Corporate Governance in Armenia
Overview of Corporate Governance Practices in Armenia
The foundations of corporate governance framework in Armenia lie in civil legislation, which includes the RA Civil Code and other laws containing civil law norms, such as those on:
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Joint Stock Companies,
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Limited Liability Companies,
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Securities Market,
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Anti-Money Laundering and Counter-Terrorism,
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Accounting,
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Auditing.
Additionally, sector-specific laws, such as the Laws on Banks and Banking and Insurance and Insurance Activities, also include corporate governance regulations for organizations within these sectors.
Since 2019, significant changes have been introduced to the regulatory framework governing corporate governance in Armenia. These changes aim to promote transparency and accountability in organizations, protect the rights of minority shareholders, and, in general, guide organizations toward good governance practices. Specifically:
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In organizations with the status of an open joint-stock company, at least one-third of the board should consist of independent directors. The law also specifies the criteria for determining a director's independence. Additionally, such companies are required to establish an audit committee under the board, and the roles of board chair and CEO (or general director) cannot be held by the same person.
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The procedure for approving transactions with potential conflicts of interest has been revised to enhance transparency regarding the essential terms of such transactions, ensure the independence of decision-makers, as well as eliminate actual and potential conflicts of interest.
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Public Interest Entities are required to undergo external audits conducted by independent auditing firms to ensure the credibility and accuracy of their reports.
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Starting from January 1, 2023, all legal entities operating in Armenia are required to submit a declaration/statement on their ultimate beneficial owners. This aims to reveal the individuals who actually own or control the company.
The role of corporate governance is emphasized in key strategic documents related to the development of transparent and fair market relations in Armenia, including:
Comprehensive and Enhanced Partnership Agreement with the EU, which requires that the future developments of Armenia's corporate governance policies align with international standards, particularly the OECD Principles of Corporate Governance.
Anti-Corruption Strategy for 2023-2026, which is built on a pillar that combating corruption requires active involvement from the private sector and highlights the importance of cultivating a corporate governance culture to implement anti-corruption measures within the private sector.
Civil society institutions play a crucial role in shaping Armenia’s corporate governance landscape, particularly the Corporate Governance Center, which promotes the enhancement of best practices in the country. The Center leads several initiatives, including:
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Business Integrity Club. It is Armenia's first collective anti-corruption initiative within the business community. The Club fosters collective action among Armenian businesses on corporate governance issues. It aims to enhance transparency and accountability in Armenia's business landscape and increase trust in the country’s economic system, thereby supporting the attraction of long-term, patient, and constructive investments and promoting economic development.
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Armenian Women on the Board of Directors Network. Its mission is to promote good governance in Armenia by fostering a culture of diversity and inclusion in the corporate governance framework. The Network aims to continuously develop the capacity of Armenian women to serve on boards and executive management teams, create a pool of talented Armenian women who are interested, prepared, and capable of taking on responsibilities as board or executive team members, and facilitate networking.
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Source:
Narine Melikyan
Director
The Corporate Governance Centre
