General Characteristics of a Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) is the most common organizational and legal form for small and medium-sized businesses in Kazakhstan. Its main distinction from other forms (e.g., a general partnership) is the limited liability of its participants, as well as the possibility of having a single participant.

📑 II. Commentary by Paragraphs of the Article

🔹 Paragraph 1. Features of LLP and Liability of Participants

“…a partnership established by one or more persons…”

🔍 Key characteristics:

• It may be established by one or more persons (individuals or legal entities);

• The authorized capital is divided into shares, the sizes of which are defined in the constituent documents;

• Participants are not liable for the obligations of the LLP and bear risk only within the limits of their contributions.

📌 Important: This provision protects the personal property of participants from claims by creditors of the LLP, unless abuse of rights is proven.

“…Exceptions to this rule may be provided by this Code and legislative acts”

🛑 Exceptions:

A participant may be held subsidiarily liable if:

• they assumed obligations on behalf of the LLP without proper authority;

• they abused their rights (Article 8 of the Civil Code of the Republic of Kazakhstan);

• the LLP is recognized as fictitious (based on judicial practice).

“…participants who have not fully contributed their shares bear joint liability…”

🔍 This means that until a contribution is fully paid, a participant bears joint (solidary) liability for the LLP’s obligations within the unpaid portion.

📎 Related provisions:

• Article 42 of the Civil Code of the Republic of Kazakhstan — state registration and amendments;

• Law of the Republic of Kazakhstan “On Limited and Additional Liability Partnerships” (hereinafter — the LLP Law), Articles 11–14;

• Resolution of the Supreme Court of the Republic of Kazakhstan No. 1 dated June 27, 2003 — on liability of participants.

📘 Judicial practice: In case No. 2-5373/2021, the court recognized as lawful the recovery of debt from an LLP participant who failed to contribute 500,000 tenge, where the LLP had no funds — the creditor obtained satisfaction on a joint basis.

🔹 Paragraph 2. Number of Participants and Restrictions

“The number of participants is not limited”

🔍 Unlike the legislation of many countries, Kazakhstan does not impose a maximum number of participants (e.g., in Russia — 50).

“…may not have as its sole participant another business partnership consisting of one person”

📌 This is an anti-abuse provision aimed at preventing nested “single-person” structures that may be used for:

• concealing beneficial owners;

• money laundering;

• fictitious transactions.

📎 Related provisions:

• LLP Law, Article 6 — structure of participants;

• Law of the Republic of Kazakhstan “On State Registration of Legal Entities”.

🔹 Paragraph 3. Audit and Disclosure

“At the request of any participant — a mandatory audit”

📌 This ensures internal control: even a minority participant has the right to initiate an audit, and the LLP must pay for it (unless otherwise provided in the charter).

“Public reporting is not required…”

🔍 An LLP is not obliged to disclose information publicly unless it operates in regulated sectors or such obligation is specified in its constituent documents.

📘 Exceptions:

• Microfinance organizations;

• Collection agencies;

• Tender participants;

• Recipients of public funds (see the Law “On Public Procurement”).

🔹 Paragraph 4. Reorganization and Liquidation

“May be voluntarily reorganized or liquidated by decision of the participants”

📌 The decision is made:

• unanimously — unless otherwise provided in the charter;

• or by a majority vote if shares are equally distributed.

“May be transformed into another business partnership, a joint-stock company, or a cooperative”

🔍 Transformation requires:

• valuation of assets;

• approval of a transfer act;

• state re-registration.

📎 Related provisions:

• Articles 45–47 of the Civil Code of the Republic of Kazakhstan — reorganization;

• LLP Law, Articles 46–49 — reorganization and liquidation;

• Law “On State Registration of Legal Entities”.

🔹 Paragraph 5. Repealed

(Invalidated in 1998, not subject to analysis)

🔹 Paragraph 6. Legal Regime of LLP

“Rights and obligations are determined by this Code and legislative acts”

📘 This means that, in addition to the Civil Code, LLPs are governed by:

• the Law “On LLPs and ALPs”;

• business, tax, and labor legislation;

• judicial interpretations and law enforcement practice.

⚖️ III. International Comparison

📌 General principle: participants are not liable for the company’s debts unless they violate the law, commit fraud, or act in circumvention of the charter.

📚 IV. Related Legal Provisions

📝 V. Conclusions and Recommendations

1. An LLP is a flexible and secure business form that allows limiting participants’ liability.

2. Contributions must be fully paid; otherwise, the participant risks being held jointly liable.

3. An audit is mandatory upon request of any participant.

4. Reorganization and transformation of an LLP into other forms are broadly permitted.

5. The LLP charter should clearly regulate:

   • governance procedures;

   • contribution mechanisms;

   • conditions for withdrawal and profit distribution;

   • liquidation procedures.

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