On Banks and Banking Activity in the Republic of Kazakhstan (стр. 3 )

Article 17. Founders and Shareholders of a Bank
 
  1. Legal entities and individuals, being residents and non-residents of the Republic of Kazakhstan (subject to the restrictions stipulated by paragraphs 5 and 6 of this Article and Article 18 of this Law), may be founders and shareholders of a bank.
  2. On behalf of the State, only the Government may be a founder and shareholder of a bank. The state-owned enterprises and organisations, where more than fifty percent of the charter capital or shares belong to the state, may not be founders or shareholders of a bank, except for the national management company.
  3. (excluded by the Law N 162 dated 2.03.01)
  4. For the purposes of protection of the bank creditors’ interests and provision of the stability of banking system in the Republic of Kazakhstan in the case, if measures taken by the authorized body did not lead to the bank’s financial status improvement:
  1) at single violation of the capital adequacy ratio and (or) the liquidity ratio by a bank, or violation of any other prudential standards and (or) another standards and limitations obligatory for compliance two or more times within twelve consecutive calendar months, the Government of the Republic of Kazakhstan in coordination with the authorized body shall have a right to take a decision on purchase of the bank’s authorized shares by the Government of the Republic of Kazakhstan or the national management holding in the amount, necessary for improvement of its financial status and performance of the prudential standards and (or) any other standards and limitations obligatory for compliance by the bank in accordance with the procedure, set out in Article 17-2 of this Law;
  2) in case if a bank has negative capital, the authorized body shall have a right in coordination with the Government of the Republic of Kazakhstan to implement the forced repurchase of the bank’s shares on the condition of obligatory subsequent sale of such shares at the acquisition price to a new investor, who guarantees necessary improvement of the bank’s financial status.
  5. The legal entities, registered in the off-shore zones or having the affiliated persons, registered in the off-shore zones, or the individuals, who are participants (founders, shareholders) in the legal entities registered in the off-shore zones, and which list is established by the authorized body, may not possess and (or) use and (or) dispose directly or indirectly voting shares of the banks, being residents of the Republic of Kazakhstan.
 Such a restriction shall not apply to the banks, which individual credit rating is not lower than A, issued by of one of the rating agencies, which list is established by the authorized body.
  5-1. A shareholder participating in the general meeting shall represent a statement with indication of execution of the requirement, set out in part 1 paragraph 5 of this Article by his shareholders (participants) in the case, if information on the country of registration of such shareholders (participant) is not available in the bank.
  A shareholder, who failed to represent the mentioned statement, shall not be admitted to participate in the general meeting.
  At disclosure of untrue information, mentioned in the statement, or disclosure of violation of the requirement, set out in part 1 paragraph 5 of this Article:
  1) in case if a decision was taken by the majority of voting shares (except for voting shares of the shareholder, who has represented the statement), the decision of the general meeting shall be recognized as taken without consideration of votes of such shareholder;
  2) in case if a vote of the shareholder, who has represented the statement, was decisive, such a circumstance shall serve as a ground for recognition of the decision of the general meeting as invalid upon request of the authorized body or any other concerned parties in accordance with the procedure, established by the legislation of the Republic of Kazakhstan.
  6. (Excluded by the Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107)
  7. Upon request of the authorized body, the entities which directly or indirectly hold a bank’s shares or have influence on the decisions taken by the bank’s shareholder, except for the national management holding, are obliged to submit the foundation documents and other information, required for identification of the large participants in the bank and their financial status.
  Reference. Article 17 with amendments, inserted by the RK Presidential Decree, having an effect of the Law, dated 27.01.1996 N 2830; RK Laws dated 07.12.1996 N 50; dated 11.07.1997 N 154; dated 29.06.1998 N 236; dated 10.07.1998 N 282; dated 16.07.1999 N 436; dated 02.03.2001 N 162 (see art. 2); dated 25.04.2001 N 179; dated 10.07.2003 N 483 (effective since 01.01.2004); dated 08.07.2005 N 72 (enactment procedure, see art. 2); dated 07.07.2006 N 178 (effective since the date of its official publication); dated 19.02.2007 N 230 (enactment procedure, see art. 2); dated 23.10.2008 N 72-IV (enactment procedure, see art.2); dated 12.02.2009 N 133-IV (enactment procedure, see art.); dated 13.02.2009 N 135-IV (enactment procedure, see art. 3).

  Article 17-1. Bank Holding and Large Participant in a Bank

  1. Not a single entity, independently or jointly with other entity (entities), may be a bank holding, large participant in a bank without approval of the authorized body.
 The legal entities, being non-residents of the Republic of Kazakhstan, may obtain a permit of authorized body for acquisition of the status of a bank holding or large participant in a bank, if the minimum required rating of one of the rating agencies is available. The minimum rating and the list of the rating agencies shall be defined by the normative legal act of the authorized body.
 The mentioned rating is not required for the legal entities, being non-residents of the Republic of Kazakhstan, intending to own indirectly ten percent and more of the bank’s placed shares or vote indirectly ten percent and more of the bank’s voting shares through ownership (voting) of shares (participation shares) of the legal entity, being non-resident of the Republic of Kazakhstan, which is the bank’s large participant, that directly owns ten percent and more of placed shares or may vote ten percent and more of voting shares of the bank, which was assigned the required minimum rating.
 Large participants in a bank, being individuals, shall pay for the bank’s shares in the amount not exceeding the value of their property.
  2. The rules for issue, revocation of a permit for acquisition of the status of a large participant in a bank or bank holding, the requirements to the documents which are subject to submission for receiving such a permit, shall be defined by the authorized body.
  3. For receiving of such a permit, a person intending to become a large participant in a bank shall submit to the authorized body an application for acquisition of the status of large participant in the bank with the attached documents and information, set out in paragraphs 4, 5, 6, 7, 7-1 herein.
  4. To receive a permit for acquisition of the status of large participant in a bank, an individual shall submit the following documents:
  1) information on the terms and procedure for acquisition of the bank’s shares, including the description of sources and funds used for acquisition of shares with the attached copies of the confirming documents;
  2) a power of attorney issued to the applicant’s representative, who is assigned to represent the interest of the applicant (if any);
  3) a list of the legal entities, where such an individual is a large participant, and notarized copies of their foundation documents;
  3-1) a recapitalization plan of the bank in case of eventual deterioration of the financial condition of the bank;
  3-2) information on fair business reputation with the attached copies of the confirming documents;
  3-3) a statement of income and property, as well as the copy of declaration of the individual income tax, submitted to the tax authorities in the cases, established by the legislative acts of the Republic of Kazakhstan, and any other documents, certified by the authorized bodies of the individual’s country of residence;
  4) brief information on the applicant in the form, established by the normative legal acts of the authorized body, including the information on education, work experience;
  5) written confirmation of the respective state body of the individual’s country of residence, being non-resident of the Republic of Kazakhstan, which certifies that acquisition of shares of the resident bank of the Republic Kazakhstan is permitted by the legislation of this country, or declaration of the authorized body of the respective country, which confirms that such a permit is not required under the legislation of the country of such founder.
  5. To obtain a permit for acquisition of the status of large participant in a bank, a legal entity being resident of the Republic of Kazakhstan shall submit the following documents:
  1) ) a copy of the decision of the supreme body of an applicant on acquisition of the bank’s shares;
  2) information and documents, mentioned in subparagraphs 1), 2), 3) and 3-1) of paragraph 4 herein;
  2-1) information on fair business reputation of the executive officers;
  3) notarized copies of the foundation documents, brief information on the large participants in the applicant and the large participants in the applicant’s large participants;
  4) brief information on the executive officers of the applicant in the form, established by the normative legal act of the authorized body, including the information on education and work experience;
  5) annual financial statements for the last two closed financial years, certified by an auditing company, and financial statement for the last closed quarter prior to submission of the respective application;
  6) analysis of the financial implications of obtaining the status of a bank’s large participant, including the forecasted estimated balance of the applicant and the bank after acquisition, plans and proposals of the applicant, if any, on sales of the bank’s assets, reorganization or significant revision of operation or management of the bank, including the action plan and the organizational structure.
  6. To obtain the permit for acquisition of a status of the bank’s large participant, the legal entity – non-resident of the Republic of Kazakhstan shall submit the following documents:
  1) information and documents, mentioned in subparagraphs 1), 2), 3) and 3-1) of paragraph 4 and subparagraphs 1), 2-1), 3), 4), 5) and 6) of paragraph 5 herein;
  2) information on the credit rating of the legal entity, given by one of the international rating agencies, which list is defined by authorized body, except for the cases, established by paragraph 1 herein.
  7. To obtain a permit for acquisition of the status of the bank’s large participant, a financial organization, being non-resident of the Republic of Kazakhstan shall submit the following documents:
  1) information and documents, listed in paragraph 6 herein;
  2) written confirmation from the financial supervision body of the applicant’s country of residence, which states that the applicant is authorized to carry out the financial activities under the legislation of that country, or declaration of the financial supervision body of the applicant’s country of residence, which confirms that such a permit is not required under the legislation of that country. 
  7-1. To obtain a permit for acquisition of the status of a bank holding, a financial organization, being non-resident of the Republic of Kazakhstan, which is subject to the consolidated supervision in the country of its location, shall submit the following documents:
  1) a document, confirming the minimum required rating of one of the rating agencies, which list is established by the normative legal act of the authorized body, except for the cases, set out in paragraph 1 of this Article;
  2) written confirmation from the financial supervision body of the applicant’s country of origin, which states that the financial organization, being non-resident of the Republic of Kazakhstan is subject to the consolidated supervision;
  3) a written permit (approval) from the financial supervision body of the applicant’s country of origin for acquisition of the status of a bank holding by the financial organization, being non-resident of the Republic of Kazakhstan, or declaration from the authorized body of the respective country, which confirms that such a permit (approval) is not required under the legislation of that country.
  8. The individuals may be recognized as the large participants of a bank on a joint basis, if such individuals hold ten percent and more of placed shares (less preference shares and shares repurchased by the bank), or are able to vote directly or indirectly ten percent and more of the bank’s shares, and:
  1) if such individuals have joint influence on the bank’s decision by virtue of the agreement between them or otherwise;
  2) if such individuals are individually or jointly large shareholders of each other;
  3) if one of such individuals is an executive or representative of another individual;
  4) if one of them enables another individual to purchase the bank’s shares in compliance with the agreement concluded between them;
  5) if they are close relatives or spouses.
  9. The reasons for denial to issue a permit by the authorized body to the individuals, intending to become a bank’s large participant are as follows:
 non-observance of the requirements of subparagraphs 3)-5) of paragraph 2 Article 20 of this Law (in relation to an individual or executive officers of an applicant, being a legal entity);
 unstable financial status of the applicant;
 non-submission of the documents required by this Article;
 violation of the requirements of the antimonopoly legislation in the result of acquisition of the status of a bank’s large participant by the applicant;
 the cases, when one of the parties in a transaction on acquisition of the status of a bank’s large participant is an entity (its affiliated person), registered in the offshore zone, or an individual, which is a participant (founder, shareholder) in the legal entities, registered in the offshore zones, which list is established by the authorized body;
 non-observance of other requirements specified by this Law to the founders and shareholders of banks by the applicant;
 analysis of the financial consequences of acquisition of the status of a bank’s large participant by the applicant provides for deterioration of the bank’s financial status;
  absence of the authorities to carry out financial activity within the frames of the legislation of the country of origin by a financial organization, beingnon-resident of the Republic of Kazakhstan;
  absence of the minimum required rating of one of the international rating agencies, which list is established by the authorized body for an applicant, represented by a legal entity, being non-resident of the Republic of Kazakhstan, except for the cases, set out in paragraph 1 herein;
  inefficiency of the represented recapitalization plan of a bank in case of possible deterioration of the bank’s financial status;
  absence of fair business reputation of an applicant, represented by an individual, and of the executive officer of an applicant, represented by a legal entity;
 the cases,when an entity was previously a large participant, represented by an individual or the chief executive officer of the large participant, represented by a legal entity and (or) an executive officer of a financial organization in the period not more than one year prior to taking a decision by the authorized body on temporary closing of the financial organization, forced repurchase of its shares, forfeiture of a license of the financial organization, as well as forced liquidation of the financial organization or its recognition as a bankrupt in accordance with the legislation of the Republic of Kazakhstan. This requirement shall be effective within five years since taking a decision by the authorized body on temporary closing of the financial organization, forced repurchase of its shares, forfeiture of a license of the financial organization, as well as forced liquidation of the financial organization or its recognition as a bankrupt in accordance with the legislation of the Republic of Kazakhstan.
  10. One of the following grounds shall be recognised as a sign of unstable financial position of an applicant, being a legal entity:
 an applicant, being a legal entity, was incorporated less than two years prior to the submission date of the application;
 obligations of the applicant exceed its assets less the amount of assets, placed in shares and participation shares in the charter capital of another legal entities, and in the bank’s shares intended for purchase;
 losses upon the results of two last financial years;
 amount of the applicant’s obligations represents a material risk for financial condition of the bank;
 availability of an unsettled and (or) balance debt of the applicant to the bank;
 analysis of the financial implications of acquisition of the status of large participant by the bank forecasts deterioration of the financial status of the applicant;
 other reasons, evidencing availability of damaging the bank and (or) its depositors.
  11. In the event if an entity fails to receive a permit for acquisition of the status of large participant in a bank, the authorized body shall have a right to apply the enforcement measures to such entity as provided by Article 47-1 of this Law.
  12. Issue of a permit to the entities intending to become a bank holding shall be made by the authorized body in a manner, established for a bank’s large participant.
 In addition to the documents and information as provided by paragraphs 5-7 herein, an entity intending to become a bank holding shall submit the documents confirming availability of the systems of risk management and internal control, including in relation to the risks associated with the activity of its subsidiary.
   In addition to the reasons, set out in paragraph 9 herein, the following shall serve as the reasons for denial of issue of a permit of the authorized body to the entity intending to become a bank holding:
 cases when an applicant as a financial organization is not subject to the consolidated supervision in the country of its location;
 impossibility to conduct the consolidated supervision over a bank conglomerate, as the legislation of the location country of the participants of such bank conglomerate, being non-residents of the Republic of Kazakhstan disallow such participant and the bank conglomerate to fulfil the requirements, established by this Law.
  12-1. Shareholders, which hold jointly ten percent and more of a bank’s voting shares and acting by virtue of the agreement concluded between them, which provides the decision-making on following issues, shall not be recognized as the bank’s large participants:
  1) convocation of the extraordinary general meeting or appeal to the court for its convocation in case if the Board of Directors refuses to convene the general meeting;
  2) inclusion of additional issues into the agenda of the general meeting;
  3) convocation of the meeting of the Board of Directors;
  4) conducting of audit by an auditing organization at the company’s expense.
  13. Entities, which jointly refer to a bank holding, shall be the entities, which own in total twenty five percent or more of placed shares of the bank (less preference shares and shares repurchased by the bank), or have an opportunity to vote, directly or indirectly, twenty five percent or more of placed shares of the bank and:
  1) jointly influence on the bank's decisions by virtue of the agreement between them or otherwise;
  2) separately or mutually are large participants in each other;
  3) one of them is a representative of another one;
  4) one of them granted the another an opportunity to purchase the bank’s shares in accordance with the concluded agreement.
  14. A decision on the application submitted for acquisition of the status of a bank holding or a large shareholder of the bank in compliance with the requirements of this Article shall be taken by the authorized body within three months after submission of the full set of documents.
  15. The authorized body shall have a right to revoke its permit issued in compliance with this Article, in case if the information submitted was discovered as untrue, or violation of the antimonopoly legislation of the Republic of Kazakhstan in the result of acquisition of the status of a large participant or a bank holding, or incompliance of the large participants or the bank holding with the requirements of this Law. In this case the entity, to which a measure was imposed, shall reduce the amount of its shares in the bank below the level stipulated in this Article.
  16. Provisions of this Article on the necessity of obligatory preliminary obtainment of the authorized body’s permit shall not apply to the cases, when an entity became compliant with the requirements to a large participant in a bank or a bank holding due to the reasons beyond its control, or acquired title to the bank’s shares in the amount, equal or exceeding the limits, defined in this Article, in the result of transfer of the pledged property into its ownership under the debt obligation, when shares of the bank were subject to pledge.
 In such cases an entity, which complies with the requirements to a large participant or a bank holding, shall be obliged to notify the authorized body within thirty days after acquisition of shares or when it becomes aware of its compliance with the requirements to a large participant of the bank or a bank holding, and shall not take any actions aimed at influencing the management or policy of the bank, or shall not vote the shares, acquired in such a manner, until it obtains a written permit of the authorized body in compliance with the provisions of this Article.
 Application for acquisition of the respective status shall be submitted to the authorized body within sixty days after acquisition of shares, or when it becomes aware of its compliance with the requirements to a large participant of the bank or a bank holding, unless such an entity intends to alienate the shares within the prescribed period. Information on taking a decision on alienation of shares within sixty days after its acquisition shall be immediately delivered to the authorized body after the date of such a decision.
  17. The authorized body shall have a right to request for information from individuals and legal entities at availability of information indicating that such an entity or an individual complies with the requirements to a bank holding or large participant of the bank, or such an entity is a direct, indirect owner of the bank’s shares, or has an opportunity by virtue of the agreement or otherwise to vote shares of the bank in the amount, equal or exceeding the limits, defined in this Article, without a permit of the authorized body in compliance with this Law. Such information may be required from any entity, which possesses it or from any organization, controlled by these entities.
  18. Within thirty days after taking a decision, large participant of a bank, a bank holding shall be obliged to notify the authorized body on change in the ratio of the bank’s shares held by such an entity to the number of placed shares (less preference shares and shares repurchased by the bank) and (or) to the number of voting shares of the bank, held directly or indirectly, or has the opportunity to vote directly or indirectly, with submission of the confirming documents.
 In case of changes in the ratio of a bank’s shares held by the large participant, a bank holding to the number of placed shares (less preference shares and shares repurchased by the bank) and (or) to the number of voting shares of the bank towards increase, the large participant of the bank, the bank holding shall provide the authorized body with the information on the sources of funds used for acquisition of the bank’s shares with attached copies of the confirming documents.
 In case of changes in the ratio of a bank’s shares up to the amount less than ten or twenty five percent, held by the bank’s large participant, a bank holding to the number of placed shares (less preference shares and shares repurchased by the bank) and (or) to the number of voting shares of the bank, the authorized body upon application of the bank’s large participant, the bank holding, or in case of independent discovery of the mentioned fact shall take a decision on recognition of the written permit issued earlier as invalid within one month since the date of discovery of this fact in accordance with the procedure, established for issue of a permit for acquisition of the status of a bank’s large participant or a bank holding.
  19. On a quarterly basis a bank shall submit to the authorized body the list of all its large participants or bank holdings with indication of the ratio of the bank’s shares held to the number of placed shares (less preference shares and shares repurchased by the bank) and (or) to the number of voting shares of the bank, but not later than on the tenth date of the month, following the reported quarter.
  20. Banks shall notify the authorized body on changes in the structure of shareholders possessing ten percent and more of voting and (or) placed shares (less preference shares and shares repurchased by the bank) within fifteen calendar days after they become aware of this fact.
  21. If banks, large participants of the banks, bank holdings, as well as individuals and legal entities, which comply with the requirements to a bank holding or large participants of a bank, do not submit or submit in untimely manner the information required under paragraphs 16-20 of this Article in the prescribed terms or submit untrue information, they shall bear the liability, established by the laws of the Republic of Kazakhstan.
  Reference. Article 17-1 is stated in the wording of the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107). Article with amendments, inserted by the RK Law dated 19th of February 2007 N 230 (enactment procedure, see art.2); dated 23.10.2008 N 72-IV (enactment procedure, see art.2).