Issuance and Placement of Securities

📘 I. General Overview

Securities are a key instrument for capital raising by a joint-stock company (JSC). They are:

• a mandatory attribute of a JSC, unlike other legal forms such as LLPs;
• a tool of ownership, debt relations, or derivative rights.

Article 91 establishes the general principles of issuance and placement of such securities, including restrictions and requirements.

📑 II. Commentary on the Article’s Clauses

🔹 Clause 1: Types of Securities

"The types of securities issued by a joint-stock company are determined by legislative acts."

📘 According to the Law of the Republic of Kazakhstan "On the Securities Market", a JSC may issue the following types of securities:

• Shares:
  • common shares;
  • preferred shares;
• Bonds:
  • secured;
  • unsecured;
• Derivative securities:
  • options;
  • warrants;
  • convertible bonds and shares.

📎 Depositary receipts (including GDRs/ADRs for foreign listings) may also be issued during international placements.

🔹 Clause 2: Procedure for Registration and Placement of Shares

"The procedure for state registration of the issuance of declared shares and their placement is defined by legislative acts..."

📘 Regulated by:

• The Law of the Republic of Kazakhstan "On the Securities Market";
• Rules of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM);
• Legal acts on registration of security issuances.

📌 Steps:

1. Preparation of the issuance prospectus;
2. Approval by the governing bodies of the JSC;
3. Registration of the issuance with ARDFM;
4. Placement of shares (including through KASE or OTC);
5. Maintenance of the shareholder register by a professional registrar.

🔹 Clause 3: Bonds

"A JSC has the right to issue secured and unsecured bonds..."

📘 Differences:

• Secured bonds – backed by collateral or a bank guarantee;
• Unsecured bonds – based on the general credit rating of the JSC.

📎 Bond issuance rules:

• Law of the Republic of Kazakhstan "On the Securities Market";
• KASE listing rules (if publicly traded);
• ARDFM instructions.

📌 Restrictions: A JSC may not issue bonds if:

• it has negative equity;
• it is in bankruptcy, liquidation, or rehabilitation proceedings.

🔹 Clause 4: Income from Securities

"The form, method, and procedure for payment of income are determined by the charter or issuance prospectus."

📘 Possible types of payments:

• dividends on shares;
• coupon income on bonds;
• income from derivative securities.

📎 The charter and prospectus must specify:

• frequency (quarterly, annually);
• method (cashless, via nominal holder);
• decision-making procedure (GMS and board resolution).

🔹 Clause 5: Prohibition on Dividend Payments

Dividend payments are prohibited if:

📘 These provisions are aimed at protecting creditors’ interests and ensuring market stability.

📎 Case law: If dividends are paid under capital deficit conditions, participants may be held jointly liable for damages to creditors.

🔹 Clause 6: Derivative Securities

"A JSC may issue derivatives, options, and convertible securities..."

📘 Derivative instruments:

• Stock options – commonly used in executive incentive programs;
• Convertible bonds – may be exchanged for shares at a predetermined price.

📎 Regulated by:

• The Law "On the Securities Market";
• ARDFM resolutions;
• IFRS (especially IFRS 9 for financial instruments).

⚖️ III. Practical Examples

📌 Example 1: JSC "AlemFinance" was held administratively liable for paying dividends despite having uncovered losses, violating Article 91 of the Civil Code and the Law "On JSCs".

📌 Example 2: JSC "TechInvest" had to cancel its option issuance due to the lack of registration of the issuance prospectus, despite a board resolution.

📚 IV. Related Legal Provisions

📝 V. Conclusions and Recommendations

1. A JSC must follow the established procedure for issuing and placing all types of securities, including mandatory registration with ARDFM.
2. Before paying dividends or coupon income:
   • assess the financial position (equity, solvency);
   • confirm the absence of legal prohibitions.
3. When issuing derivative securities:
   • formalize decisions via the General Meeting of Shareholders;
   • prepare the issuance prospectus;
   • register it with the authorized body.

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