Since 2014, the civil legislation of the Russian Federation has divided commercial and non-commercial enterprises into corporate and unitary. In this article, we will describe what applies to unitary legal entities. How do corporations differ from them? About it further.
Difference of corporate legal entities from unitary
A corporation is understood as a set of persons whose purpose of unification can be considered to achieve common goals, to carry out joint activities. In this case, the association of persons forms an independent subject of legal relations - a legal entity.
In legal practice, over time, a general idea has been developed about the types and legal personality of a legal entity.
The concept designating a corporate legal entity is known to the legislative systems of all developed countries.
This separation helps to resolve in a general way not only the management structure and competence of the bodies of a corporate commercial and non-profit organization, but also a number of internal relationships that cause controversy in legal practice (for example, challenging decisions of meetings or other collegial bodies, conditions determining the withdrawal participants, etc.).
Unitary legal entities include commercial enterprises that do not own the property that is assigned to them. Corporations were singled out as special forms of legal entity formation, and this contributed to the consolidation in the Civil Code of general rules regarding the status of corporate enterprises themselves and their participants. I must say that there are no similar general rules that relate to unitary enterprises in civil law. In Russian civil law, a new classification criterion has been identified for the separation of corporate enterprises, which are based on the membership of participants and unitary organizations. Corporate-type legal organizations are enterprises that are based on membership of participants.
From the participants of the corporation, the main body of management of the legal entity is formed - the general meeting. Participation in the corporation gives its participants the corresponding membership rights and obligations regarding the formed legal entity. In the form of a corporate enterprise, enterprises of both commercial and non-commercial nature can be created. Corporations include all commercial legal entities, with the exception of only unitary enterprises.
Unitary legal entities are legal entities whose founders do not become their participants and do not acquire membership rights in them.
Types of Corporations
In addition, some non-profit organizations may also be assigned to this type:
- consumer cooperatives;
- public organizations;
- associations (unions);
- partnerships of property owners;
- Cossack companies entered in the corresponding state register;
- indigenous communities.
Based on this, the misconception that a consumer cooperative belongs to unitary legal entities can hardly be true. In respect of all corporate organizations, including non-profit, uniform rights for their participants and the same management rules are established.If the founders of a legal entity do not become members, then this enterprise belongs to unitary legal entities. Ownership of property secured by the owner does not transfer to a unitary enterprise. The property assigned to him is considered indivisible. It can not be distributed by deposits or shares, even between employees of the organization. Unitary enterprises of the state and municipal type according to the list fall into the category of such organizations.
Types of unitary institutions
Unitary legal entities include various types:
- public, charitable and other foundations;
- state institutions (including state academies of sciences), municipal and private (including public) institutions;
- autonomous non-profit organizations;
- religious organizations;
- public law companies.
Unitary Legal Entities
As we have already noted above, organizations whose property cannot be divided into parts belong to unitary legal entities. The list of such institutions, we repeat, can be presented by state and municipal enterprises, various foundations, autonomous non-profit organizations, religious organizations, as well as public law companies. They lack such a thing as “membership”.
Is transformation possible?
Specialists have long noted that the existence of such a legal form as a unitary enterprise is unpromising in terms of the development of civil law. It also stipulated its gradual replacement with another type of commercial organization, including business companies. It is also noted that in the future, only federal state-owned institutions in especially important economic spheres should remain to satisfy the needs of the federal state.
But lawmakers did not make such drastic changes, leaving unitary enterprises of both state and municipal kind, endowing them not with the right of economic management of property, but with the right of operational management or economic management. As mentioned above, legal entities whose founders do not become their members are unitary.
Corporate legal entities
The supreme body of the corporation under the civil law of the Russian Federation is called the general meeting of participants. In some non-profit organizations, where the number of participants exceeds one hundred people, the supreme body may be in the form of a congress, conference or other collegial body determined by their charters in accordance with the law.
Functions of the supreme body
In any corporate organization, the supreme body considers issues:
- determination of the main activities of the organization, as well as the acquisition and use of property;
- approving and changing the charter of a corporate organization;
- determination of the rules for admission to the composition of members of the corporation and exclusion from the composition of its participants, except if such rules are determined by law;
- the formation of other bodies of the enterprise, as well as the early termination of their powers;
- approval of the annual report and accounting (financial) reports of the corporation, if in the charter or in accordance with the legislation of the Russian Federation these powers are not referred to the competence of other bodies of the organization;
- making decisions on the creation by participants of the corporation of other legal organizations, the participation of the corporation in other legal entities, the creation of branches and the opening of representative offices of the organization;
- making decisions on the reorganization and liquidation of the enterprise, the formation of the composition of the liquidation commission, as well as approval of the liquidation balance sheet;
- election of the audit commission and appointment of auditors of the legal entity.
Can a supreme corporate body function alone?
The competence of the highest collegial body may be expanded by Russian legislation and the charter, and other issues of the corporation may also be included in it. Corporate entities must comply with all regulations. This is important, because before that, the opportunities for the meeting of shareholders strictly corresponded to what is specified in the provisions of the Federal Law “On Joint-Stock Companies”. It was impossible to go beyond the limits of this law. In addition to the formation of a supreme authority in the corporation, the creation of a sole executive body (represented by the director, general director, chairman, etc.) is also taking place.
And in the event that the Civil Code, another law or the charter of the organization provides for the creation of a collegial body (board, directorate, etc.), then it is formed as accountable to the highest body of the corporation. Corporate legal entities often also form a council that oversees the activities of all these bodies.
Other conditions for the exercise of authority
An important point should be noted: in the corporate charter, special conditions may be provided for granting the powers of the executive body to several citizens who can act together, and it is also possible to create several sole executive bodies that can act without coordinating their decisions among themselves. Such a body can be represented by both an individual and a legal entity.
The introduction of these rules forms the basis for the emergence of a special kind of relations among the participants in the corporation. These relationships are called corporate. The emergence of corporations in itself is considered by specialists as the development of the general provisions of the new edition of article two of the Civil Code of the Russian Federation. Also important is paragraph 2 of Article 65.1 of the Civil Code of the Russian Federation, according to which participants in a corporate organization acquire membership rights and obligations with respect to a registered legal entity.
Legal Exclusions
The only exceptions are cases indicated in the Civil Code of the Russian Federation. These rights apply to:
- participation in the management of a corporate organization (with the exception of business partnerships in which special management rules apply);
- obtaining information on the activities of a legal entity, acquaintance with accounting reports and other documents within the framework provided for by civil laws and constituent documents;
- appeal of decisions of bodies of the corporation, the application of which will lead to civil law consequences;
- actions on behalf of the corporation to reimburse the corporation for damage;
- contesting transactions legally.
Members of the corporation can also be vested with other rights provided for by legislative acts or the charter.
Corporate Membership Requirements
In addition to rights, participants in the corporation are also vested with duties, which include:
- participation in the formation of property;
- non-disclosure of confidential information about the work of the corporation;
- participation in strategic decisions for the corporation;
- the impossibility of performing actions that are deliberately aimed at causing harm to corporate interests;
Members of the corporation may be vested with other duties in accordance with legislative and constituent documents.
The legal personality of the legal entities of the considered types is determined by their place in the economic system.