Articles of Incorporation of the Hungarian - Kyrgyz Development Fund
ARTICLES OF INCORPORATION
of the Hungarian - Kyrgyz Development Fund
The Hungarian - Kyrgyz Development Fund (the “Fund”) is an entity organized and existing under the Agreement between the Government of the Kyrgyz Republic and the Government of Hungary on the Hungarian-Kyrgyz Development Fund dated April 8, 2021 (the “Agreement”), and these Articles of Incorporation.
Section I. Founders, status, goal, objectives, roles of the Fund
Article 1. Founders of the Fund
The founders of the Fund are the Government of the Kyrgyz Republic and the Government of Hungary (hereinafter “Party”, together “Parties”).
Article 2. Name, location, language of the Fund
- 2.1. Full name of the Fund:
- in Hungarian: Magyar - Kirgiz Fejlesztesi Alap;
- in Kyrgyz: Венгрия-Кыргыз өнугуу Фонду;
- in Russian: - Венгерско-Кыргызский Фонд развития;
- in English: - Hungarian-Kyrgyz Development Fund.
- 2.2. Short name of the Fund:
- in Hungarian: MKFA
- in Kyrgyz: ВКӨФ;
- in Russian: ВКФР;
- in English: HKDF.
2.3. Location of the Fund: Bishkek, Kyrgyz Republic.
2.4. The working and official language of the Fund shall be Russian.
Article 3. Status of the Fund
3.1. The Fund is an international organization subject to the international law which has international legal capacity and the right to enter into international agreements within its remit.
3.2. The Fund shall have the rights of body corporate, specifically:
- a) consummate any transactions not contradictory to the Articles of Incorporation of the Fund;
- b) lease, purchase, and alienate movable and immovable property or otherwise dispose of such property in order to meet its business needs;
- c) open bank accounts and consummate transactions involving funds.
3.3 The Fund shall not be liable for any obligations of the Parties, and the Parties, shall not be liable for any obligations of the Fund.
3.4. The obligations of the Parties not related to the Fund’s operations may not be performed out of the Fund’s monetary resources. The Fund’s monetary resources may not be alienated by enforcement at the requests of third parties towards performance of obligations of the Parties not related to the Fund’s operations.
Article 4. Goals and objectives of the Fund
4.1. The Fund is organized for the purposes of contributing to economic cooperation between the Kyrgyz Republic and Hungary, the upgrade and development of the economy of the Kyrgyz Republic, the leveraging of opportunities.
4.2. In order to achieve the aforesaid goals, the Fund shall:
- a) extend loans for self-liquidating projects in the high-priority economic sectors of the Kyrgyz Republic;
- b) participate in the capital of business entities incorporated and existing in the Kyrgyz Republic;
- c) assist any business entities incorporated and existing in the Kyrgyz Republic in obtaining mid- and long-term loans upon acceptable financial terms, specifically, at rates below average market rates with comparable maturity of such loans;
- d) participate in the development of financial sector of the economy of the Kyrgyz Republic, specifically, in assisting the entities obtaining monetary resources from the Fund in implementing new types of financial services and products;
- e) assist its partners and clients in using state-of-the-art corporate governance methods;
- f) accomplish any other objectives jointly formulated by the Parties.
Article 5. Roles of the Fund
In order to achieve its business goals and accomplish the objectives formulated, the Fund shall perform the following roles:
- a) select and assess any projects proposed for financing in accordance with the rules and procedures of the Fund;
- b) finance projects (specifically, by participating in the capital of bodies corporate);
- c) decide on the conditions for selecting and financing any lending institutions for the implementation of projects;
- d) monitor the implementation of any projects financed by or with the participation of the Fund;
- e) raise loans and place bonded loans and other debt securities in the national and international financial markets in accordance with the policy of the Fund;
- f) place temporarily surplus funds in accordance with the policy of the Fund;
- g) interact with the international organizations, corporations, and institutions for development for the purposes of implementing projects in the Kyrgyz Republic;
- h) offer financial and investment consulting services;
- i) perform any other activity which is not contradictory to the goals of the Fund set forth in the Agreement and these Articles of Incorporation.
Section II. Monetary resources of the Fund
Article 6. Monetary resources of the Fund
6.1. The Monetary resources of the Fund shall be constituted by:
- a) contributions to the authorized capital of the Fund;
- b) proceeds from the placement/investment of temporarily surplus funds of the Fund;
- c) grant proceeds;
- d) proceeds from the provision of monetary resources of the Fund on a repayable basis and investment (participation in capital);
- e) donations to the Fund;
- f) other injections to the Fund.
6.2. Contribution to the authorized capital of the Fund shall be sixteen million U.S. dollars (USD 16,000,000).
6.3. Contribution to the authorized capital shall be made by the Hungarian Party as follows:
- a sum in U.S. dollars and/or Euros equivalent to sixteen million U.S. dollars (USD 16,000,000) shall be contributed in favor of the Fund to the special account with the National Bank of the Kyrgyz Republic on to September 30, 2021;
6.4. Apart from the sum specified in paragraph 2 of this Article, the Fund shall be entitled to raise borrowings from other sources upon any terms and conditions similar to the financial terms of loans extended by the International Development Association, a part of the World Bank Group.
6.5. The profit/loss of the Fund shall be determined for the full fiscal year in accordance with the International Financial Reporting Standards.
6.6. The profit of the Fund shall be directed toward the statutory goals of the Fund.
6.7. The Fund shall establish special provisions in order to cover in a timely manner any possible losses associated with the performance of the Fund’s project activities. The procedure for forming the same and the amount shall be determined by the management bodies in accordance with their remit.
Section III. Management of the Fund's activity
Article 7. Competent bodies
7.1. In order to ensure interaction between the Parties, as well as between the Parties and the management bodies of the Fund, the Parties shall determine competent bodies by giving notice to each other via diplomatic channels.
7.2. Any issues related to the activity of the Fund which cannot be resolved within the remit of its competent management bodies laid down by these Articles of Incorporation shall be submitted for consideration by the Parties through such competent bodies.
Article 8. Management of the Fund
8.1. The business and affairs of the Fund shall be managed by the Board of the Fund and the Management Board of the Fund.
8.2. The Board of the Fund shall be the supreme management body of the Fund entrusted with the strategic management of its business and affairs. The Board of the Fund shall be composed of 3 representatives of the Kyrgyz Side and 2 representatives of the Hungarian Side. The Chairperson of the Board of the Fund shall be appointed by the Government of the Kyrgyz Republic. The Chairperson of the Board of the Fund shall appoint one member of the Board of the Fund on the Hungarian Side as his/her Deputy.
8.3. The Board of the Fund shall hold its meetings on an as needed basis, yet at least three time per year. Any extraordinary meetings of the Board of the Fund shall be convened on the initiative of the Board of the Fund, the Chairperson of the Board of the Fund or the Chairperson of the Management Board of the Fund, as well as on the initiative of either Party. A meeting of the Board of the Fund shall be declared properly constituted and can validly deliberate if attended by all members of the Board of the Fund.
8.4. The Management Board of the Fund shall be its permanent collegial executive body. The Management Board of the Fund shall be composed of 3 representatives of the Kyrgyz Side.
8.5. The Parties, alone, shall appoint and terminate their respective representatives to the Board of the Fund and the Management Board of the Fund. The Chairperson of the Management Board of the Fund shall be appointed by the Government of the Kyrgyz Republic for a 3-year period. The Chairperson of the Management Board of the Fund shall appoint one member of the Management Board of the Fund as his/her Deputy.
8.6. The members of the Management Board of the Fund shall perform their roles and responsibilities for a fee within the budget of the Fund approved by the Board of the Fund.
Article 9. Remit of the Board of the Fund
9.1. The following powers and authority shall fall within the remit of the Board of the Fund:
- a) passing of resolutions to expand the authorized capital of the Fund;
- b) determination of the amount of remuneration for the Chairperson of the Management Board of the Fund and members of the Management Board of the Fund;
- c) approval of the organizational structure of the Fund, manning table, and the threshold amount of compensation payable to the employees of the Fund out of the Fund’s profit.
- d) approval of the Annual Report of the Management Board of the Fund, the financial statements of the Fund, including the Independent Auditor’s Report;
- e) review of reports of the Management Board of the Fund on the efficiency of the operations financed out of the Fund’s monetary' resources;
- f) approval of the budget and financial plan of the Fund for the next fiscal year;
- g) approval of the procedure for selecting the external auditor of the Fund and the external auditor of the Fund itself, as well as the rules of procedure of the internal audit function;
- h) supervision of the activity of the Management Board of the Fund related to the administrative management and disposal of the Fund’s monetary resources;
- i) prioritization of the Fund’s activity in the field of international cooperation and the adoption of resolutions on the execution of international agreements;
- j) approval of accounting policy;
- k) approval of the investment, lending, and borrowing policies of the Fund;
- l) review and approval of the extended loans and/or investments in excess of one million U.S. dollars (USD 1,000,000) or other authority limits for the Management Board laid down by the investment and lending policy of the Fund;
- m) approval of the rules of procedure of the Board of the Fund;
- n) adoption of resolutions on the setup, rules and conditions of functioning of the committees necessary to perform investing and lending activity;
- o) submission of proposals for the suspension and/or discontinuation of the Fund’s business to the Parties;
- p) submission of proposals to the Parties for the amendment of the Agreement and these Articles of Incorporation;
- q) adoption of the resolution to initiate a temporary suspension and/or discontinuation of the Fund’s business, as well as the submission of proposal to the Parties for the allocation of any unused resources of the Fund;
- r) other issues entrusted to the Board of the Fund in accordance with these Articles of Incorporation.
9.2. The Board of the Fund shall be entitled to delegate to the Management Board of the Fund powers and authority on certain matters, except for any matters requiring the relevant powers and authority in voting by members of the Board of the Fund.
9.3. A contract with the Chairperson of the Management Board of the Fund shall be signed by the Chairperson of the Board of the Fund or, following his/her written direction, by a member of the Board of the Fund.
9.4. The Board of the Fund shall control the process of founding the Fund, the obtainment of all business authorization rights and licenses, and compliance of expenses which may not exceed 9,5% of the authorized capital in the first year / including all initial costs, personnel costs, etc./ After the first year, all costs shall be covered out of profit from the Fund’s business.
Article 10. Voting at the Fund's Board meetings
10.1. Every member of the Board of the Fund shall hold one vote. The delegation of voting powers to other persons shall be allowed provided that such delegation is confirmed by the competent bodies of the Parties.
10.2. A resolution of the Board of the Fund shall be passed unanimously by consensus on the issues provided for in subparagraphs a, f, i, к, 1, p, q paragraph 1, Article 9 of these Articles of Incorporation.
10.3. On any issues requiring the adoption of a unanimous resolution, members of the Board of the Fund must have the relevant powers and/or resolutions of the Parties. That said, the delegation of voting powers to other persons shall not be allowed.
10.4. Resolutions on the remaining issues of the Fund’s business shall be passed by the Board of the Fund by a simple majority vote, constituted by at least 3 positive votes, of the total number of members of the Fund’s Board.
10.5. The Board of the Fund shall be entitled to conduct voting by written ballot or online voting of members of the Board of the Fund. Such resolutions shall be in the form of meeting minutes of the Board of the Fund, which shall be sent out to members of the Board of the Fund.
10.6. Each member of the Board of the Fund shall have the right to vote as follows: “Aye,” “Nay,” “Abstain.” In addition to the above-mentioned opportunities, each member of the Board of the Fund shall have veto power - the voting topic in question shall be automatically removed from the agenda and submitted for follow up revision.
Article 11. Management Board of the Found
11.1. The activity of the Management Board of the Fund shall be governed by the Board of the Fund. The Management Board of the Fund shall rely in its activity7on these Articles of Incorporation and the resolutions of the Board of the Fund. The Management Board of the Fund shall report to the Board of the Fund.
11.2. The following powers and authority shall fall within the remit of the Management Board of the Fund:
- a) development and submission for approval of the Board of the Fund of the following policies of the Fund: investment, lending, borrowing, accounting, procurement, pricing, surplus funds distribution policies, asset and liability structure policy of the Fund;
- b) development and approval of other business policies and programs of the Fund, preparation of proposals for the tackling of strategic business objectives of the Fund;
- c) preparation and holding of meetings of the Board of the Fund, submission for approval by the Board of the Fund of the annual report of the Management Board of the Fund, financial statements, financial plan and draft budget of the Fund for the next fiscal year;
- d) adoption of resolutions on investment and project financing, save for any issues classified by these Articles of Incorporation as belonging to the powers and authority of the Board of the Fund;
- e) preparation for consideration at the meetings of the Board of the Fund of draft resolutions on the issues classified by these Articles of Incorporation as belonging to the powers and authority of the Board of the Fund;
- f) adoption of resolutions on the placement and raising of funds, determination of a reasonable asset and liability structure of the Fund with the aim of maintaining liquidity and generating profit, ensuring control of risks and liquidity pursuant to the policy of the Fund approved by the Board of the Fund;
- g) approval of interest rates and tariffs for the Fund’s services in accordance with the pricing policy of the Fund approved by the Board of the Fund;
- h) approval of the rules and procedures of the Fund falling within the remit of the Management Board of the Fund;
- i) addressing of other business issues of the Fund not classified by these Articles of Incorporation as belonging to the powers and authority of the Board of the Fund and the Chairperson of the Management Board of the Fund.
11.3. The meetings of the Management Board of the Fund shall be held on an as needed basis, yet at least on a monthly basis. A meeting shall be deemed to be valid if attended by all members of the Management Board of the Fund.
11.4. A resolution of the Management Board of the Fund shall be passed unanimously by consensus on the issues provided for in subparagraph f, paragraph 2 of this Article.
11.5. The procedure for passing resolutions on any issues provided for in subparagraph d, paragraph 2 of this Article shall be determined by the Management Board of the Fund in reliance on the investment and lending policy approved by the Board of the Fund in accordance with these Articles of Incorporation.
11.6. Resolutions on all other issues classified as falling within the remit of the Management Board of.the Fund shall be passed by a majority vote.
11.7. In the passing of resolutions, every member of the Management Board of the Fund shall hold one vote. The delegation of voting powers to other persons shall not be allowed. Members of the Management Board of the Fund shall be entitled to include their comments and proposals in the minutes of meetings of the Management Board of the Fund. The meeting minutes of the Management Board shall be signed by the Chairperson of the Management Board of the Fund.
Article 12. Chairperson of the Management Board of the Fund
12.1. The Chairperson of the Management Board of the Fund shall manage the business and affairs of the Fund and the Management Board of the Fund within his/her remit and the rights prescribed by these Articles of Incorporation and the management bodies of the Fund.
12.2. The Chairperson of the Management Board of the Fund shall represent the Fund and be given the following powers and authority:
- a) execute operations and transactions on behalf of the Fund (without a power of attorney) within the powers and authority laid down by these Articles of Incorporation;
- b) acts on behalf of the Fund and represent its interests (including before international organizations, regulatory and administrative authorities, courts and other institutions and organizations);
- c) adopt a sole resolution on the closing of transactions related to the Fund’s business activity and unrelated to lending and investing activity;
- d) recruit and dismiss the employees of the Fund, determine their job responsibilities;
- e) make motions for the identity of staff members of the internal audit function;
- f) issue orders and give instructions, which shall be binding upon all employees of the Fund;
- g) sign financial and executive documents of the Fund;
- h) exercise other powers and authority in accordance with the provisions of these Articles of Incorporation.
12.3. The Chairperson of the Management Board of the Fund shall assume liability to the Board of the Fund for compliance with its resolutions, the management of the Fund’s business and affairs, and for its performance.
12.4. The Chairperson of the Management Board of the Fund shall allocate powers and job responsibilities among members of the Management Board of the Fund and manage the functioning of the Management Board of the Fund. In the absence of the Chairperson of the Management Board of the Fund, his/her roles and responsibilities shall be exercised by Deputy Chairperson.
Section IV. Individual aspects of the Fund’s business
Article 13. Ban on political activity
13.1. The Fund, the Board of the Fund, the Management Board of the Fund and employees of the Fund shall rely in their activity solely on the interests of the Fund, its goals and roles provided for in these Articles of Incorporation.
13.2. Given the status of the Fund as international organization, the Parties shall refrain from any attempts to put pressure on any officer of the Fund when the latter perform their respective duties and responsibilities.
13.3. The Fund shall not participate in raising loan proceeds, seeking support or any other assistance which may cause any damage whatsoever to its goals or roles, limit the same, result in any deviation front the same or otherwise alter the same.
13.4. The Fund, members of the Management Board of the Fund, and the employees of the Fund shall not be entitled to intervene in any political events occurring in any country of the Parties, adopt any resolutions related to direct or indirect financing of any political parties, organizations or individuals involved in political activity, directly or indirectly. In adopting resolutions, the bodies of the Fund shall rely solely on the considerations aimed at achieving the goals of these Articles of Incorporation.
Article 14. Business principles of the Fund
The operations of the,Fund shall be performed in accordance with the following principles:
14.1. the Fund shall finance projects on the condition of timely repayment at maturity;
14.2. the Fund shall offer financial solutions only in the projects with existing or raised minimum Hungarian content and/or Hungarian service expressly set forth in the lending and investment policy of the Fund;
14.3. the Fund shall not raise any contributions or approve the seeking of any assistance which may cause any damage whatsoever to its goals and objectives, limit tire same, result in any deviation from the same or otherwise alter the same;
14.4. the Fund shall not finance any events in the countries of the Parties if either Party objects against such financing;
14.5. loans, investment or any other financing which may be made by the Fund shall be used to purchase goods and services in the countries of the Parties manufactured in the countries of the Parties, except when the Board of the Fund or the Management Board of the Fund permits the purchase in a country other than the country of the Party of a portion of goods and services manufactured in a country other than the country of the Party, making such purchase cost effective and rendering investment efficient;
14.6. the Fund shall use reasonable efforts to ensure that any loan extended by the Fund or any borrowings involving the Fund or participation interest in capital are used solely for the purposes for which such loan or participation interest in capital has been provided, with due regard for savings and efficiency considerations.
Article 15. Fiscal year, financial statements and other reports of the Fund
15.1. The Fund’s fiscal year shall begin on January 1 and end on December 31.
15.2. The Fund shall maintain accounting records and prepare financial statements in accordance with the International Financial Reporting Standards (IFRS). The Fund shall also have the right to maintain accounting records and prepare financial statements in the Kyrgyz soms. Statistical and tax reports shall be submitted under the laws of the Kyrgyz Republic to the extent not contradictory to these Articles of Incorporation.
Article 16. Audit of the Fund and publication of statements/reports
16.1. The internal audit function shall be set up within the Fund in order to control the financial and economic activity of the Fund, the identity of whose staff members shall be approved by the Board of the Fund for one-year period (which period shall be extendable). The internal audit function shall report to the Board of the Fund.
16.2. An independent external audit of the Fund shall be conducted on an annual basis in order to audit and confirm the reliability of the Fund’s annual financial statements. The procedure for selecting an independent international professional audit firm holding a license to transact auditing business and sharing no common property- related interests with the Fund or its founders shall be determined by the Board of the Fund.
The Board of the Fund shall annually select an independent international professional audit firm recognized as the best upon the completion of selection process and grant to the Chairperson of the Management Board of the Fund the right to enter into a contract with the same.
16.3. The Fund shall send out to the Parties the Annual Report and Independent Auditor’s Report on the same in quarter one of the year following the reporting period the latest.
The Fund shall publish its financial statements and any other reports whose publication it considers to be feasible for achieving its goals and performing its roles.
Section V. Immunities, privileges, and benefits of the Fund
Article 17. Immunities and privileges of the Fund
17.1. In order to achieve its goals and perform its roles, the Fund shall be vested in the countries of the Parties with the immunities, privileges, and benefits provided for in this Section and documented in the existing agreements between the Fund and the Parties.
17.2. Notwithstanding the provisions of paragraph 1 of this Article, no action or claim shall be taken/lodged against the Fund by either Party, including any person, body and/or institution of the country of the Party acting or asserting claims on behalf of such Party. The Parties may use special procedures to settle any conflicts provided for in these Articles ofIncorporation, the provisions and rules of procedure of the Fund, as well as the existing agreements between the Fund and the Parties / international organizations.
17.3. The property and assets of the Fund located in the countries of the Parties shall be protected from search, impressment, arrest, confiscation, expropriation or any other form of seizure or alienation, except as provided for in the national laws of the Parties and related to the implementation of provisions of Clause 8 of the Agreement.
17.4. To the extent necessary to achieve the goals and perform the roles of the Fund, and with due regard for the provisions of these Articles of Incorporation, all property and assets of the Fund shall be free and clear of any and all restrictions, prescriptions, and moratoria.
17.5. The archives, property and any information possessed or owned by the Fund shall be immune in the countries of the Parties.
17.6. The provisions of this Article shall not apply to any actions or claims of subjects from among the recipient of the Fund’s resources.
Article 18. Waiver of immunities and privileges
The Board of the Fund may waive any immunity, privilege or benefit provided for in these Articles of Incorporation to such extent and upon such conditions which, in its opinion, may meet the interests of the Fund.
Section VI. Final provisions
Article 19. Procedure for temporary suspension of the Fund’s business
19.1. The Board of the Fund may adopt a resolution to initiate the suspension of the Fund’s business in emergency. A resolution on the suspension of the Fund’s business shall be adopted by the Parties as motioned by the Board of the Fund.
19.2. In the event of adoption of a resolution to initiate the suspension of the Fund’s business, the execution of new agreements for the provision of resources by the Fund and the consummation of transactions involving the Fund’s resources shall be suspended.
Article 20. Procedure for discontinuing the Fund’s business
20.1. A resolution to initiate the discontinuation or the Fund’s business shall be adopted by the Board of the Fund. A resolution to discontinue the Fund’s business shall be adopted by the Parties as motioned by the Board of the Fund.
20.2. In the adoption of a resolution to initiate the discontinuation of the Fund’s business, all operations involving the Fund’s resources shall be immediately discontinued, save for activity aimed at protecting and safeguarding the Fund’s resources, accumulating payments under the existing agreements for the provision of the Fund’s resources, and settling any obligations payable out of the Fund’s resources accruing prior to the date of adoption of the relevant resolution by the Board of the Fund.
20.3. In the adoption of a resolution to discontinue the Fund’s business, after the repayment of loans and other pecuniary obligations, all funds which remain unallocated within 15 days shall be returned to the contributing Parties on a pro rata basis.