MERGERS AND ACQUISITIONS

Kazakhstan law provides for the following legal structures for mergers and acquisitions:

acquisition of participation interests/shares in LLPs/JSCs;
acquisition of fixed assets from an existing and operating legal entity (industrial equipment, immovable property, etc.);
signing of franchise agreements and acquisition of intellectual property rights; or
sale of an enterprise as a property complex.

Comparison of the two most common types of business acquisitions:

Comparison criteria		Acquisition of interests/shares in a company	Acquisition of company’s core assets
1.	Speed of acquisition	Usually high	Usually low
2.	Related expenses	Small	Can be significant
3.	Historic risks	Remain the same	Minimized
4.	Special permits, licenses	Remain in force	Cease to exist
5.	Contracts with counterparties	Remain in force	Cease to exist
6.	Obligations	Remain in force	Usually cease to exist
7.	Transaction taxes	without VAT	with VAT

Jurisdiction and Industry Based Specifics of M&A transactions

Please see in the table below certain examples of transactions subject to approval/ authorisation/notification by/of Kazakhstan authorities:

Financial organizations
1.	Acquiring the status of a major participant of a bank / bank holding company.
2.	Obtaining consent to set up an insurance (reinsurance) organization.
3.	Obtaining by an insurance (reinsurance) organization or insurance holding consent to set up or to acquire a subsidiary or substantial participation interest in the authorised capital of other legal entities.
4.	Obtaining consent to voluntary reorganization of an insurance (reinsurance) organization
Antitrust (antimonopoly) laws
5.	Applying to antitrust authority for consent to economic concentration as a result of the following transactions: 1) reorganization of a market entity through merger or acquisition; 2) acquisition by a person (group of persons) of voting shares (participation interests, stakes) in the charter capital of a market undertaking where such person (group of persons) acquires the right to dispose of more than fifty percent of said shares (participation interests, stakes), provided that prior to the acquisition such person (group of persons) has not disposed of shares (participation interests, stakes) in such market undertaking or has disposed of fifty or less percent of the voting shares (participation interests, stakes) in the charter capital of such market undertaking; and 3) acquisition of the right to own, possess and use, including in consideration for payment (transfer) of the charter capital, by a market undertaking (group) fixed production assets and/or intangible assets of another market undertaking, provided that the book value of the property constituting the subject matter of the transaction (interrelated transactions) is more than ten percent of the book value of the fixed production assets and the intangible assets of the market undertaking disposing of or transferring the property.
6.	Notifying antitrust authority of transactions recognized as economic concentration in the following cases: 1) acquisition by a market undertaking of the rights (including under a trust deed, joint venture agreement or agency agreement) permitting to give instructions binding upon another market undertaking in carrying out its business activities or to perform the functions of its executive body; and 2) participation of same natural persons in executive bodies, boards of directors, supervisory boards or other governing bodies of two or more market undertakings, provided that such natural persons determine in the market undertakings the terms and conditions of carrying out their business activities.
Subsoil and subsoil use laws
7.	Complying with the state’s right of first refusal with respect to the acquisition of the alienated subsoil use right (or part thereof) and/or facilities related to the subsoil use right for strategic fields or blocks, with or without consideration.
8.	Applying for consent to alienation of a subsoil use right and other rights related thereto.
Strategic Facilities
9.	Obtaining the Government’s consent to encumber or alienate strategic facilities.
10.	Complying with the right of first refusal with respect to the purchase of a strategic facility at market value (this right belongs to the Government of the Republic of Kazakhstan or, at its discretion, to the national management holding company).

Restrictions on foreign participation in Kazakhstan resident legal entities

Although Kazakhstan law grants “national treatment” to foreign investors, there are certain restrictions on foreign participation in Kazakhstan resident legal entities. Please refer to the table below for a list of the most common restrictions:

	Statutory Restrictions
	Foreign nationals and legal entities are prohibited from owning, using, disposing of and/or managing, directly and/or indirectly, more than 20% of shares (participation interests, stakes) in a legal entity who is the owner of a mass media outlet in the Republic of Kazakhstan or from carrying out activities in this field.
	Foreign citizens, stateless persons and foreign entities without forming a legal entity in Kazakhstan are prohibited from managing and operating telecom backbone/trunk lines.
	Individuals and corporations (either individually or within a group) are prohibited from purchasing or otherwise acquiring title to more than 10% of voting shares (participation interests, stakes) in an entity that owns and/or operates or manages telecom lines as a long-distance carrier without a prior consent of the government telecommunications and information authorities and national security authorities.
	Foreign citizens, stateless persons and foreign entities are prohibited from possessing, using, disposing of and/or managing, either directly or indirectly, cumulatively more than 49% of voting shares (participation interests, stakes) in an entity that is engaged in telecommunications activity as a long-distance carrier possessing ground lines (cable, including fibre optic, and radiorelay lines) without a favourable resolution of the Kazakhstan Government based on the opinion of the government telecommunications and information authorities issued in consultation with national security authorities.
	Legal entities incorporated in offshore jurisdictions may not, either directly or indirectly, own and/or use and/or dispose of voting shares in Kazakhstan resident insurance/reinsurance companies.
	Legal entities incorporated in offshore jurisdictions may not, either directly or indirectly, own and/or use and/or dispose of voting shares in Kazakhstan resident banks.
	Foreign citizens, stateless persons, foreign corporations, as well as legal entities over 50% of shares/interests in which are held by foreign citizens, stateless persons or foreign corporations, are denied the right to use any land until 31 December 2021 (moratorium). After such moratorium is lifted, the aforementioned persons may be granted the right to use land for a period of up to 25 years.