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Minority Shareholders Face New Challenges as Kazakhstan Overhauls Securities Market Regulation

The Kazakhstani government has introduced significant changes to the country’s securities market regulation, aimed at increasing transparency and confidence in the financial sector. The amendments, which came into effect on [date], introduce new rules for minority shareholders and brokers, while also simplifying procedures for joint-stock companies.

New Approach to Determining Share Price

One of the key changes is the new approach to determining the price of shares when a large shareholder acquires 95% or more of the voting shares. Previously, the price was based on the market value of the share on the exchange as at the date of demand for buyback. Now, the price will be determined as the highest price of either:

• The average price of shares on the stock exchange for the last six months preceding the date of the transaction
• The price of shares in a transaction that resulted in the shareholder acquiring 95% or more of the voting shares

This change is expected to reduce disputes and uncertainty in practice, as it takes into account fluctuations in share prices over a longer period. The new approach also applies when shares are not traded on an exchange, with the price determined by an appraiser or the price of shares in a transaction that resulted in the shareholder acquiring 95% or more of the voting shares.

Restrictions on Minority Shareholders’ Right to Request Information

Another significant change is the restriction on minority shareholders’ right to request information about joint-stock companies. Under the new rules, joint-stock companies can refuse a shareholder’s request for information and documents if:

• The request relates to financial statements published on the company’s website
• Repeated requests within the last three years
• Documents related to past periods of the company’s activities

New Options for Brokers and Dealers

The amendments also introduce a new option for brokers and dealers to be established in the form of limited liability partnerships (LLPs), with mandatory formation of a supervisory board. This change is expected to increase flexibility and competitiveness in the securities market.

Implementation and Effectiveness

While the changes are aimed at promoting transparency and confidence in the financial sector, it remains to be seen how they will work in practice. The government has said that it hopes the new rules will simplify processes and reduce disputes between shareholders, but only time will tell if this is the case.

Note

This article is prepared for general information purposes only and does not constitute legal advice.