A Guide to Board of directors in Joint-Stock companies of Kyrgyz Republic

In the contemporary world, the role and value of a board of directors in companies increase day by day. Many companies which were previously fully managed by their owners are now entering the new stage of their business development requiring new approaches to direction and control. Companies having a board of directors in their structure reassume its significance and opportunities for enhancing their efficiency and performance. International financial institutions conducting surveys of corporate governance in companies give special consideration to their board of directors in terms of its independence, coordination and efficiency.

It is obvious that not every company needs a board of directors. For example, there are many small and medium-sized enterprises that can effectively operate without it. But any emerging company will eventually enter the stage when the increase in the scale of operations, number of employees and amount of assets can give rise to certain management issues for its operating owners, which, in turn, can lead to a slowdown in its growth. However, non-operating owners may also need help from professional practitioners to provide supervision over senior management (CEO or executive board) and to set long-term strategic direction for the company’s daily operations. Members of the board of directors may include not only financial or legal experts but also technical experts specializing in a particular field of activity pursued by the company, such as engineers, architects, technicians, programmers, etc. It is encouraged that apart from the professional qualifications and personal qualities, the members of the board should be able to act independently and in the interest of the company and all of its owners rather than for the benefit of individual owners and/or groups of owners whom they represent. As a rule, the most typical functions of the board of directors include: supervision over senior management; development of strategic plans; oversight over internal control and risk management; representation and protection of owners in matters related to strategic management of the company. Thus, the board of directors is not only an intermediate corporate organ but also a link between managers and owners (shareholders), a guarantor of good and transparent governance and a key element of the effective organizational structure of the company.

This guide provides an overview of the main requirements under Kyrgyz law for the board of directors as one of the governing bodies in jointstock companies. Issues covered in this guide include board of directors’ operating procedures, functions, eligibility criteria, liability, etc.

The information provided in this guide is not detailed or conclusive due to its limited scope and is based solely on the analysis of the current laws of the Kyrgyz Republic (the «Kyrgyz Law») effective December 21, 2015. This guide is intended primarily for members of the board of directors, senior management (sole or collective executive bodies), shareholders and other interested parties.

This guide has been developed by Kalikova & Associates lawyers: Magomed Saaduev, Ruslan Sulaimanov and Meerim Talantbek kyzy. We appreciate the comments provided by IFC Central Asia Corporate Governance Project. This guide is available online in attachment.