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Legislation

Revised State Control and Supervision Procedure: a Guide on Inspections for Businesses

Effective from 8 June 2018, Kazakhstan introduces a revised procedure for exercising state control and supervision over businesses' compliance with the local legislation requirements (1).

The amendments are mostly intended to more extensively use preventive measures, without instituting administrative proceedings.  The list of the areas of activities subject to control has been reduced (leaving out 20 areas of activities out of 114 and 108 controlling functions of governmental agencies out of 544).  The Administrative Code of the Republic of Kazakhstan no longer contains 47 articles previously providing for administrative liability of businessmen.

Each form of control and supervision has its own grounds for scheduling, procedure for implementation and different procedural specifics, and the inspected entity, same as the inspecting agency, has certain rights and obligations.  Not all businessmen are aware of those rights and obligations, and even if they are, they do not exercise their rights proficiently enough.

To help businesses feel confident and withstand inspections, we offer a kind of Q&A crib note to give them a general idea of the basic and currently topical details of the state control and supervision.

What are the types of control and supervision and the grounds for their scheduling?

The revised Entrepreneurial Code of the Republic of Kazakhstan says that the state control and supervision over activities of business entities may be implemented in the form of:

• Inspection(conducted in accordance with a special procedure on the basis of risk degree evaluation, or on an unscheduled basis), and
• Preventive control and supervision (2) (which may be implemented with orwithout a visit to the entity and/or its facilities).

Depending on the type of control and supervision applied to inspected entities, the latter are subdivided into four groups.

The first group comprises entities with a high degree of risk (3) (due to different factors of their activities in the field of atomic energy, fire safety, turnover of poisons or weapons, sanitary-and-epidemiological wellbeing, industrial safety, and ensuring the payment of taxes and other mandatory payments) that are subject to all possible forms of control and supervision, including both types of inspections and both types of preventive control.

This group of entities is subject to regular special procedure inspections and preventive control with a visit to be conducted not more than once a year (4).  Special procedure inspections and preventive control with a visit are prohibited in respect of small business entities for three years of the date of their state registration (except for legal entities established as a matter of reorganization and successors of reorganized legal entities).

The ground for scheduling special procedure inspections and preventive control with a visit is a half-year schedule (list) approved by the regulatory governmental agency or a local executive authority.  Half-year schedules (lists) are formed in respect of entities, specifying on a mandatory basis the facilities for which the inspection or preventive control is scheduled.  The consolidated half-year schedule (list) is placed on the website of the General Prosecutor's Office before the 25^th of December and before the 25^th of May of the current calendar year.  No changes in the half-year schedules (lists) are permitted.

The risk degree evaluation criteria and checklists used for inspections and preventive control are approved by the act of regulatory governmental agencies and are available on their websites.

An unscheduled inspection is an inspection organized by the control and inspection agency based on concrete facts and circumstances that served as a ground for scheduling such inspection, in order to prevent and/or eliminate an immediate threat to human life or health, the environment, or the legitimate interests of individuals, companies or the state.  Unscheduled inspections are conducted on the following grounds:

• Control over performance of ordinances to eliminate gross violations identified as a result of inspection and preventive control with a visit;
• Control over performance of ordinances to eliminate significant and insignificant violations identified as a result of inspection and preventive control with a visit, if the entity more than once fails to provide information on the elimination of identified violations and/or does not eliminate the violations;
• Applications by individuals, companies or governmental agencies or instructions of prosecution authorities based on concrete facts of statutory requirement violations, failure to eliminate which entails harm to human life or health, or based on concrete facts of causing harm to human life or health, the environment or the legitimate interests of individuals, companies or the state;
• Cross-inspection in respect of third parties with which the inspected entity has had civil relationships, in order to obtain the information required for the inspection;
• Repeat inspection due to the inspected entity's application stating disagreement with the initial inspection, and some other grounds.

Preventive control without a visit to the entity (facility) is conducted by the inspecting agencies without registering this form of control and supervision with the statistical agency and without notifying the inspected entity in advance.

Following preventive control without a visit, if violations are identified, the summary documents are drawn up (an information memo, opinion, recommendations, etc.) without instituting an administrative violation case, but explaining to the entity, on a mandatory basis, the procedure to eliminate the violations.

As regards preventive control without a visit, the laws of the Republic of Kazakhstan determine the procedure for that form of control and supervision to mandatorily indicate the preventive control objectives, instruments, methods of implementation, list of entities, frequency of conducting and method of recording (5).

The second group comprises entities subject to unscheduled inspections and preventive control with or without a visit.

The third group comprises entities subject to unscheduled inspections and preventive control without a visit.

The fourth group comprises entities that are only subject to preventive control without a visit.

The areas of activities of business entities subject to state control and supervision are referred to the above groups and the entities are qualified as having a certain degree of risk by the regulatory governmental agencies in each area.

The entities subject to control and supervision that are referred to the first and second groups may be transferred to the third group, if such entities have executed third party civil liability insurance contracts or are members of a self-regulated organization based on voluntary membership (participation), provided, however, that the laws of the Republic of Kazakhstan and the risk degree evaluation criteria established by the regulatory governmental agencies determine the instances where subject entities are exempt from inspections and preventive control.