Russian business law: the essentials. Отсутствует

Law on Education stipulates that the educational organization, regardless of its organizational-legal form, must form a collegial management body, which is a general meeting of the employees of the organization.

      The corporation’s charter may stipulate that the powers of the sole executive body are given to several persons. Additionally, it is possible to create several sole executive bodies that act independently from each other in a corporation. These rules have been introduced in the CC of the RF recently, therefore the practical application of these rules is still in development.

      The natural person (general director, president, chairman), individual entrepreneur (managing director), and legal entity (management company) can act as the sole executive body of the corporation.

      3.11.2. Responsibilities of the Person Authorized to Act on Behalf of a Legal Entity; Responsibilities of the Members of the Executive Board of the Legal Entity; and Persons Determining the Actions of the Legal Entity (so-called "removal of a corporate veil")

      A person who is granted with the right to act on behalf of a legal entity, as per a legal act or a constituent document, bears liability for losses caused to this legal entity by his/her fault. Conditions of the responsibility of the named person are dishonesty or unreasonableness of its actions. In similar cases, responsibility is also incurred by members of executive board who voted for the decisions of the legal entity which led to losses; or dishonestly evaded from participation in voting. Finally, persons, who have the opportunity to determine the actions of the organization, are liable for losses of the legal entity caused by their guilty actions (Article 53.1 of the CC of the RF).

      3.11.3. Representations and Branches of the Legal Entity

      Any legal entity has the right to have representations and/or branches. According to the CC of the RF, the representation is a separate division of the legal entity, and is located outside of its primary address. The representation can:

      i) represent interests of the legal entity,

      ii) exercise their protection.

      The branch differs from representation by exercising any functions of the legal entity, including the functions of representation (Article 55 of the CC of the RF).

      4. Certain Types of Legal Entities

      4.1. Corporate Profit Organizations

      4.1.1. General Provisions on Economic Partnership and Companies

      Economic partnerships and companies have many features in common. Paragraph 2 of chapter 4 of the CC of the RF contains the general provisions on partnerships and companies. These norms appeared in the CC of the RF recently, and they should be taken into account when dealing with partnerships and companies.

      4.1.1.1. Charter (Share) Capital of Economic Partnership and Companies

      The charter (share)[32] capital of economic partnerships and companies is divided into parts (shares in a limited liability company and economic partnerships, stocks in the joint stock companies), which give corporate rights to the owners of these shares. Charter capital is the minimum possible size of property of the legal entity expressed in a monetary equivalent. The size of charter capital is established by the legal entity itself and is specified in its charter. Besides, information on the size of legal entity's charter capital is contained in USRLE, and anyone can receive information on it, having ordered an extract from the register.[33]

      The share size (number of stocks) at the stage of the creation of the legal entity depends on the cost of the property which the participant brought to the charter capital of the legal entity.

      4.1.1.2. Contributions to Property of Economic Partnerships and Companies

      Unless otherwise stated in law, as a contribution to the property of the company, participants can bring:

      i) money,

      ii) goods,

      iii) shares (stocks) in the charter (joint) capitals of other economic partnerships and companies,

      iv) state and municipal bonds,

      v) exclusive rights, other intellectual rights, and rights by license contracts, which are subject to a monetary assessment.

      4.1.2. Economic Companies

      4.1.2.1. General Provisions on Economic Companies

      Issues of interaction of economic companies’ participants (among themselves and with the company), issues of management of economic companies, receiving of profits by participants, establishment, reorganizations, and liquidations of economic companies (corporate-legal issues of economic company’s activities) are regulated by norms of the CC of the RF, as well as by the Federal Law on Limited Liability Companies and the Federal Law on Joint Stock Companies. Currently, Russian corporate law is in a period of deep reformation. Recently the norms of the CC of the RF devoted to legal entities (chapter 4 of the CC of the RF) were essentially changed. The main changes were made by the Federal law No. 99-FZ (as of May 5, 2014), and came into force on September 1, 2014. According to Clause 4 of Article 3 of Federal Law No. 99-FZ (as of May 5, 2014), legal acts (all laws and subordinate legislation) apply only to the extent that they do not contradict with the changes made to the CC of the RF by the present federal law. This should be taken into account when dealing with the FL on Limited Liability Companies and the FL on Joint Stock Companies.

      4.1.2.1.1. Types of Legal Entities

      In the Russian Federation, the following types of the legal entities exist:

      i) Limited Liability Company (LLC),

      ii) Joint Stock Company (JSC).

      The joint stock companies, in turn, may be public and non-public.

      4.1.2.1.2. Public and Non-public Legal Entities

      An LLC is a non-publicnon-public legal entity. The JSCs may be both public and non-public. The JSC is deemed public when its shares (or securities convertible into shares) have been publicly placed by an open subscription, or have been publicly converted on the conditions established by the laws on the securities. If the charter and the firm name of the legal entity indicate that the company is public, then the rules on public companies are applied (Clause 1 of Article 66.3 of the CC of the RF).

      Many of the issues concerning the activities of the public and non-publicnon-public JSCs are regulated in different ways. This must be considered while conducting business.[34]

      4.1.2.1.3. The Legal Entities’ Charter Capital

      The charter capital cannot be less than the established minimal threshold (the minimum amount of the charter capital), and this is different for the various organizational-legal forms of legal entities. It is established by the federal laws on the profit of legal entities' separate organizational-legal forms (FL on Limited Liability Companies, FL on Joint Stock Companies). Moreover, the federal laws regulating the implementation of separate types of activities (for example, banking, insurance and others) may establish increased requirements as to the minimum amount of the company’s charter capital.

      The minimum amount for the charter capital of LLCs and non-public JSCs is 10000 rubles; and 100000 rubles for public JSCs (the second paragraph of the Clause 1 of Article 14 of the FL on Limited Liability Companies, Article 26 of FL on Joint Stock Companies).

      If at the end of the second and each subsequent fiscal year, the legal entity’s net assets value is less than its charter capital, the company is obliged to reduce its charter capital. If the net assets value is less than the minimum amount of the charter capital, it is subject to liquidation.

      At a vote on various issues, the number of votes of the company's participants depends on the size of their shares in the charter capital (for LLC) or the stock number (for JSC). There are few exceptions to this rule.

      4.1.2.1.4. Corporate Agreement

      Some

32

Economic companies have charter capital, and economic partnerships have share capital. Everything written in the present chapter on charter capital applies to the joint capital as well.

33

It is possible to receive information on legal entity from official source on the site of the FTS of Russia at: http://egrul.nalog.ru/

34

For example, a public JSC, is obliged to disclose the annual report, annual financial statements, announcement of the shareholders’ general meeting, and other information. A non-public JSC is obliged to do so only if the number of its participant exceeds 50. Furthermore, shareholders of a non-public JSC may have the privilege of stock acquisition, as well as have the ability (if it is provided by a charter) to prohibit the alienation of the stock to a third party. Public JSC shareholders may not have such rights. There are also other differences between public and non-public JSCs.