Types of Companies

Armenian legislation provides the same legal guarantees and protections to foreign and local businesses. Foreign investors have the right to create any form of enterprise.

The Civil Code of the RA defines the following most common types of enterprises:

• Joint-Stock Company (open and closed);
• Limited liability company;
• Business partnership (general or limited).

Joint Stock Company (JSC). This form is similar to a corporation in Europe and USA.  A JSC is a legal entity whose charter capital is divided into a defined number of shares. The founders determine the quantity and value of the shares of stock.

 

The liability of the founders is limited to the nominal value of the shares in their possession.

 

The Joint Stock Company law defines two types of JSCs - open, when the stocks are sold to the public without the consent of the other stockholders, and closed, when the stocks are distributed only among its founders or other previously determined group of persons or entities.

 

According to recent legislative amendments no minimum capital requirement is required for joint stock companies except for those operating in financial sector, such as: banks, credit, insurance companies etc.

 

Limited liability company (LLC). This form of organization is basically the same as a closed stock company with the only difference being that the capital of LLC is divided into ownership shares. The LLC is a legal entity founded by one or several persons. The liability of its founders is limited to the initial investment. The profits are divided among founders according to the investment share ratio unless another ratio is stipulated in the charter. The LLC and founders are taxed separately.

 

Business partnerships. This is an association of two or more people or organizations who run a profit-making business as owners. Business partnerships may be created in the form of a general or limited partnership.

 

A general partnership is a form of legal entity that represents an association of two or more individuals (general partners) who act as owners of the partnership. The partners jointly bear liability with all their property for the obligations of the partnership.

A limited partnership is a form of legal entity that represents an association of two or more individuals who act as owners or contributor participants of the partnership. It is different from a general partnership with respect to the liability obligations of its partners. A limited partnership has two types of partners – general and limited. General partners are liable for the obligations of the partnership with all their property. Limited partners do not participate in the conduct of the daily operations of the company, and are only liable to the extent of their contributions to the charter capital or working capital of the company.

 

An individual may be a general partner in only one partnership.

 

Daughter enterprises. A business company is considered to be a daughter enterprise if another (or principal) business company or partnership, by virtue of dominant participation in the subsidiary’s charter capital or in accordance with a contract concluded between them, has the power of determining decisions taken by such a company. A subsidiary is not liable for the debts of the parent company.

 

Dependent companies. A business company is a dependent company if another (the dominant or participant) partnership or company has more than 20% of the charter capital of a LLC or more than 20% of the voting shares of a JSC.           

 

Representative Offices and Branches. Foreign companies may operate in Armenia without establishing a new entity, i.e. by registering in Armenia a representative office or a branch of a foreign legal entity. Representative offices and branches are not legal entities, and they act on the basis of statutes approved by their foreign legal entity.