IFLR 1000
The Guide to the World's Leading Financial Law Firms


Printer-friendly version

Investment regulations

David Sargsyan

In recent years Armenia has taken remarkable steps towards the establishment of a favourable and appealing investment environment: it has created a stable legal framework for foreign investors and developed important instruments such as securities services and M&A. The financial innovation of these instruments and the implementation of a flexible regulatory structure assure an increase of foreign capital in the various Armenian economic structures.

Legal framework and privileges

The Republic of Armenia (RA) Law on Foreign Investments has established a general legal framework for the regulation of foreign investment and has provided certain privileges for investors. It defines a simple and adequate procedure for starting a business in Armenia. Depending on the investment plan chosen by the foreign investor, investment can be executed through, among other things, authorised capital, purchased property, assets and loans.

More particularly, the Armenian legislation on foreign investments ensures compensation for any damage caused by illegal actions of the government and provides guarantees against nationalisation, confiscation and undesirable legislative amendments. Therefore, according to the so-called grandfathering clause of the Law, in the event that there are amendments to foreign-investment legislation, the legislation that was effective at the moment of investment will be applied, upon the request of a foreign investor, for a five-year period from that moment.

New securities market law

The New RA Law on the Securities Market (enacted on February 29 2008) has sufficiently enhanced the legal framework for regulation of securities investments and has made it more flexible by defining a wide range of investment services. The range of services includes operations with securities such as execution of transactions, legal consulting on investments in securities, management of securities packages and the guaranteed or non-guaranteed allocation of securities.

Investment services are provided by investment companies that will be incorporated under Armenian law. For the provision of the investment services, the company will obtain a special licence, issued by the RA Central Bank. New legislation also states the possibility of the provision of investment services by the establishment of foreign companies' branches and representative offices on Armenian territory.

Mergers and acquisitions

M&A is considered to be one the most implemented and efficient forms of foreign investment. It is regulated under Armenian corporate law and can take place in two possible forms: (i) simple merger, where two or more companies (local and foreign) cease their existence by merging and establishing a new company; and (ii) acquisition or merger by takeover, where one company (foreign) acquires one or more target companies and the latter cease to exist.

During the simple merger the rights and responsibilities of merging companies are transferred to a new company. In the case of merger by takeover the rights and responsibilities of the target company are transferred to an existing company that will assume the liabilities of the posterior companies against the creditors.

M&A is executed on the basis of a merger (or acquisition) agreement that will be concluded between the companies involved in the merger (or acquisition) and will be signed by the company's executive body and verified by the general meeting of shareholders.

See also

Central and Eastern Europe

Legislation guide

Investment regulations

Law firm contact details