A major reform of the system for state registration of businesses

According to the Government resolution dated February 9, 2017 №66 “On measures to implement the Resolution of the President of the Republic of Uzbekistan dated October 28, 2016 No. PP-2646, aimed at improving the system of state registration of business entities, a conceptually new system of state registration of businesses, both legal entities and individual entrepreneurs is established.

Joint project of UNDP and Chamber of Commerce and Industry of Uzbekistan  “Business Forum of Uzbekistan”, which took part in drafting of this Government resolution is sharing the details on what will change when the new mechanism of new business registration is implemented.

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According to new regulation, which sets a detailed framework for new business registration mechanism, 62 regulatory documents related to new business registration are amended and  repealed starting April 1, 2017, when new system is rolled out.

Starting February 2017, "single window" centers will become authorized institutions for registration of all business entities, other than banks and credit bureaus.

Functions of the State Statistics Committee on firm name reservation, of the State Tax Committee on registering individual entrepreneurs importing goods intended for sale, as well as of the Ministry of Justice for registering of companies with foreign investments, insurance companies and insurance brokers, audit firms, tax consulting organizations, exchanges, pawnshops, investment funds, markets and other business entities transferred to 194 “single window” centers.

Starting April 2017, business registration procedure will be carried out in a real-time mode within 30 minutes of submission of the electronic application, with the exception of two cases – when raising the statutory capital of the entity and when registering transfer of a share of founders, registration of which will be implemented within 16 hours.

An application for state registration and re-registration of the business can be submitted either through the automated registration system functioning 24/7 and integrated with my.gov.uz, or if applicant choses to do it in person – submit an application to the “single window” center of the district, where the business is or will be registered. “Single window” centers are available in all districts and cities of the country and are open from Monday to Friday from 9:00 to 18:00 without a break for lunch.

Number of documents required for registering a legal entity (business) reduced from six to two, i.e. only application form and company’s constituent documents are required (except for merger, spin-off and splitting the company, where applicants are required to submit scans of transfer of assets or split balance sheet). To register as an individual entrepreneur, an applicant needs to submit only application form, instead of set of seven documents, which was the case before.

It is important to note that the registration procedure via the single portal - my.gov.uz, through an automated system has several advantages compared to registering in person.

Firstly, there is no need to submit to registration authority of originals of documents in paper form, so applicants do not  have to visit the registering authority in person, as well as a cash office of a bank to pay the state fee for registration, which also reduces the indirect costs of the applicants;

secondly, the state fee schedule for registration, including business re-registration when applied via the Internet, is set at 50% of the state fee, which is due when registering via “single window” centers in person;

Third, an applicant can complete the online registration process, or pause and continue at any time convenient for the applicant.

The convenient feature of the system is that most fields of the online application form are filled by selecting field values from the drop-down menu, including automatic check for availability of the selected company name, eliminating inaccuracies, standardizing the values of application fields, and simplifying their processing. The use electronic digital signature is not required when submitting online applications, provided that applicant is a registered user of the single interactive online services portal (my.gov.uz). Applicants can either use template forms of constituent documents generated automatically by the system, based on the application data, or attach scans of such documents prepared by themselves.

For the first time it is possible to pay state registration fees through electronic payment systems operating in the country and commission of payment system is limited to 1% of the state fee rate.

Individual entrepreneurs will be able to submit online applications for temporary suspension or resumption of their activities via the automated system, making it possible to mitigate risks of incurring additional taxes due to not informing tax authorities on such events on time.

Business entities can inform all relevant authorities with a single online notice, on change of their addresses (address of operations, mailing address), eliminating the need to send separate notices to each authority.

Under reorganization or liquidation it is no longer required for businesses to publish a notice on such event in the printed media, provided that such notice for creditors is posted on the Single portal (my.gov.uz), reducing the compliance cost for businesses.

 An exhaustive list of grounds for refusal of registration of business is approved. The system performs automatic check of the information in the application with information in relevant databases.

The practice of issue of the paper-based certificate of registration of the legal entity of individual entrepreneurs on special forms, or their duplicates is abolished, leading to annual cost savings for registering authorities. Entrepreneurs can print out necessary copies of registration certificates and constituent documents by themselves, whenever they need those.

The mechanism for obtaining access to registration certificate and constituent documents in the electronic form from the repository of electronic documents on the Single portal for all public authorities (with permission from the business entities) through the automated system is established. This allows relevant authorities when reviewing applications from business entities for permits or licenses, opening bank accounts and provision of other public services to obtain all necessary information by themselves, not requesting copies of such documents from applicants.

All electronic documents related to business registration and hyperlinks to scanned documents stored in the automated system will be available in the repository of electronic documents, ensuring information security and convenient access to them.

Business entities are able to inquire the system on requests from public authorities to access documents and data related to them, except for the case when such information is classified in accordance with the legislation.

Improving transparency and accessibility of up to date information handled by Unified state register of business entities, which is a centralized electronic database, is important aspect of the reform. The document establishes minimum required list of data to be accessible on the Single portal and updated on an hourly basis. Thus, open data on legal entities should contain the following fields: name, Taxpayer ID, status (in operation, under liquidation, etc.), legal form, type of ownership, amount of the statutory fund, information on issued securities, address, etc., and for the individual entrepreneurs – name, surname, taxpayer ID, activity types, gender, etc.

In order to avoid discrepancy of registration information, rules of determining their precedence are approved. Thus, if there is a discrepancy in information in constituent documents, documents held by registering entities prevail. When there is discrepancy between information in constituent documents and records in the Unified state register of business entities, the latter ones prevail. When there is discrepancy between records in the Unified state register of business entities and other registers maintained before April 1, 2017, records in the Unified state register of business entities prevail.

A separate document – a regulation on interoperability, data exchange and cross-checking of data between relevant authorities is approved, making it convenient both for business entities and staff of relevant authorities and eliminating the need to understand internal procedures that are irrelevant for entrepreneurs.

Implementation of the complex measures on reforming the business registration system, approved with the Resolution of the President, sufficiently improves accessibility, transparency and quality of the “business registration” public service.

It should be noted that improving the ranking of Uzbekistan in the World Bank’s “Doing Business” report is one of the targets, set in the Action Strategy 2017-2021, approved with the Presidential Decree dated February 7, 2017.

Experts of the Business forum of Uzbekistan – phase III” project are expecting that new mechanism of state registration of business entities will improve the ranking of Uzbekistan in the upcoming report of the World Bank “Doing Business 2018” under the “Starting a business” indicator.

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According to the methodology of the “Doing Business” report, under the new mechanisms, state registration of a new company will take two steps (first – online registration, with fully automated registration procedures, second – opening of a bank account, with reduced requirement for submission of paper documents). Complete procedure for opening a new company, including all formalities, related to starting a business activity (which includes reserving company name, paying the state registration fee, obtaining registration certificate and registered constituent documents, making a company stamp, registering with the tax authorities, statistics authorities and People’s bank, and opening a company’s bank account), will take less than one day.

As of January 1, 2017, there are 285.3 thousand registered legal entities (excluding farms and small hold farms), 268.4 thousand or 94.1% of them are currently in operation.

During the 2016, 32.7 thousand new legal entities were registered in Uzbekistan, and 31.7 thousand of them fall within the small business category.

Majority of new registered businesses and legal entities are in Tashkent (23.7%), Tashkent region (9.1%), Ferghana region (8.0%) and Samarkand regions (7.3%).