Public companies: new civil legal status of joint stock companies.

The abbreviations ZAO and OAO are familiar even to those who are not involved in business, so deciphering them is not difficult. These are different forms of joint stock companies (JSC) - closed and open, differing from each other in the possibilities of selling shares and managing the company. Several years ago, a legislative reform was carried out giving more correct names to these business entities.

What is NAO

In 2014, the definitions relating to the organizational and legal forms of legal entities were revised. Federal Law No. 99 of May 5, 2014 amended the legislation and abolished the concept of closed joint stock company. At the same time, a new division was introduced for business entities, distinguishing them according to the criterion of openness to third parties and the possibility of third-party participation.

Article 63.3 of the Civil Code (CC) defines new concepts. According to the article, business societies are:

Public (software). These are companies whose shares are freely traded in accordance with Law No. 39 of April 22, 1996 “On the Securities Market.” An alternative requirement for classifying an organization as software is to indicate its public nature in its name.
Non-public (BUT). All others that are not public.

The legislative formulation does not provide a clear definition of a non-public company, and is based on the exclusionary principle (everything that is not software is non-public). Legally, this is not very convenient because it creates a clutter of language when trying to define terms. The situation is similar with establishing the meaning of a non-public joint stock company (NAO). It can only be determined by analogy (NAO is an AO with signs of NO), which is also uncomfortable.

But the legal procedure for transition to new definitions is simple. Law No. 99-FZ recognizes as public joint-stock companies all joint-stock companies created before September 1, 2014 and meeting the qualification criteria. And if such a company, as of July 1, 2015, has an indication in its charter or name that it is public, but in fact is not a PJSC, then it is given five years to begin public circulation of securities or re-register the name. This means that July 1, 2020 is the final date when, according to the law, the transition to the new wording must be completed.

Organizational and legal form

Public and non-public joint stock companies are distinguished according to Article 63.3 of the Civil Code. The defining feature is the free circulation of the company's shares, so it would be a mistake to mechanically translate old definitions into new ones (for example, to assume that all OJSCs automatically become PJSCs). According to the law:

Public joint stock companies include not only open joint stock companies, but also closed joint stock companies that have publicly placed bonds or other securities.
The category of non-public joint-stock companies includes closed joint-stock companies, plus open joint-stock companies that do not have shares in circulation. At the same time, the category of non-commercial organizations will be even wider - in addition to non-profit joint-stock companies, this also includes LLCs (limited liability companies).

Considering the specific nature of a closed joint stock company, which simplifies the task of concentrating assets in the hands of a group of individuals, combining it into one group with an LLC is quite logical. The legislative need to create a category of non-profit organizations becomes extremely clear - this is the unification into one group of business entities that exclude outside influence. At the same time, a non-public limited liability company can be transformed into a non-public joint stock company without any particular difficulties (the reverse process is also possible).

The difference between a public joint stock company and a non-public one

When comparing PJSC and NJSC, it is important to understand that each of them has its own advantages and disadvantages, depending on the specific situation. For example, public joint-stock companies provide more opportunities for attracting investments, but at the same time they are less stable in corporate conflicts than non-public joint-stock companies. The table shows the main differences between the two types of business entities:

Characteristics	Public JSC	Non-public joint-stock companies
Name (until July 1, 2020, the previous wording will be recognized by law)	Mandatory mention of public status (for example, PJSC "Vesna")	Indication of lack of publicity is not required (for example, JSC Leto)
Minimum authorized capital, rubles	1000 minimum wages (minimum wages)
Number of shareholders	Minimum 1, maximum unlimited	Minimum 1, when the number of shareholders begins to exceed 50 people, re-registration is required
Trading shares on the stock exchange
Possibility of open subscription for placement of securities
Preferential acquisition of shares
Presence of a board of directors (supervisory board)		You don't have to create

Characteristics and distinctive features

From a legal point of view, a non-public joint stock company is a special category of business entities. The main distinguishing features include:

Restrictions on the admission of participants. These can only be the founders. They act as the only shareholders, since the company's shares are distributed only among them.
The authorized capital has a lower limit of 100 minimum wages, which is formed by contributing property or cash.
Registration of a non-public JSC is preceded by the preparation of not only the company’s charter, but also a corporate agreement between the founders.
The management of the NAO is carried out through a general meeting of shareholders with a notarized recording of the decision.
The amount of information that a non-public JSC must place in the public domain is much less than that of other types of JSC. For example, non-public joint stock companies, with few exceptions, are exempt from the obligation to publish annual and accounting reports.

Disclosure of information about activities to third parties

The principle of publicity implies placing information about the company’s activities in the public domain. Information that a public company must publish in print (or online) includes:

Company annual report.
Annual accounting reports.
List of affiliates.
Statutory documentation of a joint stock company.
Decision to issue shares.
Notice of a meeting of shareholders.

For non-public joint stock companies, these disclosure obligations apply in a reduced form and apply only to organizations with more than 50 shareholders. In this case, the following will be published in publicly available sources:

Annual report;
Annual financial statements.

Certain information about a non-public JSC is entered into the Unified State Register of Legal Entities (USRLE). This data includes:

information on the value of assets as of the last reporting date;
information about licensing (including suspension, re-issuance and termination of a license);
notification of the introduction of surveillance as determined by the arbitration court;
subject to publication in accordance with Articles 60 and 63 of the Civil Code of the Russian Federation (notifications of reorganization or liquidation of a legal entity).

Charter

In connection with legislative changes caused by the emergence of new organizational and legal forms (public and non-public joint stock companies), JSCs must carry out a reorganization procedure with amendments to the charter. For this purpose, a board of shareholders is convened. It is important that the changes made do not contradict Federal Law No. 146 of July 27, 2006 and must contain a mention of the non-publicity of the organization.

The typical structure of the charter of a non-public joint-stock company is determined by Articles 52 and 98 of the Civil Code of the Russian Federation, as well as Law No. 208 of December 26, 1995 “On Joint-Stock Companies”. Mandatory information that must be indicated in this document includes:

name of the company, its location;
information about placed shares;
information about the authorized capital;
amount of dividends;
procedure for holding a general meeting of shareholders.

Organizational management and governing bodies

In accordance with current legislation, the charter of a joint stock company must contain a description of the organizational structure of the company. The same document should consider the powers of governing bodies and determine the procedure for making decisions. The organization of management depends on the size of the company, can be multi-level and has different types:

General Meeting of Shareholders;
supervisory board (board of directors);
collegial or sole executive body (board or director);
audit committee.

Law No. 208-FZ defines the general meeting as the highest governing body. With its help, shareholders exercise their right to manage the joint-stock company by participating in this event and voting on agenda items. Such a meeting may be annual or extraordinary. The company's charter will determine the boundaries of the competence of this body (for example, some issues can be resolved at the level of the supervisory board).

Due to organizational difficulties, the general meeting cannot resolve operational issues - for this purpose a supervisory board is elected. Issues that this framework addresses include:

determination of priorities for the activities of a non-public joint stock company;
recommendations on the amount and procedure for paying dividends;
increasing the authorized capital of the joint-stock company through the placement of additional shares;
approval of major financial transactions;
convening a general meeting of shareholders.

The executive body may be sole or collegial. This structure is accountable to the general meeting and is responsible for the improper performance of its duties. At the same time, the competence of this body (especially in a collegial form) includes the most complex issues of the current activities of a non-public joint stock company:

development of a financial and economic plan;
approval of documentation on the company’s activities;
consideration and decision-making on the conclusion of collective agreements and agreements;
coordination of internal labor regulations.

Issue and placement of shares

The registration process of a joint stock company is accompanied by the introduction of special securities into circulation. They are called shares, and according to Law No. 39-FZ they give the owner the right:

receive dividends - part of the company's profit;
participate in the management process of a joint stock company (if the security is voting);
ownership of part of the property after liquidation.

The putting of securities into circulation is called an issue. In this case, shares may have:

documentary form, confirming ownership rights with a certificate;
undocumented, when a record of the owner is made in a special register (in this case, the concepts of “securities” and “issue shares” are conditional).

After the issue, the distribution (placement) of shares among the owners follows. The process is fundamentally different for PJSC and NJSC, implementing different methods of generating profit for these companies. A wide channel for the distribution of securities in the first case implies more careful control of activities by government agencies. The table shows the differences between public and non-public joint stock companies in the placement of shares:

	Public JSC	Non-public JSC
Registration of share issue	It is necessary to register a public prospectus for the issue of securities (a special document with information about the issuer and the issue of shares).	Charter and founders' agreement required
Circle of shareholders	Is not limited	No more than 50 people
Placement of shares	Publicly on the stock exchange and other securities markets	Among shareholders (or under their control), there is no open subscription and free circulation on exchanges
Shareholder's ability to alienate (sell) shares	Under the control of other JSC participants	Free

Certification of JSC decisions and maintaining the register of shareholders

The General Meeting of Shareholders is the highest body of the company's management, determining the further development of the organization. At the same time, the legally correct drawing up of the protocol and certification of decisions taken is of great importance, relieving participants, board members and managers from mutual claims and disputes about forgery. According to Law No. 208-FZ, protocol documentation must contain:

time and place of the general meeting of shareholders of a non-public JSC;
the number of votes belonging to the owners of voting shares;
the total number of votes of shareholders who participate;
indication of the chairman, presidium, secretary, agenda.

Hiring the services of a notary will make the protocol more secure and increase the level of reliability of this document. This specialist must personally attend the meeting and record:

the fact of adoption of specific decisions specified in the minutes of the meeting;
number of present shareholders of a non-public joint-stock company.

An alternative to contacting a notary would be the services of a registrar who maintains the register of shareholders. The procedure and procedure for confirmation in this case will be similar. According to the law, from October 1, 2014, maintaining the register of shareholders became possible only on a professional basis. To do this, joint stock companies must turn to the services of companies with a specialized license. Independent maintenance of the register is punishable by a fine of up to 50,000 rubles for management, and up to 1,000,000 rubles for legal entities.

Change of organizational form

The reform of joint stock companies, begun in 2014-2015 by Law No. 99-FZ, should be completed in 2020. By this time, all official company names must be re-registered in the form prescribed by law. Depending on the availability of publicity, the former CJSC and OJSC are transformed into PJSC and JSC. Indication of non-publicity by law is not mandatory, therefore the abbreviation NAO may not be used in the official details of the company, and the presence of shares in free circulation allows you to do without the abbreviation PJSC.

The legislation allows changing the form of ownership from PJSC to NAO and vice versa. For example, in order to transform a Non-Public JSC, you must:

Increase the authorized capital if it is less than 1000 minimum wages.
Conduct inventory and audit.
Develop and approve an amended version of the charter and related documents. If necessary, the organizational and legal form is renamed to PJSC (this is not mandatory by law, if there are shares in free circulation).
Re-register.
Transfer property to a new legal entity.

Preparation of constituent documents

When re-registering a NAO, special attention should be paid to the correct preparation of documentation. Organizationally, this process breaks down into two stages:

Preparatory part. This involves filling out an application in form P13001, holding a meeting of shareholders and preparing a new charter.
Registration. At this stage, the company details change (a new seal and forms will be required), which should be warned about by counterparties.

Advantages and Disadvantages

If we compare the capabilities of PJSC and NJSC, then each of them has its own pros and cons. But, depending on the specific business situation, one or another option will be suitable. Non-public joint stock companies have the following advantages:

The minimum authorized capital is 100 minimum wages for a non-public joint-stock company (for a public joint-stock company this figure is 10 times higher). But this plus immediately becomes a minus when compared with the same figure for an LLC - 10,000 rubles, which makes the form of a limited liability company more accessible to small businesses.
Simplified form of purchasing shares. State registration of the purchase and sale agreement is not required; it is only necessary to make changes to the register.
Greater freedom in managing the company. This is a consequence of the limited circle of shareholders.
Restrictions on Disclosure. Not all shareholders want information about their share in the authorized capital or the number of shares to be available to a wide range of people.
A less risky investment for investors than a publicly traded company. The absence of public trading of shares is a good protection against the unwanted possibility of a third party purchasing a controlling stake.
Lower office costs than PJSC. The requirements for non-public documentation are not as serious as for those that are to be made public.

If we compare it with a public joint-stock company, then non-public joint-stock companies have a number of disadvantages. These include:

The closed nature greatly limits the ability to attract third-party investments.
The process of creating a company is complicated by the need for state registration of the issue of shares (in addition, this leads to an increase in the authorized capital).
The decision-making process may be in the hands of a small group of people.
Limits on the number of shareholders of 50 people compared to the unlimited number of a public JSC.
Difficulties with leaving the membership and selling your shares.

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Ten key differences between a public JSC and a non-public one

Concepts of public and non-public companies

The concepts of public and non-public companies are enshrined in Article 66.3 of the Civil Code.

Public joint stock companies- these are companies that are based on shares (securities) that have a large-scale free circulation market. These are societies with an unlimited and dynamically changing composition of participants.

Non-public joint stock companies- these are business companies based on shares that do not enter the organized circulation market.

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We have presented the main differences between public JSCs and non-public ones in a convenient table

№

Difference

Public JSC

Non-public JSC

Legal norm

Placement and circulation of shares is the main difference

Shares and securities that are convertible into shares are placed by public subscription and are publicly traded in accordance with securities laws

Shares and securities cannot be placed by open subscription; they are not publicly traded

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As a rule, national legislation regulating the stock market imposes certain information disclosure requirements on companies whose shares may be offered for purchase to an unlimited number of persons and/or traded on the stock market. Companies that meet these requirements are called public companies.

From an investor's perspective, shares of a public company may be considered a more liquid asset than shares of non-public companies for the following reasons:

shares may be offered for sale to an unlimited number of persons;
a potential buyer can evaluate the company using open (including independent) sources;
shares of a public company are traded on a stock exchange, where it is easier for a seller to find a buyer than on an unorganized market;
information about transactions completed on the organized market (price and volume of the transaction) is available in open sources to both the buyer and the seller and can be used as a basis for evaluating a package for sale.

A public company that entered the stock exchange, but for some reason ceased operations, is called a shell company.