Risks of the absence of constituent documents: what is important for an entrepreneur to know

In the course of providing legal services, our company is increasingly faced with the fact that most entrepreneurs do not have constituent documents on hand.

According to the Civil Code of the Republic of Kazakhstan, Article 41, paragraph 1, the list of constituent documents includes such documents as: a constituent agreement, a decision to establish a company, and the Charter.

There is another document that is not included in the list of constituent documents of an LLP, but is always requested by any government agency, when such a need arises, and by many of your partners and counterparties – an order on the assumption of office of the first manager (director).

What risks does an entrepreneur bear who does not have constituent documents?

The fact is that the absence or incorrect execution of constituent documents can lead to: serious legal consequences, undermining the trust of partners and other inconveniences in the course of entrepreneurial activity.

  • For example, your constituent documents will be among the first to be requested by the bank, since their provision is an important condition for opening a company account, as well as for subsequent changes made to the constituent documents.
  • Constituent documents play a key role when participating in tenders. They provide information on the legal status, goals and objectives of the company, which allows procurement organizers to evaluate potential suppliers.
  • When selling a share in a limited liability partnership (LLP), constituent documents, such as the charter and the memorandum of association, regulate the procedure for alienation of the share. They contain information on the rights and obligations of the participants, as well as on the procedures related to the sale or transfer of the share. In such situations, it is important to have clearly drawn up and legally correct documents.
  • Constituent documents can also be used when challenging transactions or decisions made by a legal entity. They establish rules and procedures that must be followed in the company’s activities, and may be the basis for recognizing a transaction or decision as invalid if they are violated.

The presence of properly executed constituent documents is not only the basis for the legal protection of your business, but also the basis for the further growth and development of your Business.

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Author of the article: Kenzhemergenova M.N.