Pursuant to Clause 5 of the Work Plan for interaction between the Mazhilis of the Parliament of the Republic of Kazakhstan (8th convocation) and the Center for Private Law, and in cooperation with the faction of the Nationwide Social Democratic Party (OSDP), a draft law titled “On Introducing Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Issues of Conditional Land Shares” has been developed.
The draft law proposes establishing a procedure for pledging land plots formed from conditional land shares, whereby such plots may only be pledged with the consent of all participants. This requirement prevents any pledging without the approval of the general meeting of participants.
It also proposes mandatory revaluation of charter capital every three years to promptly adjust the value of assets, including land plots. Furthermore, the draft law stipulates specific obligations for the body or individuals responsible for convening a general meeting of participants in a Limited Liability Partnership (LLP). Notably, if a decision is made to include in the agenda a participant’s application for the allocation in kind of a land plot (the right to which was contributed to the LLP’s charter capital), the responsible body or individuals must ensure that the general meeting is convened no later than one month from the date of the request.
What Are Conditional Land Shares?
During the privatization of state agricultural enterprises and the reorganization of collective farms, rural residents and farmers acquired the right to a certain “conditional” area of land allocated from the overall land holdings of former collective and state farms.
The concept of a land share was first mentioned in the Presidential Decree of the Republic of Kazakhstan “On Land” dated December 22, 1995. It was defined as a quantitatively determined share of participation, together with other individuals, in the rights and obligations associated with a land plot, which could be allocated under the conditions and in the manner established by the Decree and other legislation (subparagraph 3 of Article 1 of the Decree).
Holders of conditional land shares had the right to:
1. Transfer the land share right as a contribution to the charter fund of business partnerships or as a share in production cooperatives formed on the lands of reorganized entities;
2. Receive a land plot in accordance with the land share for the purpose of setting up a peasant (farmer) farm or engaging in other entrepreneurial activities related to agricultural production;
3. Donate or sell the right to the land share;
4. Lease out or pledge the right to a conditional land share.
Subsequently, the concept of a “conditional land share” was carried over into the Law “On Land” dated January 24, 2001, which clarified that a citizen’s right to a conditional land share is confirmed by a certificate of the right to a conditional land share. Unlike the Presidential Decree “On Land,” however, this Law did not explicitly grant holders of conditional land shares the right to lease or pledge them.
With the adoption of the Land Code of the Republic of Kazakhstan (hereinafter, the Code) on June 20, 2003, holders of conditional land shares were required, by January 1, 2005, to exercise this right through one of the following actions, in the manner and under the conditions established by the Code:
1. Acquire private ownership of the land plot;
2. Obtain temporary land use rights for independently operating a peasant (farmer) farm or conducting commercial agricultural production;
3. Contribute it as a share in the charter capital of a business partnership, in payment for shares of a joint-stock company, or as a contribution to a production cooperative (Paragraph 4 of Article 170 of the Code in the version dated June 20, 2003).
It should be noted that if a holder of a conditional land share failed to exercise the right to receive a land plot by January 1, 2005, they would forfeit the conditional land share, and that land plot would be transferred to the special land fund of the district.
Thus, under the transitional provision of the Code, since 2005, former holders of conditional land shares have become either owners (land users) of land plots or participants in business entities, depending on the method they chose to exercise their rights to conditional land shares.
As a result, the institution of land shares ceased to exist in 2005, and by Law of the Republic of Kazakhstan No. 464-IV dated July 20, 2011, the transitional provision of the Code set forth in Article 170 was repealed.
What the Draft Law Will Achieve
• Strengthening the protection of the rights of conditional land share holders.
• Introducing requirements for revaluating the charter capital of LLPs, which in turn will help promptly adjust the value of assets, including land plots.
• Establishing the obligation of the body or individuals convening the general meeting of an LLP to ensure that, if a request is submitted by a participant for the in-kind allocation of a land plot contributed to the LLP’s charter capital, a general meeting is convened within one month of the request.
