Counterparty Due Diligence Before Signing: A Step-by-Step Guide for Doing Business in Uzbekistan

Counterparty Due Diligence Before Signing: A Step-by-Step Guide

Counterparty due diligence is not a box-ticking exercise — it is a mandatory step before any significant transaction. In my practice, the majority of disputes that eventually reach the courts could have been avoided had the client carried out even a basic verification of their prospective partner in advance. What follows is the framework I use myself and recommend to every client doing business in Uzbekistan.

Key Takeaways

• Registration and legal status — confirm the entity genuinely exists and is not in the process of liquidation or suspension.
• Signatory authority — the right to bind the company must be established by its charter or a valid power of attorney.
• Tax standing and litigation history — outstanding tax liabilities and active claims materially affect a supplier's reliability.
• Business reputation — market feedback, public track record, and references from mutual partners complement formal documentary checks.

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Step 1. Verify Registration Details

The first thing I always recommend is to go directly to official government registries. In Uzbekistan, information on legal entities and individual entrepreneurs is publicly available through the State Tax Committee portal and the Unified State Register of Business Entities.

What to establish at this stage:

• Full and abbreviated legal name, and the entity's legal form (LLC, JSC, sole proprietorship, etc.).
• Tax Identification Number (TIN) and state registration number.
• Date of incorporation and current status (active, in liquidation, suspended).
• Registered address — and whether it matches the company's actual place of business.

If the company was incorporated very recently, or if its registered address is shared by dozens of other entities (a so-called "mass address"), treat this as a prompt for additional questions before proceeding.

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Step 2. Request and Review Constitutional Documents

Once the basic registry check is done, I always request the counterparty's corporate documents directly. A trustworthy partner will provide them without hesitation.

Documents to prepare — and to request from your counterparty:

• [ ] Certificate of state registration
• [ ] Company charter (articles of association) — current version
• [ ] Fresh registry extract (typically no older than one to three months — verify the accepted timeframe at the time of your transaction)
• [ ] Board resolution or order appointing the director/CEO
• [ ] Power of attorney, if the contract will be signed by someone other than the director
• [ ] Licences and permits, where the activity is subject to licensing
• [ ] VAT registration certificate, where applicable

I pay particular attention to powers of attorney: they must be valid at the date of signing and must clearly set out the scope of authority granted.

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Step 3. Tax Standing and Financial Position

A counterparty's reliability is substantially shaped by its tax compliance record. Significant outstanding tax liabilities are a warning sign: a partner in that position may be insolvent, or may attract regulatory scrutiny at the most inconvenient moment for you.

Where to check:

• The tax debt verification service on the Uzbekistan State Tax Committee portal.
• Participation records in public tenders and government procurement, where relevant.

Where the scale of the transaction warrants it, request the counterparty's financial statements for the past one to two years. For high-value deals, consider engaging an independent auditor.

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Step 4. Litigation History and Enforcement Proceedings

Court records and enforcement proceedings in Uzbekistan are accessible through open judicial databases and enforcement registers. One or two concluded disputes is entirely normal for any active business. However, if a company is a habitual defendant or has a pattern of failing to comply with court judgments, that represents a direct financial risk to you.

I recommend looking not just at the volume of cases, but at their substance: disputes arising from contractual non-performance, wage arrears, or unpaid supplier invoices are indicators of systemic issues rather than isolated incidents.

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Summary Table: Steps, Documents, and Common Mistakes

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Step 5. Business Reputation — Informal but Essential

Formal document review does not replace market intelligence. Speak with mutual business contacts, look for mentions of the company in sector associations, and search for feedback in professional communities. In my experience, I have encountered companies that appeared impeccable on paper yet carried an unambiguously negative reputation in the market.

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FAQ: Common Questions on Counterparty Due Diligence

Can an individual entrepreneur (sole trader) be verified in the same way as a company?

Yes. Individual entrepreneurs are registered in the same state registry, hold a TIN, and can be checked through the same channels. They do not have a charter — instead, verify the registration certificate and the entrepreneur's identity document.

Is it always necessary to check for licences?

Only where the counterparty's activity is subject to licensing. The list of licensable activities is set by legislation and is periodically revised — confirm the current list at the time of your transaction.

What should I do if the counterparty refuses to provide documents?

This is itself a red flag. A well-functioning business will rarely have a legitimate reason to withhold its charter or a registry extract. In such cases, I recommend at minimum capping the initial transaction value and structuring payment so that the counterparty bears the prepayment obligation.

Is due diligence necessary for every transaction with an existing partner?

In an ongoing business relationship, periodic refreshes are sufficient — once a year, or whenever the transaction volume increases materially. A company's legal status and financial position can change.

When should I engage a lawyer for counterparty due diligence?

For high-value or atypical transactions, when onboarding a new foreign partner, or where a self-conducted check has uncovered warning signs but the deal remains commercially attractive. A lawyer can help you structure the risks and build appropriate contractual protections.

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Conclusion

Verifying the reliability of a supplier or business partner is an investment that pays for itself many times over. A few hours spent before signing a contract can save you months of litigation and substantial financial loss.

If you would like a thorough counterparty check carried out by specialists, or wish to establish a structured framework for legal support for your business in Uzbekistan, book a consultation with Pactum. We will assess your specific situation and recommend the most suitable approach.

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*This article is provided for general information purposes only and does not constitute individual legal advice. Legislation, procedures, and requirements are subject to change — please verify all details as at the date of their intended application.*