How to Check a Company in Uzbekistan Before Entering into a Transaction
Entering into a contract with a new counterparty involves more than agreeing on price and commercial terms. Before a significant transaction, it is important to establish whether the company legally exists, who is authorised to act on its behalf, whether it holds the necessary licences, whether it is involved in material litigation, and whether there are circumstances that could put performance of the contract at risk.
In Uzbekistan, a substantial part of the initial company due diligence can be conducted using publicly available government sources. The appropriate depth of the review, however, depends on the nature of the transaction. Checking a supplier before an ordinary commercial contract and conducting legal due diligence in Uzbekistan before acquiring a company or an equity interest are very different exercises.
1. Check the Company’s Registration and Current Status
The first step when seeking to check a company in Uzbekistan is to establish its exact legal name, taxpayer identification number (TIN), legal form, registration date and current status.
Information on business entities is maintained in Uzbekistan’s Unified State Register of Business Entities. The state business registration system provides access to publicly available information concerning registered businesses and their current status.
This check should be carried out before a contract is signed rather than after a dispute arises.
A commercial or brand name used by a business on its website, in correspondence or in marketing materials may differ from the full registered name of the legal entity.
The contract should therefore contain the correct details of the entity that will actually assume the contractual obligations.
2. Verify Who Is Authorised to Sign the Contract
It is equally important to verify the authority of the individual signing the agreement on behalf of the company.
If the agreement is signed by the company’s director, the corporate information provided by the counterparty should be compared with current registration and corporate documents.
If another representative signs the agreement, the power of attorney should be reviewed carefully. In particular, it is necessary to establish:
- who issued the power of attorney;
- when it was issued;
- how long it remains valid;
- whether it authorises the representative to enter into the particular transaction.
For major transactions, confirming the identity of the signatory may not be sufficient.
Depending on the company’s legal form, its charter and the nature of the proposed transaction, approval by a shareholder, general meeting or another corporate body may also be required.
The practical risk is straightforward: even commercially favourable contractual terms provide limited protection if a dispute subsequently arises over whether the person signing the contract was authorised to bind the company.
3. Check Licences and Permits
Where the counterparty conducts an activity that requires a licence or special permit in Uzbekistan, businesses should verify not only that the document exists but also that it remains valid and covers the relevant activity.
The Ministry of Justice maintains the Licence information system, which contains the official register of licences and permits. Searches can be conducted using identifying information such as the company’s TIN.
This check is particularly important where a licence or permit is essential for the counterparty to perform its contractual obligations.
A copy of a licence provided several years ago should not be treated as a substitute for verifying its current status.
4. Review the Company’s Litigation History
A company’s litigation history can sometimes provide more useful information about its business practices than a presentation or commercial proposal.
Uzbekistan’s Supreme Court electronic systems provide access to published judicial information, including matters heard by the economic courts. This can help identify disputes in which a company has participated as claimant, defendant or another party.
The existence of court proceedings does not in itself mean that a business is unreliable. Litigation may be a normal part of the operations of an active company.
What matters more is the nature, frequency and pattern of disputes.
For example, repeated claims involving:
- non-payment for supplied goods;
- failure to return advance payments;
- non-performance of contractual obligations;
- similar recurring commercial disputes
may justify additional investigation.
Proceedings connected with insolvency also deserve particular attention, as Uzbek legislation provides judicial procedures applicable to insolvent legal entities.
5. Assess the Counterparty’s Tax Risks
Tax-related checks have become an increasingly important component of counterparty due diligence in Uzbekistan.
The Tax Committee of Uzbekistan expressly emphasises the importance of exercising due care when selecting counterparties and recommends checking business partners before entering into cooperation.
Such checks may include analysing available financial information, tax-related data, the company’s actual presence at its registered or declared address and other information concerning its business activities.
The Tax Committee also maintains information concerning businesses where informal economic activity or questionable transactions have been identified.
Transactions involving such entities may have tax consequences for their counterparties.
For this reason, tax due diligence in Uzbekistan should not be limited to the question: “Does this company have a TIN?”
Businesses should also consider whether the counterparty’s actual operations appear consistent with the proposed transaction.
For example, a company acting as a major supplier should normally be able to explain the origin of the goods and how it has access to the personnel, facilities, warehousing, transport or subcontracting and logistics arrangements necessary to perform the contract.
6. Request Financial Documents
Not all relevant information is available through public registers.
For significant transactions, a company may consider requesting additional information directly from the counterparty, including:
- financial statements;
- information on material assets and liabilities;
- confirmation concerning significant tax liabilities;
- documents relating to the specific asset or transaction.
The Tax Committee itself includes the analysis of financial statements among the recommended measures for checking business partners.
A counterparty’s refusal to disclose financial information does not automatically indicate a problem.
However, in a major transaction, such a refusal should be considered together with the other information identified during the company verification process in Uzbekistan.
7. Acquiring a Company or Equity Interest Requires More Extensive Due Diligence
Checking a supplier before signing an ordinary contract is not the same as conducting legal due diligence of a company in Uzbekistan before acquiring a business or an equity interest.
In an M&A or investment transaction, the review may need to cover considerably more information, including:
- the company’s corporate history;
- its charter and amendments;
- ownership structure;
- authority of corporate bodies;
- material contracts;
- real estate and other significant assets;
- loans and other financial obligations;
- pledges, guarantees and other security;
- employment matters;
- intellectual property rights;
- licences and permits;
- tax risks;
- material litigation.
The purpose of due diligence in such cases is not simply to label a company as “good” or “bad”.
The objective is to understand which legal, financial and commercial obligations an investor is effectively acquiring together with the business.
Red Flags That May Require Further Investigation
Additional investigation may be appropriate where, for example:
- registration data materially differs from the documents provided by the company;
- the person signing the agreement cannot adequately demonstrate their authority;
- a required licence is missing, expired or does not cover the relevant activity;
- the company’s actual business appears inconsistent with its stated activities;
- the company is involved in numerous similar court disputes;
- there are indications of insolvency;
- material tax risks have been identified.
None of these factors necessarily means that the transaction should be abandoned.
Instead, the results of due diligence in Uzbekistan may influence how the transaction and the contract should be structured.
Depending on the risks identified, the parties may consider mechanisms such as advance or deferred payment, bank guarantees, security for contractual obligations, specific representations and warranties, indemnities or contractual exit rights.
A properly conducted review therefore serves not only to identify problems but also to determine how identified risks can be allocated and managed within the transaction.
LOYAL conducts company and transaction due diligence in Uzbekistan, including corporate, contractual, tax and regulatory reviews for local and international businesses.
Sources
- Unified State Register of Business Entities / Uzbekistan’s state business registration system.
- Ministry of Justice of the Republic of Uzbekistan — Licence information system.
- Supreme Court of the Republic of Uzbekistan — electronic system for judicial information and court decisions.
- Tax Committee of the Republic of Uzbekistan — recommendations on counterparty due diligence.
- Law of the Republic of Uzbekistan “On Insolvency”.
