In 2023, the net flow of foreign direct investment (FDI) from the Russian Federation into the real sector of Armenia amounted to -AMD25.1 billion, which means that in 2023, direct investments from the Republic of Armenia (RA) to Russia exceeded investments in the opposite direction, and there was an outflow of capital from Armenia to Russia. At the same time, the United Arab Emirates had the most significant impact on the indicator in 2023, with a 100-fold increase over the year, amounting to AMD100.8 billion. This may have been due to a significant activation of relations with the UAE. In 2023, the latter became the second biggest export partner of RA with a 26% share in exports.

Capital outflow was recorded in the first quarter of 2024. The net inflow of FDI made in the real sector was -AMD28.5 billion. This circumstance may have been primarily due to the increase in the dram exchange rate, which reduced the attractiveness of investing in Armenia. The dram has strengthened against the USD by 4.4% since January this year. At the same time, the Central Bank’s refinancing rate also remains high, which reduces the availability of credit funds. In 2021 the rate was 5%, and it is now 8%.

In terms of the distribution of the net flow of FDI made in the real sector during 2021–2023, the mining industry and the air transport sector were stable. The former is always one of the main export directions of Armenia, and the presence of significant and stable investments in the latter may be related to the implementation of the policy of forming a national carrier. In 2023, there were significant direct investments in the field of financial intermediation, which could be related to the process of purchasing an economic entity in the banking sector. Another area of investment was beverage production, which is also related to the fact that beverages have export potential.

In 2022–2023, high economic growth rates were recorded in:

• construction (18.6% in 2022, 16% in 2023);
• the wholesale and retail trade (17.6% in 2022, 23.5% in 2023);
• transportation (28.5% in 2022, 13.5% in 2023);
• accommodation and catering (30% in 2022, 30.9% in 2023); and
• information technologies (48.5% in 2022, 34.5% in 2023).

Armenian legislation does not currently provide for a joint venture as an independent legal entity. This was regulated by the RA Law “On Enterprises and Entrepreneurial Activity” adopted on 14 March 1992, according to which, a joint venture is a joint entity based on collective or mixed ownership, which is a legal entity, with obligatory property and/or currency investments of foreign citizens, enterprises or organisations.

Main Provisions of Joint Ventures

In relation to joint ventures, this law, among other things, established the following main provisions:

• the legislation of the Republic of Armenia may establish the minimum necessary amount of the authorised fund and investments of a foreign participant required to obtain and maintain the status of a joint venture;
• in order to maintain the status of a joint venture, an enterprise must have at least one foreign participant;
• joint ventures are established and operate in the form of companies; and
• joint ventures will receive tax, customs, fiscal, income transfer and other benefits in accordance with the procedure established by the legislation of the Republic of Armenia.

Participation of Foreigners

The legislation concerning entrepreneurship with the participation of a foreign element established different rules than for the subjects of the Republic of Armenia. This, however, was cancelled by the adoption of the Civil Code of the Republic of Armenia on 1 January 1999.

As a result, foreign persons may engage in entrepreneurial activity in Armenia without providing additional requirements (minimum threshold of the authorised capital, etc) using any form of legal entity envisaged by the legislation on an equal footing with the entities of the Republic of Armenia (limited liability companies, additional liability companies, open and closed joint stock companies, partnerships based on full trust, etc). On the other hand, the legislation of the Republic of Armenia provides for a more favourable treatment of foreign investments than in the case of its own entities, as discussed in 2.2 Choice of JV Vehicle.

Limited Liability Company

According to the data available in the State Register of Legal Entities of the Ministry of Justice of the Republic of Armenia, the most common organisational-legal form among JVs is the limited liability company.

As for advantages and disadvantages, participants of a limited liability company are not liable for its obligations and only bear the risk of losses associated with the activities of the company within the value of their contributions. A participant of a limited liability company may not be released from the obligation to make a contribution to the authorised capital of the company, including the deduction of claims against the company. A participant of a limited liability company has the right to sell their share or part of the authorised capital of the company, or otherwise assign it to one or more participants in the company. Alienation by the shareholder of a company of one’s share (the part) to third parties is allowed if other is not provided by the charter of a company.

Joint Stock Company

In the case of joint stock companies, participants (shareholders) are not liable for its obligations and only bear the risk of losses related to the company’s activities to the extent of the value of the shares owned by them. The release of a shareholder from the obligation to pay for the company’s shares, including by setting off claims against the company, is not allowed, except for cases stipulated by the RA Law “On Joint Stock Companies”. Shareholders of a closed joint-stock company have a pre-emptive right to acquire shares sold by other shareholders of the company.

Agreement on Joint Activities

A different form of JV is the agreement on joint activities. In this case, two or more persons (participants) undertake to unite their deposits and act together, without creating a legal entity, to make a profit or achieve another goal that does not contradict the law.

Foreign Investment

In Armenia, a number of advantages may be the main driving force behind the choice of JV type. In particular, the RA Law “On Foreign Investments” stipulates that the legal regime of foreign investments and the related legal regime in the Republic of Armenia may not be less favourable than the regime of ownership, property rights and investment activities of citizens, enterprises, institutions and organisations of the Republic of Armenia.

In order to encourage foreign investment in the most important spheres of social and economic development, additional privileges may be established in accordance with the procedure established by the legislation of the Republic of Armenia.

Guarantees in case of changes in the legislation of the Republic of Armenia are also of great importance. In particular, according to the RA Law “On Foreign Investments”, in case of changes in the legislation of the Republic of Armenia regulating foreign investments, within five years of the time of the investment, at the request of the foreign investor, the legislation in force at the time of the investment will be applied.

It is also noteworthy that foreign investments in the Republic of Armenia are not subject to nationalisation. State authorities cannot confiscate foreign investments. Confiscation as an exceptional measure is allowed only in the conditions of a state of emergency established by the legislation of the Republic of Armenia, by court decision and with full compensation.

Also noteworthy is the customs privilege, according to which, the importation of goods included in the list established by the RA government by an enterprise aimed at replenishing its statutory fund with foreign investments is exempt from customs duties.

At the same time, enterprises with foreign investments have the right to export products (works, services) of their own production and import products (works, services) for their own needs without a licence, except for cases stipulated by RA legislation and international treaties.

Main Regulators

Among the main regulators, the Ministry of Justice, as well as the State Revenue Committee and the Central Bank, have a primary role.

Main Statutory Provisions

The main statutory provisions include the Civil Code of the RA; the Law “On Limited Liability Companies”; the Law “On Joint-Stock Companies”; the Law “On Foreign Investments”; the Law “On State Registration of Legal Persons”; the State Record Registration of Separate Subdivisions, Institutions of Legal Persons and Individual Entrepreneurs; the Law “On Combating Money Laundering and Terrorism Financing”; and other normative legal acts.

The main law regulating the fight against money laundering in the Republic of Armenia is the RA Law “On Combating Money Laundering and Terrorism Financing”, according to which the authorised body is the Central Bank. It defines the means and obligations of financial institutions and organisations to prevent and detect money-laundering activities.

The Financial Monitoring Centre (FMC) of the Central Bank is an administrative-type financial intelligence unit with the mission to combat money laundering and terrorism financing. The main function of the FMC is to collect, analyse and share information for the purpose of combating money laundering and terrorism financing.

In accordance with the above, various normative acts define the duty of transferring relevant information to the Central Bank for individual entities, such as banks, notaries, etc.

According to the RA Law “On Foreign Investments”, the legislation of the Republic of Armenia defines the RA territories where, based on the requirements of ensuring national security, the activities of foreign investors and enterprises with foreign investments are limited or prohibited.

At the same time, enterprises with foreign investments can carry out any type of economic activity that corresponds to the goals provided by the charter of the enterprise with foreign investments providing these are not prohibited by the RA legislation.

Enterprises with foreign investments can engage in certain types of economic activity defined by the RA legislation only after receiving a licence in the prescribed manner.

The RA Law "On Protection of Economic Competition" is the primary regulation for antitrust control in Armenia, the enforcement of which is entrusted to the Competition Protection Commission (CPC).

Regulations that may be applicable to joint ventures include, but are not limited to, the prohibition of anti-competitive agreements, abuse of a monopolistic or dominant position, abuse of a strong negotiating position, and the concentration of economic entities.

It is noteworthy that joint ventures which meet the income or asset thresholds specified by legislation must, prior to implementing any concentration activities – such as reorganisation, acquisition of assets, etc – submit a declaration to the CPC for the purposes of assessing the competitive situation as a result of the concentration, identifying or predicting the possibility of preventing, limiting or prohibiting competition, or otherwise limiting economic competition in the relevant product market, as well as to determine if a dominant position could be established or if consumers’ interests might be adversely affected. Only after receiving the CPC’s approval can the concentration be put into effect․

In the event of a violation of the aforementioned obligation, the CPC is authorised to issue a warning; impose fines on business entities, state bodies and their officials; and prohibit the concentration.

There are no specific regulations in Armenia exclusively targeting listed party participants to JVs. However, listed parties are subject to general regulations and transparency requirements that they must adhere to.

First of all, it is important to note that it is not companies themselves that are listed on stock exchanges, but rather their securities – specifically, securities issued by open joint-stock companies.

Generally, these requirements include transparency obligations concerning the company’s corporate governance. This encompasses the governing bodies, their members, individuals with significant influence on decision-making (eg, major shareholders or significant participants as defined by RA legislation), heads and members of the board and executive bodies, other managers, and, in some cases, the publication of information about their remuneration and bonuses. Additionally, companies are required to publish financial statements that reflect their financial situation, along with an independent auditor’s opinion. They must also disclose information about their main activities, key factors affecting their performance, primary markets, competitive position, and strategic plans, visions, and memorandums.

The RA Law “On the Securities Market” stipulates that for securities to be listed on the stock exchange, both the security and its issuer must comply with the minimum requirements established by the normative legal acts of the Central Bank. Specifically, Regulation 4/04 “On prospectus and reports of the reporting issuers” approved by the board of the Central Bank of the Republic of Armenia by Resolution No 68-N, dated 11 March 2008, mandates that essential facts and information related to the company and its issued securities must be published on the issuer’s website. This includes, but is not limited to:

• Basic information about the issuer, including information about governing bodies, their members, transactions with the issuer’s affiliated persons, as well as information about the company’s major shareholders and controlling persons, etc. According to the mentioned regulation, a “major shareholder” is a person who, directly or indirectly, personally or through an affiliated person, possesses 5% or more of the voting rights in the statutory capital of the issuer.
• Information on the company’s major shareholders and controlling persons should include the following (to the extent that the issuer is informed) –
1. the first name and surname of major shareholders (except the members of the issuer’s governing bodies) and the size of the share held by each of them (if there are no major shareholders, then this fact must be stated separately);
2. information on whether all shares belonging to the major shareholders give the same voting right; and
3. information on whether an issuer is directly or indirectly under control (if they are under control, the first name and surname of the controllers and other information necessary for their identification, plus the nature of the supervision – based on which factors are controlled – is also required).
• Basic information on the shares announcement about the working capital, capitalisation and liabilities, the purpose of the offer and the use of borrowed funds, etc).
• Other relevant facts and information, namely:
1. a description of any judicial, arbitration or administrative proceedings in which the issuer is involved (including any proceedings which have started or are expected to start and of which the issuer is aware) and which may have or have had a significant effect on the issuer’s financial situation or profitability;
2. a security or warranty for meeting the liabilities of other persons, exceeding 5% of the book value of assets owned by the issuer on an ownership, as well as termination or invalidation of such contracts; and
3. acquisition or disposition of any participation, which directly or indirectly gives more than 5% of the voting rights to other companies, and the termination or invalidation of such contracts, etc.

According to the RA Law “On the Securities Market”, investment companies, branches of foreign investment companies, regulated market operators, central depositories, corporate investment funds, investment fund managers or a branch of a foreign investment fund manager are obliged to submit information about individuals who are beneficial owners of an investment company, a branch of a foreign investment company, a regulated market operator, a central depository, a corporate investment fund, an investment fund manager, or a branch of a foreign investment fund manager, to the Central Bank of RA. This submission is in accordance with the standards set by the RA Law “On Combating Money Laundering and Terrorism Financing” and the requirements established by the normative legal acts of the Central Bank board.

In Armenia, regulations related to the disclosure of persons with significant control or ultimate beneficial owners (UBOs) are primarily designed to ensure transparency and prevent money laundering and terrorism financing. These requirements align with international standards and are overseen by various regulatory bodies, including the Central Bank and the State Revenue Committee.

According to the RA Law “On Combating Money Laundering and Terrorism Financing”, a beneficial owner is the natural person on behalf of, or for the benefit of, whom the customer ultimately acts; and/or who ultimately (de facto) controls the customer or the person on behalf of, or for the benefit of, whom the transaction is conducted or the business relationship is established.

The beneficial owner of a legal person (except for a trust or another legal arrangement without the status of a legal person under foreign law) is the natural person, who:

• directly or indirectly holds 20% or more of the voting stocks (issued stocks, shares) of the given legal person, or has 20% or more direct or indirect participation in the authorised capital of the legal person;
• ultimately (de facto) exercises control over the given legal person through other means; or
• is an official carrying out the overall or routine management of the given legal person, where no natural person complying with the requirements of the above two bullet points is identified.

The RA Law “On State Registration of Legal Persons, State Record-Registration of Separate Subdivisions, Institutions of Legal Persons and Individual Entrepreneurs” also stipulates that, proceeding from the objectives of the RA Law “On Combating Money Laundering and Terrorism Financing”, the participant who is an investor or who is considered to be a party to the transaction in commercial organisations must submit a declaration to the Agency containing the following information in case of alienation (acquisition) of a share in the authorised capital (share capital) or formation or change of an authorised capital (share capital) of a commercial organisation (including those re-domiciled to Armenia), if AMD20 million has been exceeded:

• data on the participant, authorised person, real beneficiary contributing to the authorised capital;
• the amount of the contribution;
• the amount of the authorised capital as a result of the contribution;
• the date of making the contribution; and
• in the case of risky contributions, the ground for the risk, the criteria and a description thereof.

The Agency is obliged to provide the Central Bank with the information prescribed by the RA Law “On Combating Money Laundering and Terrorism Financing”.

The legal person is obliged to submit to the Agency a declaration on the real beneficiaries of the legal person as prescribed by the RA Law “On Combating Money Laundering and Terrorism Financing”, when there is a change in the state registration or authorised capital, or the composition of the participants. One copy of the declaration must be provided to the Central Bank at its request. Where an obviously false or incomplete declaration on the real beneficiaries is submitted, the Agency will report this to the Central Bank.

The study of judicial practice indicates that Armenia is striving to align with international practice, and references to the acts of international authoritative bodies are evident in its judicial decisions. Following the adoption of the Civil Procedure Code, corporate disputes have been designated as independent proceedings. However, decisions from the highest court, the Court of Cassation, on these fundamental issues are not yet available.

Taking into account that there are no separate requirements for the creation and operation of JVs under RA legislation, it is still advisable to agree on certain documents during the negotiation stage to outline the conditions, expectations and protection of the involved parties, in line with international practice. These documents include the following.

• Due diligence questionnaire (DDQ): A comprehensive set of questions provided to partners to obtain detailed information about their business, financial status, legal status, and other relevant factors. This enables an assessment of the suitability and risks associated with the JV partner.
• Mutual non-disclosure agreement (NDA): This agreement ensures that all confidential information shared during negotiations remains confidential and is not disclosed to third parties. It protects undisclosed information and intellectual property.
• Heads of terms (HoTs) or memorandum of understanding (MoU): These documents outline the initial agreement between the parties, including the main terms and conditions of the JV.
• Exclusivity deed: This agreement guarantees that the parties will not negotiate or enter into similar JV agreements with other parties for a certain period of time.
• Dispute resolution agreement: This is a prior agreement on how disputes will be resolved, including the jurisdiction and method (eg, arbitration, mediation).

After signing the joint venture contract and officially establishing the organisation, the JV must be registered in the state register of legal entities. This includes filing the JV’s charter and other foundation documents. Disclosure typically occurs at this stage, providing transparency regarding the JV’s operations and structure.

In Armenia, disclosure of a JV usually takes place at the post-agreement stage, particularly when the entity is registered in the state register of legal entities. However, earlier disclosure may be necessary if the JV involves publicly traded companies or if specific regulatory approvals are required.

A key requirement is to ensure compliance with relevant laws and regulations, maintain transparency, and protect de-identified information where appropriate.

Establishing a JV in Armenia may involve several sequential steps. First and foremost, it includes selecting the type of JV with an agreement on joint activities or by establishing a new entity. If the parties decide to establish a new entity, then the appropriate organisational legal form should be selected, such as a limited liability company (LLC), closed joint-stock company (CJSC), joint-stock company (JSC), etc. This choice typically depends on the nature of the business, the relationship between the parties, and the desired level of liability.

The next stage involves drafting the founding documents, which outline the primary terms and objectives of the JV’s activities, the contributions of each party, the management structure, profit-sharing arrangements, dispute resolution methods, etc.

Following this, the appropriate registration must be completed in the state register of legal entities. Additionally, the JV should also be registered with the tax authorities, etc.

Joint venture documents depend on the chosen type of JV. Where there is an agreement on joint activities, the main document is the agreement between the parties, and if a new entity is established, the agreement differs based on the organisational legal form. In Armenia, JVs are usually established as LLCs.

For an LLC, the primary document is the charter, which defines the purpose of the LLC, the amount of authorised capital, the share of each participant, and other information required by law.

In the case of a JSC, the main document is also the charter; however, it must additionally include information on the types of shares to be issued by the company, the rights of shareholders, the composition and competencies of the management bodies, and the procedures for their decision-making, among other details.

A corporate JV agreement should generally encompass the objectives and scope of operations, capital investment, corporate governance, profit and loss sharing, decision-making and voting procedures, information and reporting rights, dispute resolution procedures, applicable law, and jurisdiction, among other elements.

In the case of LLCs, the highest governing body is the general meeting of its participants. An executive body, which may be collegial and/or individual, is established within the LLC to exercise current management over its activities and is accountable to the general meeting of participants.

In the case of JSCs, the highest governing body is the general meeting of shareholders. A board of directors (supervisory board) is established in companies with more than 50 shareholders. The executive body of the company can be collegial (such as an administration or directorate) and/or individual (such as a director or general manager). This executive body manages the day-to-day activities of the company and is accountable to both the board of directors and the general meeting of shareholders.

The competence of the executive body includes the resolution of all issues defined by law or the company’s charter that do not fall under the jurisdiction of other management bodies.

It is important to note that where JV decisions are taken in violation of the law, any of the JV participants can defend their violated rights in court․

In RA, as in many other countries, JVs can be financed in different ways, usually through equity, debt or a combination of both (mixed). The choice depends on the JV’s organisational legal form, its goals, the financial position of the involved parties, etc.

At the same time, foreign investors have the right to make investments in the following ways:

• by establishing departments, branches and representative offices of enterprises wholly owned by foreign investments, as well as by foreign legal entities, or by acquiring existing enterprises as property;
• by establishing new enterprises with the participation of legal entities of Armenia, enterprises without legal entity status or the participation of citizens of Armenia, or acquiring a share in existing enterprises;
• by acquiring shares, bonds and other securities defined by the legislation of Armenia;
• by acquiring land-use rights and concessions for the use of natural resources in the territory of Armenia independently or with the participation of legal entities of Armenia or enterprises without legal entity status or the participation of citizens of Armenia.
• by acquiring other property rights; or
• using methods not prohibited by the legislation of Armenia, in particular, on the basis of contracts concluded with legal entities of Armenia or enterprises without legal entity status or the participation of citizens of Armenia.

As with any disagreement, negotiation is the preferred solution. The legislation of Armenia has seen considerable advancements in mediation, positioning it as a viable option for resolving deadlocks.

To prevent deadlock situations from occurring in the first place, it is essential to establish clear voting and decision-making mechanisms during the creation of the JV charter. Implementing these mechanisms at the outset will help avoid potential conflicts and ensure smooth decision-making processes.

Typically, joint ventures do not have specific documentation requirements. However, depending on the nature of the activity, additional documents may be necessary. These can include non-disclosure agreements (NDAs), intellectual property (IP) licences, asset transfer agreements, service contracts, employment agreements, consulting agreements, and various other legal contracts.

The establishment of a board of directors is required when the JV (JSC) has 50 or more participants. However, if the number is fewer than that, its formation is discretionary, and its powers can be transferred to the meeting.

Board members are elected by the meeting. Those JV participants who have at least 10% participation are automatically included in the board without the need for election.

During the performance of their duties, the members of the board of directors, the director (CEO) of the company, members of the department and the directorate, as well as the managing organisation and the manager must act based on the interests of the company, and fulfil their rights and perform their duties towards the company in good faith and reasonably, avoiding real and possible conflicts between personal interests and the company’s interests (fiduciary duty).

The powers of the board cannot be transferred to any other entity. However, if a company has less than 50 participants, its powers are exercised by the general meeting by force of law.

A person who has the opportunity to significantly influence the company’s decisions by virtue of participation in the authorised capital of the company or other circumstances, should not induce members of the board of directors, the company’s director (CEO), members of the management board and directorate of the company, or the managing organisation and the manager to make decisions that are contrary to the interests of the company or the legitimate interests of those shareholders who do not have a significant influence on the company’s decisions.

The members of the board of directors, the director (CEO) of the company, the members of the management board and the directorate, as well as the managing organisation, the manager and other persons defined by the law are liable to the company for the damage caused to the company as a result of their actions (inaction) in accordance with the Civil Code, the Law “On the Securities Market” and other laws.

The company or shareholder(s) of the company who (jointly) own 1% or more of the outstanding common (ordinary) shares of the company, have the right to file a lawsuit against the members of the board, the director (CEO) of the company, the management board and members of the directorate, demanding compensation for losses caused to the company.

When creating a JV or contractual partnership it is important to take into account intellectual property issues.

The participants of the JV are recommended, first of all, to clarify who owns the IP objects contributed by each of them, who is the owner of the newly created IP object, how the management and protection of the rights should be carried out and the scope of the rights, how undisclosed information and trade secrets will be protected, if necessary, the procedure for granting a licence to use the object of IP, including the scope of rights, duration, financial factors, etc.

Issues related to IP can be included both in JV agreements and in separate licence agreements.

The implementation and protection of the IP rights of foreign investors is ensured by the legislation of Armenia, including judicial and administrative procedures.

In order to understand whether intellectual property rights should be licensed or transferred to a JV, it is important to understand the strategic objectives of the parties, the nature of the IP object and the prospects for its use.

In the case of a long-term and comprehensive collaboration, full acquisition of ownership may be more strategically advantageous, as the JV will acquire not only the right to use the relevant object of IP, as in the case of a licence agreement, but also the entire scope of the property rights. 

It is noteworthy that the conclusion of such agreements does not result in the transfer or restriction of copyrights and other inalienable and non-transferable personal non-property rights.

At the same time, individual rights, such as a trade mark, are subject to registration with the RA Intellectual Property Office of the Ministry of Economy.

ESG regulations are vital for sustainable business and long-term success. JV participants and other organisations should actively monitor ESG activities, keep abreast of constantly updated regulations and bring their practices into compliance.

In Armenia, among other things, the Law “On Environmental Impact Assessment and Expert Examination” aims at sectoral regulation. The law requires environmental impact assessments for certain actions and projects to prevent and mitigate environmental damage, and establishes a framework for environmental protection, including regulation aimed at air and water quality, waste management and natural resource protection.

At the same time, labour legislation establishes basic rules and regulations for the protection of workers’ health and safety.

The Law “On Combating Money Laundering and Terrorism Financing” requires companies to take measures to prevent money laundering and terrorism financing, including proper customer due diligence and reporting of suspicious transactions.

In the case of agreement on joint activities, a JV can be terminated as a result of:

• recognition of one of the participants as incapacitated, with limited legal capacity or missing, if the JV or the further consent of its participants does not provide for the preservation of the agreement in the relationship of the other participants;
• recognition of the bankruptcy of any of the participants, with the exception specified in the first bullet point;
• the death of a participant or the liquidation or reorganisation of a legal entity, with the exception specified in the first bullet point;
• refusal of any of the participants from further participation in a JV for an indefinite period, except for the case specified in the first bullet point;
• termination at the request of one of the parties to the JV concluded for a definite period in the relationship between this party and the other participants, except for the case specified in the first bullet point;
• expiration of the term of the JV; or
• reallocation of the share of a creditor or participant at their request, except for the case specified in the first bullet point.

A legal entity, including a JV, may be liquidated:

• by decision of its founders (participants) or the body of the legal entity authorised to do so by the charter, including in connection with the expiry of the term for which the legal entity was established, or in connection with the achievement of the purpose for which it was established;
• where the court recognises the registration of a legal entity as invalid due to violations of the law committed during its establishment; or
• in cases stipulated by a court decision, if a legal entity carries out activities without a permit (licence) or prohibited by law, if it repeatedly or grossly violates the law or other legal acts, if a public association or a foundation periodically carries out activities contrary to its statutory objectives, as well as in other cases stipulated by law.

A legal entity will also be liquidated as a result of bankruptcy.

In the case of liquidation of a JV, it is necessary to secure the claims of the creditors of the JV, which is done in accordance with the procedure established by law. At this stage, it is also important to ensure that tax obligations to the state are fulfilled.

There is no difference between assets originally contributed to the JV by a participant as compared to assets originating from the JV itself, in so far as property transferred to ownership through investment is concerned. In other words, both this property and the property derived from the JV may pass to the participants in the part remaining after fulfilment of all obligations, in accordance with the size of the shares of the JV participants.

The situation is different, however, if a JV participant has invested property in the JV not for ownership, but for use. In this case, upon liquidation of the JV, the property is fully returned to the participant who transferred it.