Some issues related to redemption of fractional shares

Redemption of fractional shares: why this issue is of present interest?

The redemption of fractional shares by a joint-stock company is regulated by Kyrgyz law (the “Law”) in a rather fragmented way. A direct reference to it is contained only in Article 68 of the Joint-Stock Companies Act of the Kyrgyz Republic of March 27, 2003 No. 64 (the “Companies Act”).   

According to Article 68 of the Companies Act, by decision of the general meeting of shareholders, the company may consolidate its outstanding shares so that two or more shares of the company could be converted into one new share of the same class. In this case, the charter of the company should be amended to reflect the new number of authorized shares of the company.

If a consolidation results in fractional shares, these shares should be redeemed by the company at a market price determined in accordance with Article 71 of the Companies Act. Since Article 68 of the Companies Act is an imperative sentence, the redemption of fractional shares is mandatory for the company.

Magomed Saaduev is a partner, licensed attorney and head of the Corporate & Capital Markets, Energy, PPP practice groups. Magomed has over 15 years of experience advising foreign and Kyrgyz companies on a wide range of issues, including mergers and acquisitions, corporate structuring, energy, preparation and implementation of public-private partnership projects, environmental protection. Magomed actively represents clients in the courts of the Kyrgyz Republic at all levels on civil, commercial, administrative matters.

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