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Kazakhstan introduces new “Squeeze-Out” mechanism for major shareholders

August 2018 – On 2 July 2018, Kazakhstan adopted the Law No. 166-VI "On amendments and changes to certain legislative acts of the Republic of Kazakhstan on Insurance and Insurance Activities, the Securities Market" (the “Law”). The Law entered into force on 15 July 2018 (with the exception of certain provisions, which will come into force later).

Among other things, the Law introduces a squeeze-out concept by the addition of a new Article 25-1 into the Law of the Republic of Kazakhstan "On Joint-Stock Companies" dated 13 May 2003 (the “JSC Law”). The new Article 25-1 effectively provides for the possibility of acquisition of the voting shares of a joint stock company by an acquirer of 95 or more percent of the voting shares of the company (the “Squeeze-Out”).

We note that the current legislation does not provide for a possibility to squeeze-out minority shareholders of a joint stock company. The existing mechanism of the mandatory tender offer provides for the right (but not the obligation) of minority shareholders to sell their shares to the acquirer of 30 or more percent of the voting shares pursuant to the acquirer’s tender offer.

Below is a brief description of the Squeeze-Out procedure under the new Article 25-1.

Application of Squeeze-Out to JSCs only

The Squeeze-Out mechanism will apply to companies established in the form of a joint stock company (JSC) only, i.e., it will not apply to limited liability partnerships (LLPs).

The right to demand the sale of shares

The Squeeze-Out right is triggered if a person, individually or together with its affiliated persons (the “Acquirer”), purchases in the secondary securities market[1] either:

  • 95 or more percent of the company's voting shares; or
  • a different number of the company’s voting shares amounting to at least 10 percent of the company’s voting shares, as a result of which such person becomes the owner of 95 or more percent of the company's voting shares.

The Acquirer will have the right, within 60 business days after the acquisition date, to demand that the other remaining shareholders of the company (i.e., the minority shareholders) sell their voting shares in the company to the Acquirer (the “Request”).

Definition of voting share

The JSC Law definition of a “voting share”:

  • includes:
    • common shares; and
    • preferred shares which have acquired voting rights (by law, preferred shares do not have voting rights except for specific circumstances set out in the JSC Law, such as (i) when the general meeting of shareholders of the company considers (a) a matter which may restrict the rights of a shareholder owning preferred shares, or (b) the issue of reorganization or liquidation of the company, or (c) approval of the changes to the methodology for determining the purchase price for the preferred shares when the preferred shares are redeemed by the company on an unorganized securities market in accordance with the JSC Law, or (ii) the dividend is not paid on preferred shares in full within three months as provided by the JSC Law);
  • but excludes:
    • shares redeemed by the company; and
    • shares held in nominal holding and owned by an owner, information about which is not available in the central depository’s accounting system.

Therefore, in most circumstances, the Squeeze-Out provisions will likely apply to outstanding common shares only.

Content and publication of the Request

The Request must contain (among other things) the name of the Acquirer initiating the Squeeze-Out and the purchase price of the voting shares. The Request must be sent to the company. The company must ensure further publication of the Request on the website of the depository of financial statements (the “DFO”) within three business days after the date of receipt of the Request.

The obligation of the remaining shareholders to sell their shares

The remaining shareholders must sell their voting shares in the company not later than sixty calendar days after the date of publication of the Request on the website of the DFO. Shareholders may not carry out any transactions with the company's voting shares once the Request has been published.

The purchase price specified in the Request

The purchase price of shares in the Request shall be:

  • (if the shares are traded on the stock-exchange) the market value established on the organized securities market;
  • (if the shares are not traded on the stock-exchange) the market value determined by an appraiser in accordance with the legislation of Kazakhstan on valuation activities.

Settlement procedure with minority shareholders

The Acquirer must pay the purchase price specified in the Request for voting shares to be acquired from the minority shareholders.

The purchase price must be transferred to the bank accounts of minority shareholders available in the system of registers of securities’ holders. If there is no information on the actual bank details of minority shareholders in the system of registers of securities’ holders, the purchase price for shares must be transferred to a special account opened with the central depository for unclaimed money (note: the provision regarding opening of the special account for unclaimed money will come into force on 1 July 2019).

Registration of transactions

Registration of transactions with the shares as per the Request shall be carried out based on an order of the Acquirer. The costs associated with the registration of transactions must be borne by the Acquirer.

Exemption for Samruk-Kazyna group companies

The Squeeze-Out mechanism will not apply to legal entities belonging to the group of the national managing holding in accordance with the Law of the Republic of Kazakhstan “On the National Welfare Fund”.

Exemption from the mandatory offer requirement

The requirements of Article 25 of the JSC Law regarding a mandatory offer to be made to minority shareholders by a person who has acquired 30 or more percent of the voting shares of the company (or a different number of voting shares of the company, as a result of which such person acquired (individually or together with its affiliated persons) 30 or more percent of the voting shares of the company) will not apply to an Acquirer who exercises his right to initiate a Squeeze-Out.

Squeeze-Out of shares in Privatized Companies

In joint stock companies, whose shares were privatized in the period from 1993 to 2003 (the “Privatized Companies”), the major shareholder who currently already owns 95 or more percent of the voting shares in the Privatized Company can initiate a Squeeze-Out in accordance with the new Article 25-1 anytime during the period from 1 January 2019 to 1 January 2021.

However, shareholders who currently own 95 or more percent of the voting shares in companies that were not privatized during that period do not have the same right and cannot initiate a Squeeze-Out. A major shareholder in such a company can initiate a Squeeze-Out under the new Article 25-1 only if, on or after 1 January 2019, it acquires enough shares to become a 95 (or more) percent shareholder.

Effective date of Squeeze-Out provisions

The Squeeze-Out mechanism will come into force on 1 January 2019 (subject to the above-described provisions in respect of Privatized Companies and provision in respect of the unclaimed money transferred to the special account opened with the central depositary).


The new Article 25-1 introduces an important new concept into the law. The Squeeze-Out concept has been missing in the Kazakhstan legislation for years and may be helpful in the context of future acquisitions. However, as drafted, Article 25-1 may create potential issues in certain contexts. Some of the issues that may require resolution in practice include, for instance, application of the Squeeze-Out provisions to (i) preferred shares, (ii) common shares that are held via a nominal holder and not deemed to be voting shares and (iii) depositary receipts. Another potential issue is the alignment of the Squeeze-Out timeline with the statutory timeline for obtaining the applicable state consents and waivers. These issues are obviously beyond the scope of this client alert. If necessary, we will be happy to discuss these issues in more detail with our clients.

For further information, please contact Joel Benjamin, Managing Partner, at


, Adlet Yerkinbayev, Partner, at and Kuanysh Shekerbekov, Senior Associate, at .

The information provided in this publication is of general nature, does not constitute formal advice and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided.

[1] The “secondary securities market” effectively means any transactions with the securities after they have been placed on the primary securities market, as opposed to “primary securities market” which means placement of authorized equity securities by the issuer (underwriter or issuing consortium), with the exception of further placement of such securities by the issuer which were previously redeemed by the issuer on the secondary securities market.