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BUSINESS OVERVIEW

Establishing a Business

An enterprise, or an entrepreneur may do business only after receiving a state registration certificate. A legal person shall be considered created from the time of its state registration.
The law on the State Register of Enterprises provides two types of registration: initial, when a state registration card is first filed with the State Register, and current, when additions and amendments are made to the registration card.
Registration is conducted by a local division of the State Register for a certain fee. The local division ensures that the completed registration card is sent to the central state registration body where it is assigned a state registration code, a registration number, and then a registration certificate is issued. Registration may take up to 5 days for enterprises and entrepreneurs.

Types of Business Presence

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 Armenia 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 the western corporation. 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 latter.
The liability of the founders is limited to the nominal value, as opposed to the market 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, and closed, when the stocks are owned only by founders.
The minimum capital requirement for an open JSC is 1,000 times the minimum monthly wage. For closed JSCs, this is reduced to 100 times the minimum monthly wage. In certain industries, e.g. banking, higher minimum investment requirements may apply. The founders of a JSC are obligated before registration of the company to fully pay in the charter capital. Upon the founding of a JSC all its shares must be distributed among the founders.

Limited liability company (LLC). This form of organization is basically the same as a closed stock company with the only difference being that there are no 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 founders of a LLC are obligated before registration of the company to fully pay in the charter capital. 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 Company. The partners jointly bear liability with all their property for the obligations of the partnership. A person may be a participant in only one general 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 company It is different from a full 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 only in one limited partnership.

Subsidiaries (Dependent companies). Any enterprise/legal entity can establish a subsidiary in Armenia. A business company is a subsidiary if another (or principal) business company or partnership, by virtue of dominant participation in its charter capital or in accordance with a contract concluded between them, has the possibility of determining decisions taken by such company. A subsidiary is not liable for the debts of the parent company.
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 persons, and they act on the basis of statutes approved by the legal person.

Investment Incentives

Resident entities with foreign investments may be able to secure the following tax exemptions, if the level of foreign investment (made after January 1, 1998) in the capital of the resident entity (except for banks) totals at least AMD 500 million:

If the taxpayer is liquidated within the effective period of the privilege, the profit tax is calculated at the full rate for the whole period of activity.

Guarantees

As provided by the law on Foreign Investments, in case of changes to legislation of the Republic of Armenia regulating foreign investments, the legislation which was in effect at the time when the investment was made, shall be applied for a five year period, upon the request of a foreign investor.
Foreign investments in the Republic of Armenia cannot be nationalized or confiscated. Confiscation may be allowed only as an extreme measure in case of an emergency declared in accordance with the legislation of the Republic of Armenia, and it may be applied only upon the decision of a court and with full compensation. Investors must also be compensated for any damage or loss of profit resulting from the illegal actions of state bodies or officials. Compensation shall be paid at current market prices or prices determined by independent auditors either in the currency invested, or in any other currency mutually agreed upon by the parties.
There are no limitations on export of foreign investors' and foreign employees' property, profits and other means legally earned as a result of investments, payments for labor or as compensation.