1) Is a merger control regulation in force?

Yes. The merger control regulation is set in Part 4 (Chapter 18) of the Entrepreneur Code of the republic of Kazakhstan dated 9 October 2015 (Entrepreneur Code).

2) Which authorities enforce the merger control regulation?

The Agency for Protection and Development of Competition (Competition authority) enforces Kazakhstan law and regulation in the field of protection and development of competition, including merger regulation contained therein. The Agency is an independent body directly subordinated to, and accountable for, the President of the Republic of Kazakhstan. 

Depending on the subject matter, some cases fall under the Competition authority’s jurisdiction, whereas the rest fall under general court jurisdictions.

3) Relevant regulations and guidelines with links:

4) Does general competition regulation apply to mergers or ancillary restrictions?

Kazakhstan competition regulation generally and primarily apply to mergers since the aim (of the regulation) is to prevent mergers resulting in monopoly position and/or restriction of competition. In that sense, ancillary restrictions shall be considered by the Competition authority as part of the merger filing process.

Having said that, depending on particular circumstances and the nature of any such ancillary restriction, it may not be excluded that it may become a subject of separate consideration. This potentially may be the case, when, for instance, the threshold or other qualification requirements are not met. In such case, it still may be assessed whether a particular ancillary restriction is capable of qualifying as a standalone and expressly prohibited action (i.e. non-compete clauses abuse of dominant position, etc.). 

5) May an authority order a split-up of a business irrespective of a merger?

Yes. Kazakhstan competition regulation envisages the right of the competition authority to take responsive measures by way of issue of mandatory instructions to ”stop violation of competition regulation”. Hence, the Competition authority may potentially order a split-up of a business irrespective of a merger. That said, it is not common in practice (at least not known from public sources).

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Mergers involving financial organizations

Approval (consent) from the financial market regulator (Agency for Regulation and Development of Financial Market of the Republic of Kazakhstan) is required for mergers (acquisitions of shares, rights) where financial organizations (such as bank, insurance company, etc.) are involved.

Mergers involving telecommunication operators

Approval from the competent authority in communication and information area as well as of the national security agency is required for acquisition (or obtaining by other means) of more than 10% of the voting shares (interest) in a company owning and/or managing or exploiting telecommunication lines.

Mergers involving subsoil users

Approval from the competent authority (i.e. Ministry of Energy of the Republic of Kazakhstan) in subsoil use area is required for acquisition of:

1. shares, interest or other forms of participation as well as securities confirming title or convertible into shares, of a legal entity holding a subsoil use contract on exploration and extraction or extraction of hydrocarbons, contract on extraction of uranium, license for exploration or extraction of solid minerals;
2. shares, interest or other forms of participation and securities confirming title or convertible into shares, interest or other forms of participation, of a legal entity or other organization having ability to directly and (or) indirectly determine decisions of a person holding a subsoil use right referred to in item (1) above.

Mergers involving strategic assets

Waiver of the state (of its pre-emptive right) and approval of the Government are required for acquisition of strategic assets such as main railway network, main pipelines, national electric grid, telecommunication objects, international airports and other similar objects as well as shares in companies owning such objects, as per the list approved by the Government.

The merger control regime in Kazakhstan applies equally to foreign and national investors.

Foreign investment control:

Special foreign investment rules requiring government approval of transactions apply with respect to a foreign person’s acquisition (or obtaining rights, directly or indirectly, in respect) of more than 49% of the voting shares (interest) in a company which is an operator of intercity and/or international telecommunication and owns land lines  (cable, fibre-optic or radio relay type of lines).

The approval is obtained upon an application submitted to the Ministry of Digital Development, Innovation and Aerospace Industry of the Republic of Kazakhstan. The decision is made by the Government based on conclusion of the Ministry of Digital Development, Innovation and Aerospace Industry, agreed with the National Security Committee, within 45 business days from the date of receipt of an application.

In addition, there are certain other restrictions that apply with respect to foreign investors including, inter alia, the following:

Direct/ indirect control, ownership, use and (or) disposal of shares (interest) of a financial organization (e. g. joint-stock investment funds, banks, insurance (reinsurance) companies, special financial companies, legal entities licensed to operate in the securities market) by offshore companies may be limited. For instance, an offshore company cannot obtain the status of:

• a bank holding or a major participant in a bank;
• an insurance holding or a major participant in an insurance (reinsurance) organization;
• a major participant in an investment portfolio manager.

Furthermore, it is prohibited for a foreign investor to:

• directly/ indirectly own, use, dispose and (or) manage more than 20% of shares (interest) of a legal entity that owns a mass media in Kazakhstan or carries out activities in this field;
• be a participant of a private security organization, or to have such an organization in trust management;
• be a participant of specialized training centers, where training of employees holding the positions of the head and security guard in a private security organization is carried out;
• own, use and (or) dispose as well as exercise effective control over the shares of an airline established in the form of a joint-stock company and (or) derivative securities issued in accordance with Kazakhstan or foreign law, the basic asset of which is the shares of an airline created in the form of a joint-stock company, in the amount exceeding 49% of total placed shares (minus redeemed shares) of the specified airline.

7) Are any parts of the territory exempted or covered by particular regulation?

Kazakhstan competition regulation covers the entire territory of the Republic of Kazakhstan. 

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided the established threshold is met.

9) Is there a general definition of transactions subject to merger control?

Merger control applies to the following transactions constituting economic concentrations (in this guide generally referred to as "mergers"):

1. reorganization of a market participant* (referred to as “business”) by way of merger or joining**;
2. acquisition by a person (group of persons) of voting shares (interest in the charter capital) of a business, when such person (group of persons) acquires the rights associated with more than 50% of said shares (interest in the charter capital), provided that prior to acquisition such person (group of persons) had no rights or only the rights associated with 50% or less of shares (interest in the charter capital) of a market participant;
3. acquisition by any means of title to fixed assets, provided that the balance value of such assets exceeds 10% of the balance value of fixed assets and intangible assets of the party transferring the assets;
4. acquisition by a business of rights (including based on a trust management agreement, agreement on joint activity or agency agreement) giving the right to issue mandatory instructions to another business regarding the conduct of its business activity, or the right to act as executive body of such business;
5. appointment of the same individuals to executive bodies, Board of Directors, supervisory boards or other managerial bodies in two or more businesses, when such individuals are entitled to determine strategy of such businesses.

The transactions referred to under items (1) – (3) require prior consent from the Competition authority, whereas transactions referred to under items (4) – (5) require post notification.

*Market participant means to include any legal entities (including branches and representative offices), individual entrepreneurs as well as non-commercial organizations engaged in business activities, regardless where they are established.

**Joining is defined in Kazakhstan law as a type of corporate restructuring whereby one legal entity joins another legal entity, and the latter becomes a legal successor of the former receiving its rights and obligations under a transfer act. A joined legal entity then ceases to exist.

10) Is "change of control" of a business required?

Yes, generally “change of control” is required to trigger merger control (see topic 9).

Note that corporate restructuring (reorganization) of two or more legal entities in the form of merger or joining (as defined in Kazakhstan law – see topic 9), where “change of control” does not necessarily take place, also constitutes a case of economic concentration that may be subject to merger control.

11) How is “control” defined?

The competition regulation in  Kazakhstan does not provide an express definition of “control”. Yet, from other provisions of competition regulation as well as other parts of Kazakhstan law, it is understood that “control” means the right to determine decisions made by businesses and/or give bindings to a business.

Such right may arise from the ownership right over shares (interest in the charter capital) of a business (e.g. controlling stake or blocking stake), or from another legal arrangement (e.g. trust management, appointment to a position giving decision making rights and veto rights). To this end, the “control” should be assessed and established in each particular case (from statutory/foundation documents, agreements, terms of duties, etc.).

12) Acquisition of a minority interest

Generally, acquisition of a minority interest is not sufficient to trigger a merger filing procedure.

However, if such acquisition gives to an acquirer the control over a business (e.g. blocking stake or veto right), it may be subject to merger control and trigger a merger filing procedure. Assessment and analysis of circumstances must be conducted in each particular case.

13) Joint ventures/joint control – which transactions constitute mergers?

Joint venture or joint control arrangement (or a transaction resulting in either of these) per se does not fall under merger control requirement.

However, joint control over a business gained by two or more persons constituting one group of persons may trigger merger control, if the established threshold is met (unless it falls under exemptions). For instance, this may include transactions resulting in change from joint control to sole control or inclusion of new co-owners.

Besides, joint control may be questioned, for instance, under the general prohibition of anti-competitive agreements.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

A transaction constituting an economic concentration (merger) is subject to prior consent or post notification (see topic 9 and 30), if the global aggregate balance value of assets or the global aggregate turnover for the last financial year of the businesses (including group of persons) subject to reorganization or, in case of acquisitions, of the acquirer (including group of persons) and the business(s) subject to acquisition, exceeds 10 million times of monthly calculated index (MCI) as of the date of respective filing.

Note that the MCI is established annually and usually remain effective for a year. As of 1 January 2022, 1 MCI equals KZT 3,063. 

NB: The global turnover including any turnover in Kazakhstan should be taken into account. As the thresholds may be triggered even without local assets or turnover, merger control may apply in many international transactions. However, also see topic 21 about the local nexus requirement in the form of either local assets etc. or restriction of competition in Kazakhstan. 

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

See turnover threshold above.

e) Other

N/A

15) Special thresholds for particular businesses

Special thresholds apply for mergers where a financial organization (e.g. bank, insurance company, broker, pension fund) is involved.

Note that Kazakhstan competition regulation does not expressly provide whether a financial organization must be a party to such transaction or a target (i.e. when shares of a financial organization constitute the subject matter of a transaction). The best reasonable interpretation would be that a financial organization must be either an acquirer or a target.

The special thresholds are applied instead of the turnover threshold (a) referred to in topic 14 above, unless a financial organization holds dominant or monopoly position.

The special thresholds vary depending on the type of financial organization. For instance, in case of a bank a special threshold comprises 2% and more of aggregate value of assets of Kazakhstan banks, or 2% and more of aggregate value of equity capital of Kazakhstan banks.

16) Rules on calculation and geographical allocation of turnover

The asset value and turnover referred to in topic 14 is calculated based on the following principles:

1. aggregate balance value of assets or turnover figures of the businesses subject to reorganization as well as their group of persons; or, in case of acquisitions, aggregate assets or turnover figures for the acquirer as well as its group of persons and business(es) subject to acquisition. Normally, such data is taken for the last financial year preceding year in which filing is made and from the balance sheet/annual report of the respective businesses;
2. figures (referred to above) should be taken in respect of the global assets/turnover (including any assets/turnover in Kazakhstan).

For the purposes of Kazakhstan competition regulation, a group of persons is defined to include the following:

1. a business and an individual/legal entity, if the latter has the right to dispose more than 50% of voting shares (interest) of such business;
2. a business and an individual/legal entity, if the latter acts as the sole executive body of the business;
3. a business and an individual/legal entity, if the latter has the right to give binding instructions to the business based on the statutory/foundation documents of such business or by virtue of an agreement made with such business;
4. legal entities having collective executive bodies and (or) Board of Directors (supervisory board, fund council) consisting of the same individuals for more than 50%;
5. a business and an individual/legal entity, if upon proposal of the latter the sole executive body of the business is appointed or elected;
6. a business and an individual/legal entity, if upon proposal of the latter more than 50% of collective executive body or Board of Directors (supervisory board) of the business is elected;
7. an individual, his (her) spouse, parents (adoptive parents), children (adopted children), brothers and sisters of the whole blood and half blood;
8. persons, each of which form one group with a person based on either grounds mentioned under items (1) – (7) above as well as other persons forming one group with either of such persons based on either ground mentioned under items (1) – (7) above;
9. individuals and/or legal entities forming one group of persons based on either ground mentioned under items (1) – (8) above and any business that such persons jointly control for more than 50%.

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?

No.

17) Special rules on calculation of turnover for particular businesses

In respect of special thresholds established for financial organizations (referred to in topic 15 above), the data against which certain threshold must be calculated (e.g. aggregate value of assets or aggregate value of equity capital of banks) should be taken from the financial market regulator (i.e. Agency for Regulation and Development of Financial Market of the Republic of Kazakhstan) available at its official website.

18) Series of transactions that must be treated as one transaction

No express criteria are set as to in which cases two or more transactions must be treated as one. The likely criteria would be whether the transactions are related by virtue of parties, subject matter or other material elements (may vary depending on a type of transaction).

19) Temporary change of control

As a general rule, any mergers that meet the threshold is subject to merger control even if there is only a temporary change of control. 

Having said that, exemption from merger control is envisaged in case of appointment of rehabilitation or bankruptcy manager, or temporary administrator over a legal entity (when special procedures apply to a legal entity, such as bankruptcy, rehabilitation or liquidation).

Also see topic 20.

20) Special industries, owners or types of transactions

The following industry specific exemptions apply for the financial sector:

1. acquisition of shares (interest) of a business by financial organizations, provided that such acquisition is aimed at subsequent resale of such shares (interest) and that the acquiring financial organization does not participate in voting;
2. acquisition (or obtaining) of main fixed assets and/or intangible assets of a business by financial organizations for the purpose of settlement of debt of a debtor, provided that such acquisition (or obtaining) is aimed at subsequent resale of such assets and the acquiring financial organization does not use such assets to gain profit.

21) Transactions involving only foreign businesses (foreign-to-foreign)

The thresholds in topic 14a relate to the global assets/turnover (including assets/turnover in Kazakhstan) of the relevant businesses. But foreign-to foreign transactions are exempt from merger control, unless one of conditions below is satisfied: 

1. the transaction involves directly or indirectly fixed assets and (or) intangible assets located on the territory of the Republic of Kazakhstan, or shares (interest in the charter capital) of businesses,  property or non-property rights of legal entities in the Republic of Kazakhstan; or
2. competition in the Republic of Kazakhstan is restricted.

In such case a foreign-to-foreign transaction would be subject to merger control under Kazakhstan competition regulation. For the sake of clarity, in that case the general merger control regulation (including other exemptions) would apply.

22) No overlap of activities of the parties

There is no such exemption.

23) Other exemptions from notification duty even if thresholds ARE met?

Group internal transactions 

Mergers effected within one group of persons are exempt from merger control.

Incorporation of new legal entities

Incorporation of a new legal entity (joint venture or subsidiary) is exempt from merger control. Transfer of assets as in-kind contribution to the charter capital of such new legal entity would likely be exempt based on this ground (each case is subject to a separate analysis).

Note, however, that this exemption does not apply to creation of a state enterprise and a legal entity with more than 50% ownership of the state and its affiliates (e.g. through quasi-state companies) – consent of the Competition authority would be required in such cases.

24) May a merging party file voluntarily even if the thresholds are not exceeded?

The Competition authority will only handle a merger notification if the threshold is exceeded.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No. However, if a transaction results in restriction of competition (e.g. in the form of anti-competitive agreement), the Competition authority may challenge it on a non-merger control related basis.

26) Referral within the jurisdiction

N/A

27) Referral from another jurisdiction

Despite there is no express regulation on referral of merger cases, there may be a potential for the Competition authority to consider a merger based on referral from a competition authority of another jurisdiction within the Eurasian Economic Union as the Eurasian Economic Union competition regulation envisages interaction (in broad terms) between competition authorities of the member-states as well as with regional bodies created under the Eurasian Commission to deal with competition matters. This creates a ground for potential referrals of mergers between competition authorities of the Eurasian Economic Union.

28) Referral to another jurisdiction

As mentioned in topic 27, there is no express regulation on referral of merger cases. Yet, there may be a potential for the Competition authority to make a referral to another jurisdiction within the Eurasian Economic Union.

29) May the merging parties request or oppose a referral decision?

There is no express regulation on that.

30) Stage of transaction when notification must be filed

Depending on which type of merger a transaction falls under, a prior consent of, or post notification to, the Competition authority would apply. Mergers that require prior consent of the Competition authority include transactions referred to under items (1) – (3) in topic 9, whereas mergers that require post notification of the Competition authority include transactions referred to under items (4) – (5) in topic 9.

Prior consent must be obtained before a transaction is completed.

Post notification is filed after a transaction is completed, within no later than 45 calendar days.

Note that:

• a business may apply to the Competition authority to obtain prior consent before committing a transaction referred to under items (4) – (5) in topic 9 above (i.e. that require post notification by the rule);
• in cases of acquisition through tender procedures (auctions, tenders, competitions) post notification may be submitted either before commencement of a tender procedure or after, but not later than 30 calendar days from the date of announcement of the winner.

31) Pre-notification consultations

No such procedure is established.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Kazakhstan competition regulation does not expressly regulate timing of notifications in case of public takeover bids and acquisitions on stock exchanges. The standard timing of notifications is applied (see topic 30).

33) Forms available for completing a notification

When prior consent is required, an application shall be submitted in the form established by the Competition authority (available in Russian and Kazakh versions), in electronic or in printed form (see Annex 2 to Rules for the provision of public services Consideration of applications for consent to economic concentration under topic 3).

When post notification is required, no established form of a notification is provided. Yet, as a matter of practice, the form for prior consent may be used.

34) Languages that may be applied in notifications and communication

Russian or Kazakh.

35) Documents that must be supplied with notification

Kazakhstan competition regulation provides for quite detailed lists of documents to be submitted with the merger filing depending on the type of merger. Thus, in each case the composition of the filing would vary.

Nevertheless, there are some general types of information and documents that must be part of any merger filing. These include the following:

1. Transaction documents (e.g. contract or draft contract, or other transaction document, regardless of whether the merger is brought about by an agreement between the parties to the merger, acquisition or competitive procedures such as auctions, tenders, competitions).
2. Group chart (prepared in the form of a tree-diagram) listing each legal entity, branch, representative office, individuals falling under one group of persons (as defined in topic 16) as well as businesses under the target’s direct and indirect control (where applicable).
3. Depending on the type of transaction, a detailed group overview, i.e. information on each legal entity, branch, representative office, individual falling under one group of persons as well as businesses under the target’s direct and indirect control (where applicable). Such information may include names, legal and actual address, form of shareholding, amount of charter capital and amount of shareholding, types of shares.
4. Detailed information on volume (revenues) of production and sales, export from and import into Kazakhstan of goods, works and services. Such information should be submitted for the last 2 years prior to the merger filing, the current year and the forecasted volume (revenues) for 3 years following the current year. Special attention and analysis should be given to description of similar and/or interchangeable goods, works and services. 
5. Corporate documents of businesses involved.

Other information and documents may be required depending on the particular case. These may include, for instance, corporate resolutions; information on the types of activities or geography of business operations; information on the rights (control) to be obtained as a result of the transaction; list of members of corporate bodies of market participants involved as well as management bodies to be appointed (in case of a transaction referred to under item (5) in topic 9); relevant balance sheets (where applicable) or other reports; etc.

36) Filing fees

N/A

37) Is implementation of the merger before approval prohibited?

Mergers that require prior consent from the Competition authority (namely, transactions referred to under items (1) – (3) in topic 9) cannot be completed  or implemented before obtaining of such approval due to express restriction provided in Kazakhstan competition regulation.

Mergers that require post notification to the Competition authority (namely, transactions referred to under items (4) – (5) in topic 9) may be completed subject to subsequent notification. Such transactions may also be implemented, but it is advisable to await for lapse of the notification review period by the Competition authority (i.e. 30 calendar days) to proceed with implementation.

When considering a post notification, the Competition authority may decide to prohibit a transaction, in which case the transaction must be reversed within 30 calendar days. 

38) May the parties get permission to implement before approval?

No such procedure is established.

39) Due diligence and other preparatory steps

Kazakhstan competition regulation does not expressly regulate whether or how due diligence and other preparatory steps may be carried out before approval of the merger. However, as a matter of practice, due diligence may be conducted and other preparatory steps taken before approval for the merger is obtained.

Having said that, regard should be given to the type (nature) of preparatory steps. For instance, preparatory steps introducing (temporary) change of control, e.g. appointment of an acquirer’s representative to managing bodies of the target, etc., should be avoided as they may create a risk of constituting a merger (e.g. see item (5) in topic 9) and require a separate filing.

40) Veto rights before closing and "Ordinary course of business" clauses

Depending on circumstances to be assessed in each particular case, creating veto rights or introducing “ordinary course of business” clauses taking effect before prior consent is obtained or the post notification review time has lapsed, may give rise to a risk of a gun jumping violation.

41) Implementation outside the jurisdiction before approval – "Carve out"

Kazakhstan competition regulation does not provide for a possibility to “carve out” the part of a transaction that relates to Kazakhstan until approval is obtained (or post notification filing is made). 

42) Consequences of implementing without approval/permission

Consequences of committing/implementing a transaction subject to merger control before consent has been obtained or post notification filed may include the following:

1. Transaction may be considered void. 
2. Imposition of an administrative fine upon persons that committed/implemented the merger without consent (notification) of the Competition authority in the amount up to 1,600 MCI (as of 1 January 2022, 1 MCI equals to KZT 3,063).

Note that even if post notification is filed, a transaction may be reversed based on decision of the Competition authority upon consideration of a post notification (in case the Competition authority decides that such transaction results or may result in restriction of competition).

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

When considering the file on substantive grounds, the Competition authority conducts analysis of, inter alia, the state of competition in commodity markets, if persons (group of persons) involved in the transaction under consideration carry out activities with similar or interchangeable goods, works and/or services and/or there are signs of restriction of competition. Such analysis include, in particular:

• determining the criteria of interchangeable goods, works and services;
• determining the borders of the relevant commodity market;
• determining the time period for analysis of the relevant commodity market;
• determining the participants of relevant commodity market;
• calculation of volume of the relevant commodity market and market shares of the merging parties and competitors. 

Other factors may be taken into consideration, depending on particular case.

45) May any non-competition issues be considered?

No.

46) Special tests or criteria applicable for joint ventures

No.

47) Decisions and remedies/commitments available

The Competition authority may decide on approval, conditional approval or restriction of a merger. As a matter of practice, the Competition authority often issues a decision approving a merger subject to general conditions such as avoidance of restriction of competition.

The Competition authority may also decide to reverse a transaction committed or implemented, when considering a post notification file (see topic 37).

In addition, the Competition authority, upon its own initiative or an application of an interested person, may revise its decision on consent or prohibition of merger in the following cases:

1. if, within 3 years after the issuance of the decision, circumstances become known, on the basis of which the issuance of this decision should have been refused;
2. if the decision was made on the basis of inaccurate information provided by the person who submitted a merger file, which led to the adoption of an illegal decision;
3. non-fulfillment by the participants of the merger of the requirements and obligations contained in the decision of Competition authority.

Based on the results of the decision revision, the Competition authority may: 

1. leave the decision without amendment;
2. amend the decision;
3. cancel the decision; or
4. issue a new decision.

48) How and when will details about the merger be published?

Publication of decisions on mergers is not a standard procedure. The Competition may (but not obliged to) publish a note on certain files considered. The content of such note would vary depending on such aspects as importance for a certain industry, effect on economy and exposure of the parties involved.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties may only inquire the Competition authority about the status of the case. They are not granted access to the file.

Third parties:

Third parties are not granted access to the file.

50) Who can appeal and what may be appealed?

The applying party may either file a new merger file to the Competition authority, whereby it can effectively appeal the decision on previous file, or alternatively, it may appeal to the general courts.  The former option may be considered in case of rejection, but regard should be given to the grounds of any such rejection and appropriate rectification should be made when submitting a new file.