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Local business incentives - Legal forms of companies - Registration and licensing procedures - Legal framework - Foreign exchange control - Regulations concerning equity investment - FDI inflows - Expertise of the political risk

Local business incentives

The investment and trade policies of Armenia are considered to be the most open in the CIS by international organizations. Foreign companies are encouraged to invest and are entitled by law to the same treatment as local companies, moreover they have certain advantages. Large-scale privatization offers additional attractive opportunities.
Some of the major incentives offered to the foreign investors include:
1. Favorable investment legislation which provides guarantees to foreign investors and protects investors from changes in the business related laws for 5 years.
2. Strong Government Commitment to FDI Attraction
3. Skilled and cost-effective work force
4. No limitation on foreign ownership
5.Competitive energy costs
6.Access to CIS and Middle East markets
7. No Export Duty
8. Free foreign-exchange conversion
9. Free repatriation of profit
10. No restrictions on staff recruitment
11. Corporate Tax Holidays
12. No restrictions on remittances

The ADA (Armenian Development Agency) is the agency that deals with investment-related matters and it should be contacted for further information.


Legal forms of companies

Form Number of partners/shareholders Minimum and/or maximum capital Liability Registration fee Release of financial documents
Joint-Stock Company (Open- and Closed-) The number of shareholders in an Open Joint-Stock Company is not limited while as incase of Closed Joint-Stock companies the total number of shareholders should not be more than 49. The minimum number of members of the Board of Directors is 3. The minimum statutory capital requirements is 100 times the minimum monthly wage for a closed company and 1,000 times of the minimum monthly wage for an open company. The participants in a joint-stock company (the stockholders) are not liable for its obligations and bear the risk of losses connected with the activity of the company within the limits of the value of the shares of stock belonging to them. a) Fees for registration as a legal entity : 12,000 AMD
b) Fees for registeration of the company's name: 5,000 AMD
Limited Liability Company 1 (Minimum) 50,000 AMD The liability of its owners is limited to the nominal value of their shares owned in the company. a) Fees for registration as a legal entity : 12,000 AMD
b) Fees for registeration of the company's name: 5,000 AMD
Company with Supplementary Liability 1 (Minimum) 50,000 AMD The participants jointly and severally bear subsidiary liability for its obligations with their property in a multiple of the value of their contributions which multiple is identical for all of them and is determined by the Charter of the company. a) Fees for registration as a legal entity : 12,000 AMD
b) Fees for registeration of the company's name: 5,000 AMD
Partnership (Full- and Limited-) 2 (Minimum) There is no minimum share capital required but share value is fixed by the Civil Code. Unlimited incase of Full-Partnership, and limited (restricted to the amount of the partner's contribution in the partnership) incase of Limited-Partnership. a) Fees for registration as a legal entity : 12,000 AMD
b) Fees for registeration of the company's name: 5,000 AMD

Registration and licensing procedures
The 'Law on Registration of Legal Entities' in Armenia regulates the relations arising from the state registration of legal entities and defines the powers of the State Registration Body (called State Register) which operates under the Justice Ministry of the Republic of Armenia. The State Register consists of the central and regional units. The procedure involved in registration of a legal entity in the country involves the following steps:
1. The documents for the registration of a legal entity should be submitted to respective regional unit of the State Register taking into account the place of location of the entity under registration. A relevant record would be made into the document admission register book.
2. The State Register would issued the entity (under registration) a set of model document forms, consisting of an application form, model charter, etc. The registration of entity would be subject to approval by the RA Justice Minister.
3. The regional units of the State Register controls the processes of formation of legal entities and would verify the compliance of the relevant documents with the requirements of the law.
4. After verifying the documents, the head of the regional units of the State Register would enter the data in a state registration 'card', attach a code to the legal entity choosing it among the codes released by the central unit of the State Register, grant a registration number to the given legal entity, undersign and seal the card with a stamp, enter relevant data into the State Register and issue a state registration certificate to legal entity given there are no valid grounds to refuse the registration.
5. The documents required for the purpose of state registration of social amalgamations and unions of non-profit organizations need be be submitted to the central unit of the State Register.

Licensing in the Republic of Armenia is regulated by the 'Law on Licensing' and other international treaties. The purposes of licensing is to a) protect consumer rights b) improve the quality of goods and services c) administer control over persons engaged in types of activities that risk human lives, health and property of persons, state and public interests, the environment, cultural heritage. There are two types of licenses issued in Armenia based on the procedure involved. These are:
1) licenses given by simple procedures, as described in the Law on Licensing.
2) licenses given by compound procedures, as described in the Law on Licensing.

Legal framework
Foreign investors can make investments in Armenia only through the establishment of fully foreign-owned companies (including representations, affiliates, and branches) or the purchase of existing companies and securities, or the establishment of joint-ventures. The company registration process takes about a week. There are no limitations on the volume and type of foreign ownership, the number of foreign employees and access to financial sources.
However, a company registered by a foreigner as an Armenian business entity does have the right to buy land within the country but can take land on lease. Foreigners may obtain permission to use land under long-term leases, and concessions for the use of Armenian natural resources with the participation of an Armenian company.
In addition, a foreign investor is bound to bear the responsibility for any violation of legislation of the Republic of Armenia, as defined by legislation of the Republic of Armenia. Property of a foreign investor, including working capital and property rights may be used by that investor to guarantee any type of its/his/her obligations.

Foreign exchange control
There exists a law on 'Currency Regulations & Exchange Control' in Armenia. This law establishes the principles of conduction of currency transactions in the Republic of Armenia, the authorities of bodies of exchange control, the rights and obligations of legal and physical entities in the field of ownership, use and disposal of currency values, the responsibilities for the breach of currency legislation. Some of the features governing the foreign exchange are:
1. The Central Bank of Armenia is the main body of currency regulation in the country. It authorizes banks as agents for foreign currency transactions.
2. The residents have the right to hold foreign currency accounts in authorized banks.
3. Non residents have the right to have the accounts in foreign currency and the loacl currency in authorized banks.
4. The Central Bank of Armenia with the purpose of regulation of internal currency market in the country may define a) the limit of difference between exchange rate of purchase/ buy of foreign currency and the selling rate of foreign currency.b) a fixed rate of exchange of the local currency with respect to a foreign currency.

Regulations concerning equity investment
As part of the privatization programme initiated by the government of Armenia, a foreign investor can acquire an interest in a domestic company (both public and private) through purchase of shares or its assets. The properties and companies owned by the State need to be privatized before being acquired by a foreign investor. Privatization process in the country is regulated by the 'Law on Privatization of State Property'.  

Foreign Direct Investment inflows in Armenia

FDI inflows 2003 2004 2005 World rank (*)
FDI inflows (USD million) 157 217 220 30/141
Source : UNCTAD - World Investment Report
Note : (*) World Rank = UNCTAD Inward FDI Performance Index. It is a measure of the extend to which a host country receives inward FDI relative to its economic size. It is calculated as a ratio of the country's share in global FDI inflows to its share in global GDP.


Last modified in mai-07
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