Management of a Business Partnership

📘 Article 60 of the Civil Code of the Republic of Kazakhstan: Management of a Business Partnership

🔹 1. GENERAL MANAGEMENT STRUCTURE

Article 60 establishes the foundations of corporate governance in business partnerships. It defines:

• the hierarchy of management bodies (general meeting, executive body, etc.);
• their competence;
• the transfer of powers in cases of bankruptcy and rehabilitation;
• audit rules.

These provisions ensure legal transparency in the partnership’s activities and a balance of interests among participants.

🔹 2. CLAUSE-BY-CLAUSE ANALYSIS

✅ Clause 1: General Meeting of Participants — the Supreme Body

The general meeting of participants resolves key issues:

• amendments to the charter;
• appointment/dismissal of the director;
• distribution of profits;
• liquidation/reorganization of the partnership, etc.

📌 If the partnership is established by one person, the powers of the general meeting automatically belong to the sole participant(see also: Article 88 of the Civil Code of the RK, Article 43 of the Law “On LLPs”).

🔎 Example:If an LLP has a single founder (e.g., an individual), all corporate decisions (including appointment of the director) are formalized by a decision of the sole participant, not by minutes of a meeting.

✅ Clause 2: Executive Body — Day-to-Day Management

The executive body may be:

• sole (director, general director);
• collegial (management board, directorate).

🔹 It is subordinate to the general meeting of participants.

🛠 Possible forms:

1. Sole executive body — an individual (not necessarily a participant).
2. Collegial bodies:
   • management board — typically in large LLPs;
   • supervisory board — in cases provided by law(more common in JSCs, but may exist in LLPs if specified in the charter);
   • other bodies — e.g., an audit commission (by decision of participants).

📘 See also:

• Article 44 of the Law “On LLPs” — management structure;
• Article 36 of the Law “On Joint-Stock Companies” — analogous rules for JSCs.

🔎 Example:The LLP charter may state: “The executive body is a director appointed by the general meeting for a term of 5 years.”

✅ Clause 2-1: Bankruptcy or Rehabilitation → Change of Management

If a legal entity is declared bankrupt or a rehabilitation procedure is introduced, all management functions are transferred to the respective:

• interim manager (prior to the court decision);
• bankruptcy manager (in liquidation);
• rehabilitation manager (when measures to restore solvency are applied).

📘 Law of the RK “On Rehabilitation and Bankruptcy,” Articles 53, 55, 56.

🔎 Example:After bankruptcy proceedings are initiated, the LLP director may no longer conclude contracts or dispose of property. These actions are carried out exclusively by the bankruptcy manager.

✅ Clause 3: Competence and Decision-Making Procedure

The competence, appointment procedures, and operating rules of the partnership’s bodies:

• are established by the Civil Code of the RK;
• are detailed in the charter;
• may be regulated by special laws (e.g., the Law “On LLPs”).

📌 It is important to specify in the charter:

• who appoints the director;
• quorum and voting rules;
• decision-making procedures;
• procedures for convening meetings, etc.

✅ Clause 4: Audit — External Control

A partnership may engage an independent auditor to confirm the reliability of financial statements.

🔹 Mandatory:

• if required by participants;
• if established by law(e.g., when income/assets exceed thresholds set by the Tax Code or the Law “On Accounting”).

📌 Important:

• the auditor must not be affiliated with the partnership;
• if the audit is initiated by participants, it is conducted at their expense;
• the procedure follows the Law of the RK “On Auditing Activity.”

🔎 Example:A participant holding a 25% interest demands an audit of the LLP’s activities. The director must provide access to documentation. The auditor is selected by agreement or by court in case of dispute.

🔹 3. JUDICIAL PRACTICE

📍 Example 1: Invalid MeetingThe court declared the general meeting’s decision invalid due to failure to comply with the charter quorum and lack of proper notification to all participants.

📍 Example 2: Bankruptcy and ManagementParticipants challenged the actions of the bankruptcy manager. The court held that from the moment of bankruptcy recognition, all executive authority belongs to the manager; actions by participants outside the procedure are null and void.

🔹 4. RELATED REGULATORY ACTS

🔹 5. CONCLUSION

Article 60 of the Civil Code of the Republic of Kazakhstan establishes the fundamental principles of managing a business partnership, ensuring:

• a legal hierarchy of authority within an LLP/ALP;
• protection of the interests of participants and creditors;
• adaptation of management during crisis procedures (bankruptcy, rehabilitation);
• instruments of control and transparency (audit).

Attention!   

       Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.  

 For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085. 

Attorney at Law Almaty Lawyer Legal Services Legal Advice Civil Criminal Administrative Cases Disputes Protection Arbitration Law Firm Kazakhstan Law Office  Court Cases