Kazakhstani Law on Ownership Right Further Protection

11 марта 2016, 17:31

GRATA Finance & Securities Group has released a legal alert covering important legal developments in the Kazakhstani legislation that occurred in 2015.

Most of the changes were introduced in the legislation pursuant to adoption in May 2015 of a new policy document – the Plan of the Nation: 100 Steps for Implementation of 5 Institutional Reforms – governing the development of Kazakhstan in the short-term perspective.

The legal review covers the following areas:

1. Law on Corruption Countermeasures
2. New Civil Procedure Code
3. Law on Astana International Financial Center
4. Law on Judicial System
5. Law on Supreme Judicial Council
6. Resolution on Application of Bankruptcy and Rehabilitation Legislation by the Courts
7. New Commercial Code
8. PPP Law
9. Law on WTO Accession
10. Law on Special Defensive, Antidumping and Compensational Measures
11. Law on Ownership Right Further Protection
12. Law on Amendments to Electric Power Industry
13. Law on Amendments Related to Non-performing Loans,  Financial Services and Financial Organisations
14. Law on Agricultural Cooperatives
15. Privatisation Decree
16. Rules of Electronic Trades
17. New Procurement Law

Each of them is addressed in a separate release on our website, whereas the today’s release deals with the changes in the Law on Ownership Right Further Protection.   


The Law on Ownership Right Further Protection (Law of the Republic of Kazakhstan dated 17 July 2015 no. 333-V "On Introduction of Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on Issues of Ownership Right Further Protection, Guaranteeing of Contractual Obligations Protection and Increase of Liability for the Relevant Breach") came into effect on 1 August 2015.

The main purpose of the Law on Ownership Right Further Protection is to strengthen relevant provisions of legislation related to protection of ownership rights and guarantee of protection of contractual obligations.

Please note the following major provisions of the Law on Ownership Right Further Protection:

Clarification of “Expressly Insignificant” Criteria in Pledge Enforcement

Kazakh legislation provides that the court may refuse to levy execution on the pledged property in case of the breach of the secured obligation committed by the debtor is “extremely insignificant and the amount of the creditor’s claims is, accordingly, expressly inadequate to the amount to the value of the pledged property”. The law, however, did not previously provide any guidance as to what shall be considered as “extremely insignificant” and “expressly inadequate”. The court was able, accordingly, determine these criteria itself and refuse to levy execution on the pledged property at its sole discretion. 

To address this issue, the Law on Ownership Right Further Protection clarified that the breach shall be considered “extremely insignificant” and the creditor’s claims shall be considered as “expressly inadequate” to the value of the pledged property if the following criteria are simultaneously met: (i) the amount of non-performed obligation (excluding fines) is less than 10% of the value of the pledged property determined by the parties in the pledge agreement; and (ii) the secured obligation is non-performed for the period of not less than 3 months.

This amendment, however, does not help in situations where non-financial obligations of the borrower are breached. Literal interpretation of the amendment suggests that, only non-payment for less than 10% of the value of the pledged property for the period of 3 months can be considered as “extremely inadequate”. Breach of any other non-financial obligations (e.g. non-provision of financial statements or absence of notification on change of address of the borrower) cannot now be considered by the court as “expressly insignificant” and the court will not be able to refuse levy execution on the pledged property in case of such breaches to the detriment of the borrowers and pledgers.

Introduction of Summary of Terms Requirement for Individual Borrowers

The Kazakh banking legislation contains a number of mandatory provisions of the bank loan agreement, without inclusion of which such bank loan agreement will be held invalid.

The Law on Ownership Right Further Protection introduced the summary of terms requirement in relation to the bank loan agreements with individual borrowers (except the loans issued for the period of less than 1 month, loans issued in the framework of credit line through the payment card and overdraft loans). The bank and individual borrower now will have to sign, in addition to bank loan agreement, the summary of terms document that shall contain the main terms of the bank loan including the amount, currency and tenor of the loan, number of payments under the loan, type of interest rate (fixed or floating), final amount of interests, fines under the loan etc.


Comments and recommendations can be sent to schikanayev@gratanet.com. We will make sure we fix any problems and continue to offer you the best service we can.

Shaimerden Chikanayev, Partner

Email: schikanayev@gratanet.com 

Mob: 7701 7878020

Marina Kahiani, Partner

Email: mkahiani@gratanet.com 

Mob: 7701 7251269

This Legal Alert is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This Legal Alert should not be acted upon in any specific situation without appropriate legal advice and it may include links to websites other than the GRATA website. If you no longer wish to receive legal alerts from the GRATA Finance & Securities Group, please send an email to schikanayev@gratanet.com

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