Science Magazine «Globus»
Elena Mikheeva,
Lawyer
At this moment, the Russian Corporate Law is a subject of much discussion. In 2014, the Federal Law «On Amendments to Chapter 4 of the Civil Code of the Russian Federation and Invalidation of Certain Provisions of Legislative Acts of the Russian Federation» has been applied.
The law project «On Amendments to the first, second, third and fourth part of the Civil Code, as well as to certain legislative acts of the Russian Federation» was the first step for the implementation of the Conception of development of civil law. These changes have affected the legal status of legal entities, enlarging the role of the Civil Code, as well as the requirements for the establishment, reorganization and liquidation of legal entities and more.
Shortly before that, in 2006, in the United Kingdom the new Companies Act (Companies Act 2006) was applied. This Act is the most extensive piece of the UK legislation in the history of the British Parliament.
It seems fair to compare these two forms of legislation in order to identify differences in the approaches to the classification of companies as well as methods of their creation.
Forms of incorporation
Forms of incorporation of legal entities in the UK are significantly different from those, applied in continental Europe, including Russia (joint-stock companies, limited liability companies, etc.). A public limited company is close to the continental (public) joint-stock company, but as for non-public limited liability companies, there is no direct analogy on the continent. It combines various features of a non-public joint-stock company and a limited liability company.
The new Act leaves unchanged all types of companies that may be established in the United Kingdom such as:
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Private company limited by shares.
The company’s registered capital is divided into shares; the shareholders shall be responsible within the unpaid part of shares that they own; such companies cannot offer shares for sale to the general public;
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Private company limited by this guarantee.
The responsibility of shareholders is limited to the amount of money that they are willing to deposit into the company’s assets in case of liquidation.
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Private unlimited company.
The company’s authorized capital is divided into shares. These shares may be sold at a public sale; shareholders’ liability is limited to the amount of the unpaid shares that they own (company limited by shares), or to the amount of money that they are willing to deposit into the company’s assets in case of liquidation (company limited by this guarantee). The information about the company’s status (if it is public or non-public) is contained in its registration certificate — certificate of incorporation.
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Community interest company.
This category includes companies limited by shares, and those, not having a share capital, as well as companies limited by a guarantee that have or don’t have share capital.
In the United Kingdom it is also possible to create various kinds of partnerships (general partnership, limited partnership, limited liability partnership), but they are not regulated by the Companies Act.
A legal entity is an organization that has separate property and is responsible for its obligations, which could acquire and exercise civil rights on its behalf and have the civil duties, which could be the suitor and the defendant in the court.
The new classification of legal entities and new forms of activities were introduced due to reformation of Corporate Law. The irrelevant forms were excluded.
In accordance with a new approach to the classification of legal forms, all legal entities have been divided into two major groups: corporate entities and unitary entities.
This classification is based on membership rights.
Corporate entities are divided into:
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Commercial entities:
- Companies (non-public: limited liability company, non-public joint-stock company; public: public joint-stock company);
- Economic Partnership;
- Partnerships;
- Production cooperatives;
- Peasant (farmer) economy.
- Non-commercial entities
Unitary entities are divided into:
- Commercial entities;
- Non- commercial entities.
Corporate founders have a right to participate and form the highest governing body. Founders of unitary legal entities do not become its members and do not get membership rights.
On the 1st of September 2014 global changes have been made into the Civil Code of The Russian Federation. These changes have affected the status of business entities: now they are divided into public and non-public entities.
Public companies are joint-stock companies (JSC), whose shares and capital securities, convertible into shares, are placed publicly (by public subscription) or publicly traded on a stock exchange. Non-public companies are: limited liability company (LLC) and joint-stock company, which do not meet the above criteria.
Creation of the company
In the United Kingdom, a private or public company can be formed by one person or more, according to a new Act (there should be at least two founders, according to the previous one). To do this, they sign a memorandum of association.
Article of association and other types of decisions or agreements of the company’s participants (except memorandum of association, which now plays only a supporting role) make up the statutory documents (constitution) of the company. Copies of all statutory documents are available at the registration authority.
What is hardly compared to a Russian company is that the company is not obliged to have their own statutes: the Act authorizes the Secretary of State to publish a model of the statute for different types of companies that will be applied in the absence of a company’s own articles of association (Article 19-20.). If the founders (shareholders) of the company want to change certain provisions of the model statute, they can include in the articles of association only those provisions that differ from the model one. As a result, the statute can be very short or not exist at all.
The registration procedure for the establishment of the company is plain and sometimes doesn’t require the development of the company’s statute.
According to the new article 50.1 of the Civil Code of the Russian Federation, a legal entity can be created by a decision of the founder (or founders) on the establishment of a legal entity. This article also establishes the procedure for making such a decision.
If there is one founder of a legal entity, the decision on the establishment has to be made by him personally. If there are two or more founders, the decision has to be made unanimously by all founders.
According to the amendments made to the article 52 of the Civil Code of the Russian Federation any legal entity (except for business partnerships) will act on the basis of the statute. The founding document of a business partnership is a memorandum of association.
The new edition of article 52 of the Civil Code of the Russian Federation states that the standard forms of statutes, that are approved by government bodies, can be used for registration. This version also contains a list of information that must be included in the statute and refers to features of non-profit organizations and unitary enterprises. In these organizations the statute must contain the object and purpose of the activities of such entities.
Today, the legal entity can act on the basis of the statute, memorandum of association or on the basis of these two documents at once.