements with counterparties are terminated, and all account transactions are suspended in preparation for the upcoming tax audit.

A detailed overview of all stages of liquidation - both for companies registered under the general jurisdiction of the Republic of Kazakhstan and within the AIFC (including licensed entities) - can be found in our previously published article.

From the moment voluntary winding up begins, the company must cease its business activities, except where continuation is necessary for the effective completion of the liquidation. At the same time, the company retains its legal personality and corporate powers until the official termination (liquidation), regardless of the provisions of its articles of association (section 29 of the AIFC Insolvency Regulations).

From the date a ruling is issued to initiate rehabilitation or bankruptcy proceedings, the transfer of shares or participatory interests in the charter capital of the debtor is prohibited (subpara. 5, para. 1, Art. 50 of the Bankruptcy Law).

However, no such restrictions are imposed in the case of voluntary liquidation.

In the case of voluntary liquidation, any transfers of shares or changes in the status of participants made after the commencement of the liquidation are deemed invalid unless approved by the liquidator (section 30 of the AIFC Insolvency Regulations).

Liquidator and Liquidation Commission / Committee

The Civil Code of Kazakhstan contains only three articles dedicated to the liquidation of a legal entity:

- Article 49 - Grounds for liquidation of a legal entity;

- Article 50 - Procedure for liquidation of a legal entity;

- Article 51 - Satisfaction of creditors’ claims.

The body that adopts the decision to liquidate the legal entity appoints a liquidation commission. From the moment the liquidation commission is appointed, it assumes the authority to manage the assets and affairs of the legal entity. The liquidation commission represents the liquidated entity in court (para. 2, Art. 50 of the Civil Code).

The law does not set a minimum or maximum number of members of the liquidation commission.

Nor does it establish any specific qualification requirements for its members.

Moreover, even a former director may be included in the liquidation commission. Despite the termination of their employment, they may still be listed as the director in the legal entity database and may remain authorized on the LLP’s signature card with the servicing bank - unless replaced by a member of the liquidation commission.

In general, the procedure for voluntary winding up is set out in sections 23-36, while creditors' voluntary winding up is covered in sections 37-44 of the AIFC Insolvency Regulations.

In the case of voluntary winding up by a resolution of the members, the general meeting of the company is required to appoint one or more liquidators to carry out the winding up and distribute the company’s assets (section 32(1) of the AIFC Insolvency Regulations).

A comparison of these two types of voluntary winding up shows that the key difference lies in the involvement of creditors: at a creditors’ meeting, creditors may propose a candidate to be appointed as the company’s liquidator (section 38(2)) or establish a liquidation committee consisting of no more than five persons (section 39 of the AIFC Insolvency Regulations).

From the moment a liquidator is appointed, all powers of the company’s directors cease, unless their continuation is approved by the liquidator or the liquidation committee (section 32(2), section 40 of the AIFC Insolvency Regulations).

This reflects the flexibility and foresight of the AIFC framework, as the assistance of directors may still be necessary for the completion of winding-up procedures - for example, for closing bank accounts.

The AIFC Insolvency Regulations do not establish any specific qualification requirements for the liquidator or members of the liquidation committee.

According to Schedule 3 to the Regulations, the following definitions apply:

Liquidator - in relation to a company, means a person appointed as the company’s liquidator (including a provisional liquidator).

Person - includes any natural or legal person, as well as unincorporated bodies, including a company, partnership, unincorporated association, governmental authority, or a state.

Provisional Liquidator - in relation to a company, means a liquidator appointed on a provisional basis in accordance with section 58 (Appointment of Provisional Liquidator).

The term «Provisional Liquidator» is used in the context of compulsory winding up (sections 49-64 of the AIFC Insolvency Regulations), and may refer to any natural or legal person.

Additionally, within 3 working days of the company approving the appointment of a liquidator, it must notify[24] the AIFC Registrar of Companies of the appointment (section 5.31.6 of the AIFC Insolvency Rules). This provision does not apply to standard voluntary winding up, but does apply to creditors' voluntary winding up.

The liquidation commission takes measures to identify creditors and collect outstanding debts, and must notify creditors in writing about the liquidation of the legal entity (para. 3, Art. 50 of the Civil Code).

After the deadline for creditors to submit their claims has passed, the liquidation commission prepares an interim liquidation balance sheet. This document includes information on the assets of the liquidated legal entity, a list of claims submitted by creditors, and the results of their review.

The interim liquidation balance sheet is approved by the owner of the legal entity’s property or by the body that adopted the decision on liquidation (para. 4, Art. 50 of the Civil Code).

If the liquidated legal entity does not have sufficient funds to satisfy creditors' claims, the liquidation commission sells the company's assets through public auction in accordance with the procedure established for the enforcement of court judgments (para. 4, Art. 50 of the Civil Code).

Payments to creditors are made by the liquidation commission in the order of priority established by Article 51 of the Civil Code (para. 5, Art. 50).

After settling accounts with creditors, the liquidation commission prepares the final liquidation balance sheet, which is approved by the body that adopted the decision on liquidation (para. 7, Art. 50 of the Civil Code).

Any remaining assets after satisfying creditors’ claims (in accordance with Article 51 of the Civil Code) are distributed for the purposes specified in the founding documents (para. 8, Art. 50 of the Civil Code).

The AIFC Insolvency Regulations provide a detailed description of the liquidator’s powers in section 25 and Schedule 2.

The liquidator prepares a Statement of Affairs reflecting the company’s financial position prior to the commencement of liquidation. This document outlines the company’s assets and liabilities, as well as any encumbrances secured by the company’s assets (p. 15 of the Manual).

Upon completion of the company’s affairs, the liquidator prepares a final report on the liquidation process and the distribution of assets. To present this report, a final meeting must be convened, with participants being notified in advance through an official notice published at least one month prior to the meeting date (sections 34 and 43 of the AIFC Insolvency Regulations). This requirement applies to both types of voluntary winding up.

This aligns with the powers of the liquidation commission under Kazakhstan’s general jurisdiction, where interim and final liquidation balance sheets must be submitted to the body that adopted the liquidation decision.

Under both types of voluntary winding up, the company’s assets must first be used to settle its liabilities (with due regard to the order of priority established by the AIFC Insolvency Regulations). Any remaining assets—unless otherwise provided by the articles of association—are to be distributed among the participants according to their rights and shares in the company (section 44 of the AIFC Insolvency Regulations). For instance, a company may have a class of shares that grants priority rights to company assets in the event of liquidation.

An additional distinction of the liquidation process under AIFC jurisdiction is that if liquidation lasts more than one year, the liquidator is required to convene a general meeting of participants annually to report on the progress and actions taken during the past year, and must also submit a report to the AIFC Registrar of Companies (sections 33, 42, and 69 of the AIFC Insolvency Regulations).

Compulsory Liquidation

According to paragraph 2 of Article 49 of the Civil Code, a legal entity may be liquidated by a court decision in the following cases:

- recognition of the legal entity as bankrupt;

- invalidation of the registration if there were irremediable violations of the law during the establishment of the legal entity;

- absence of the legal entity at its registered address, as well as the absence of participants or officials essential for its operation for a period of one year;

- conducting activities in gross violation of the law, including:

· systematic activities contradicting the company’s charter objectives;

· conducting activities without the required license or engaging in activities prohibited by law;

- on other grounds provided for by legislative acts of the Republic of Kazakhstan.

A claim for the liquidation of a legal entity on the above grounds may be filed by the tax authority (para. 3, Art. 49 of the Civil Code). In cases of bankruptcy, the right to file such a claim is also granted to the creditor, the debtor, and the liquidation commission in the event of voluntary liquidation (Art. 4, subpara. 1 of para. 2 of Art. 11, and para. 1 of Art. 40 of the Bankruptcy Law).

Compulsory Liquidation

According to section 49 of the AIFC Insolvency Regulations, court-ordered winding up may be initiated in the following cases:

- the company has resolved to be wound up by the Court; or

- the company is unable to pay its debts; or

- a moratorium applicable to the company has expired, and no voluntary arrangement has been approved in respect of the company; or

- the Court has jurisdiction to make a winding-up order under any other AIFC regulations or rules; or

- the Court is of the opinion that it is just and equitable for the company to be wound up.

According to section 51 of the AIFC Insolvency Regulations, unless otherwise provided by other AIFC acts or rules, an application to the Court for winding up a company may be made only by:

- the company itself (e.g., through one of its members),

- its directors, or

- a creditor (including a contingent or prospective creditor).

For non-operational legal entities and legal entities without functioning officers, the legislation provides for special grounds and a simplified liquidation procedure (para. 2 of the Supreme Court Resolution No. 5[25]). In particular, under the Civil Code, an authorized body (typically the tax authority) may file a claim with the court in cases where the legal entity is absent from its registered or actual address, or where the founders (participants) and/or officers necessary for the entity’s operation have been absent for one year. The same applies in cases of activity carried out in gross violation of the law (para. 2, Art. 49 of the Civil Code). In such cases, the legal entity may be liquidated immediately following the court's decision, without a tax audit[26].

Additionally, the court has the authority to grant a liquidation petition without initiating bankruptcy proceedings:

- at the request of the tax authority, in cases where the debtor is recognized as absent[27]; or

- at the request of the debtor itself, provided certain conditions are met, such as: the debt amount does not exceed 2,500 MCI[28], there are no assets, no funds in bank accounts, and no other property (Art. 114 of the Bankruptcy Law).

Moreover, the draft of the new Tax Code (expected to be adopted in 2026) introduces a mechanism for administrative liquidation of inactive taxpayers without a court decision, as well as a simplified liquidation procedure without audit for entities with annual turnover below 500 million tenge.

Similar provisions also exist in AIFC acts. For example, the AIFC Companies Regulations provide for a procedure known as «Strike off», which translates as «to remove, erase, or liquidate».[29] However, in this case, the authority to strike off a company from the register lies not with the court, but with the AIFC Registrar of Companies.

According to section 167 of the AIFC Companies Regulations, the Registrar may strike off the name of a company from the register if the Registrar has reasonable cause to believe that:

(a) the company is not carrying on business or is not in operation;

(b) the company is in breach of the AIFC Companies Regulations; or

(c) the continued registration of the company is prejudicial to the interests of the AIFC.

For example, the Registrar may conclude that a company is not operating if it fails to file its annual return, or if it is not present at its registered address (especially relevant for licensed companies)[30].

The basis for a creditor to file a petition with the court for the recognition of a debtor as bankrupt and to initiate bankruptcy proceedings is an outstanding monetary obligation of the debtor to the creditor, established by a court decision that has entered into legal force or by an enforcement document ordering the recovery of funds from the debtor, or by the debtor’s acknowledgment of the debt, unless otherwise provided by law (Article 5 of the Bankruptcy Law).

The previously applicable version of this article provided that the basis for a creditor to file a petition with the court for the recognition of a debtor as bankrupt or for the application of a rehabilitation procedure was the debtor’s insolvency, provided that the obligation remained unfulfilled for three months from the due date, in an amount of not less than one hundred times the MCI.

A company may be wound up by court order if it is deemed insolvent.

A company is considered insolvent if:

(a) a creditor to whom the company owes more than USD 2,000, and whose debt is due, has served the company with a written demand for payment of that amount, and the company has failed to pay the debt or reach terms for its repayment to the reasonable satisfaction of the creditor within three weeks; or

(b) an enforcement order or other court judgment issued in favor of the company’s creditor has been returned unsatisfied in whole or in part; or

(c) it is proven in court that the company is unable to pay its debts as they fall due

(section 50 of the AIFC Insolvency Regulations).