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The Armenian parliament has passed in the first reading a legislative package introducing special regulations for companies established under international treaties in which the state holds at least a 25% stake.
The amendments will make it possible to advance the process of establishing the company envisaged for the implementation of the TRIPP project.
The package, submitted by the Government, proposes amendments to the Law on Joint-Stock Companies and six related laws. It was adopted at a special session on November 12, with 64 votes in favor. The opposition did not participate in the session.
Deputy Minister of Justice Tigran Dadunts presented the package, explaining that it proposes establishing a more flexible legal framework for the governance of companies created within the framework of international cooperation.
“With this package, we propose introducing a new legal institution into Armenia’s legal system, making it possible to establish special legal regulations for companies created on the basis of international treaties. This is not simply about providing for separate exceptions to the existing law, but about creating a flexible and predictable legal framework for the activities of companies established within the framework of international cooperation,” Dadunts said.
He said that companies involving Armenia and foreign partners may be established to implement international economic projects. Their governance models are also shaped by agreements reached during interstate negotiations, which may differ from the general rules of domestic legislation.
Dadunts noted that a number of provisions of the current law are mandatory and leave no room for flexibility. At the same time, an international treaty cannot regulate in detail all aspects of a company's corporate governance.
“The need for this legal framework became apparent in the context of the TRIPP project and the Framework Agreement ratified by the National Assembly. However, it is important to emphasize that we are establishing a generally applicable legal mechanism that can also serve the implementation of similar projects in the future,” he stressed.
The special regulations are envisaged to apply only when two conditions are met simultaneously: the company must be established on the basis of an international treaty ratified by Armenia and for the purpose of implementing that treaty, and Armenia's stake in the company must be at least 25%.
The deputy minister also highlighted as a safeguard a clearly defined list of matters that may be regulated differently from the provisions of the law. These include, in particular, major transactions, the formation of governing bodies and decision-making, the transfer of shares, and shareholder liability. If the state's stake falls below 25%, the special regulations will no longer apply.
During the discussion, MP Sergey Bagratyan asked why, if the proposed rules are more flexible, they would not also apply to companies operating under the ordinary regime.
Dadunts replied that the existing mandatory regulations protect shareholders' rights, while making exceptions to them generally applicable could create problems.
“If we allow these very flexible regulations to apply to all companies, we could thereby undermine, for example, the interests of a company's small shareholder,” the deputy minister said.
He added that, in the case under discussion, the state has already assumed relevant obligations under an international treaty and is in a stronger position than the other shareholders.
The package also proposes amendments to the Civil Code, the Law on Procurement, the Law on Protection of Economic Competition and Consumer Interests, the Law on Public-Private Partnership, and the Law on Bankruptcy, as well as the Bankruptcy Code. The draft laws also establish exceptions to the application of these laws to the companies concerned.
Parliament adopted a special procedure for consideration of the package, under which the second reading is to be held within 24 hours of its adoption in the first reading. At least three hours have been allocated for submitting written proposals and the submission of the lead committee's conclusion.
Armenian President Vahagn Khachaturyan signed into law on November 10 the legislation ratifying the Framework Agreement between the Republic of Armenia and the United States of America on Strategic Cooperation Concerning the Trump Route for International Peace and Prosperity (TRIPP). On October 28, the Armenian parliament adopted the law ratifying the TRIPP Framework Agreement by 63 votes in favor and 32 against.