The institution of affiliates is a fairly new phenomenon both theoretically and in practical terms. The article reveals the very definition and scope of its application.
Attention will also be paid to the rules for accounting for this category, responsibility for their non-compliance, as well as to the relations between the main and subsidiary organizations.
Affiliates. Concept and types
The phrase itself arose in Russian in the 90s. The concept of an affiliate was first mentioned in 1992 in the appendix to the Decree of the President of the Russian Federation. It dealt with investment funds. In a broad sense, affiliation implies being close to something, since the English verb to affiliate, from which the word is derived, is used in the meaning of "join, connect."
Also, this term can be interpreted as entry into membership. Affiliates to one degree or another exert influence on each other, whether it is economic or economic activity. In total, they represent a certain group.
This term was legislatively reflected in 1995, and the official definition appeared only in 1998 as a result of amendments to the Competition Law. Affiliates are citizens or entrepreneurs who can influence the business of other people or companies. There are some aspects according to which the subject is considered controlling in relation to the organization. Affiliates of OJSC are citizens or entrepreneurs:
- Holding over 20% of voting shares. At the same time, affiliates of the Joint Stock Company have the opportunity to influence the decision-making process in this organization.
- Holding over 50% of voting shares.
It is believed that an individual is able to have a serious impact on the organization, having the opportunity to participate in decision-making without even controlling its activities.
The legislative framework
Article 4 of the Federal Law, as mentioned above, defines what affiliates are. In addition, the normative act decrypts the possible composition of this category. The list of affiliates primarily includes entities closely related to the control mechanism.
These may include holders of a large package of voting shares, direct participants in the enterprise management process. Affiliation implies, as a rule, the possibility of one-sided impact of one side of economic activity on the other.
It should be emphasized that this refers to relations that are not property, but precisely managerial in nature. Property dependence can, rather, be defined as a consequence, and not a condition for the emergence of dependence on control. An important role in this matter is played by relationships of a kinship nature.
Classification
According to the Competition Law, affiliates can be affiliated with:
1. Enterprises:
- one of the owners of this legal entity;
- a member of a management body (for example, a board of directors);
- persons having at their disposal at least 20% of the total number of decisive shares;
- the organization in which the subject in question receives the right to control the number of votes exceeding 20% of the total;
- a party exercising the powers of a sole body.
2. An individual conducting business:
- Citizens who belong to the same group as this entity;
- an organization in which the entrepreneur in question has the right to dispose of 20% or more of the total number of votes expressed by decisive shares, deposits, and shares in the authorized capital.
3. Entrepreneurs participating in financial and industrial groups:
- members of supervisory bodies or boards of directors;
- collegial management structures;
- entities that exercise the powers of the individual divisions of the group.
Scope of this category
The category of affiliates can often be found not only in the theoretical, but also in the practical part of the activities of entrepreneurs. Meanwhile, as practice shows, many do not have a clear idea of this category. This, in turn, often becomes the cause of quite serious errors in the process of economic activity of the subject. Advantageously, the term “affiliates” is associated with corporate law. Most often it is used for:
- the process of identifying persons who knowingly have an interest in the actions of the company that are expected to lead to a transaction;
- identification of directors with a casting vote in relation to the transaction of interest to them, which the open joint-stock company intends to conclude with more than a thousand participants;
- determining the list of entities about which business community information must be provided;
- the process of identifying persons whose information is required to be provided by a joint stock company;
- determination of the list of participants who overcame the thirty percent threshold during the acquisition of shares of OJSC; in this case, certain procedures must be followed, the course of which is regulated by law.
The relationship of the main company with a subsidiary
How do affiliates interact? An example of such relations can be considered by taking the prevailing (main) society and a subsidiary (dependent on the main). When creating the latter, the company gains ample opportunity to increase its business. The main difference between the main company and branches is legal independence.
Duties
Affiliates have more than rights and opportunities. By virtue of their status, they have a number of responsibilities. First of all, they are charged with notifying the public of their shares. This must be done in writing and with the specified details (exact quantity, types of securities, etc.).
Information must be received within a certain period from the date of acquisition of shares in the property. Despite the fact that such persons are not liable before the law in connection with the failure to provide the necessary information within the allotted time, certain sanctions do exist.
If, through the fault of affiliates, a joint-stock company incurs losses of any nature (for example, property damage), then the compensation for the entire amount of the damage caused will be punished (in accordance with article 15 of the Civil Code of the Russian Federation).
Accounting Responsibilities
The company is required to maintain a list of affiliates. The list is mandatory provided to the appropriate authorities responsible for the regulation of this market. Antitrust laws impose a fine for violating existing rules for providing the necessary information. The same rules apply to the list of affiliates of LLC. Lists should be publicly posted on a page on the Internet.
Such requirements are understandable. Such information is highly demanded in the framework of a certain procedure for concluding transactions in which affiliates participate. These include, in particular, agreements of interest.A logical question arises: "Is a closed joint-stock company obliged to submit information about affiliates?"
After all, it, as a rule, is not involved in the public offering of securities. Accordingly, the rule regarding an open joint-stock company does not fully apply to a closed joint-stock company. Nevertheless, it is his responsibility to keep records of the subjects in question, albeit in an arbitrary form. If the CJSC makes a public offering of bonds, then it is obliged to publish the register of affiliates on the Internet site.
Accounting procedure
If you take any example of a list of affiliates, then the list will contain the following information:
1. Name of the company (short and full), postal address.
2. Surname and initials of the subject, address of residence (for individuals);
3. Grounds for being an influential party, date of occurrence of these grounds.
A responsibility
There are different types of punishments for violating the prescribed order.
1. Administrative responsibility. It occurs if the information is not provided in full or in violation of the terms specified in the legislation.
2. Tax liability. She is advancing against interdependent persons and concerns unjustified price adjustments that run counter to real market conditions. If, according to the results of the audit, it turns out that the value of the transaction deviates from the existing one on the trading floor by more than 20%, this fact gives the right to the supervisory authority to make an additional charge of tax and penalty interest. In this case, collection is carried out without acceptance.
3. For violation of the order of transactions involving participants in affiliates, civil liability may also be imposed.
