Modern joint-stock companies (JSC) are business companies in which the authorized capital is divided into a number of shares called shares. Depending on the characteristics of AO, they can take various forms, each of which has its own advantages and disadvantages. The Federal Law of December 26, 1995 No. 208-FZ regulates them.
Entity
If we consider AO as a legal entity, then we are talking about the organization of market participants, which has three characteristic features:
- The creation of the authorized capital is carried out from the contributions of participants, which subsequently become the full property of this joint-stock company.
- The property liability of each member of the company is limited by the total amount of the contribution made by him, while the joint-stock company bears full responsibility for all obligations undertaken.
- The authorized capital is divided into a number of shares, which are subsequently issued in exchange for the contribution made and which is owned by all its participants.
The last sign is the distinguishing feature of AO as a legal entity or a special form of existence of a certain commercial company.
Issue of shares
Closed and open joint stock company (OJSC and CJSC) work as legal entities involved in the issue of shares, while all funds received from this ensure the creation of authorized capital.
Unlike other legal entities, the joint-stock company does not have the opportunity to take place if the required number of shares is not issued, since it is possible to become a full-fledged participant only when the contribution is exchanged for a certain number of them. At the same time, all funds that are earned after the issue of shares are necessarily accounted for in advance as the specified authorized capital, and in the future, any other funds other than those that were obtained from the sale of securities cannot be allocated to it.
It is worth noting that the liability of the joint-stock company also provides for the excess of proceeds from the sale of shares over the previously specified authorized capital and their possible shortfall. Moreover, in the latter case, it will be necessary to underestimate the size of the indicated authorized capital, in which the lower limit is the minimum established by applicable law.
A legal entity can be recognized as a joint-stock company only for the reason that it is engaged in the issue of shares. It is worth noting that, in accordance with the law, a branch of a joint-stock company has the right to issue such securities only if they belong to a certain type of commercial organization, while any other companies do not have the option to issue shares if they do not take the appropriate form with all the ensuing consequences.
Organization
Any organization is an association of several participants or members that exist independently, that is, in no way depend on this association. Moreover, the company itself and its participants are a single whole, and at the same time exist separately from each other.
If we consider JSC as an organization, then this is a legal entity in one of the forms of commercial activity. It is worth noting that the existing forms of joint-stock companies represent a unique version of unity, since such companies exist not only as a unity of an organization and its members, but also as a unity of an organization and a common set of shares, since the latter represent the property of shareholders, not the company itself. Any share that is issued by an AO represents the personification of the participant, and he is not just some ordinary member of a certain organization, but represents a full-fledged shareholder.
AO is an organization of several market participants, the condition in which is determined by the presence of shares that were issued by this company. At present, JSCs on the market exist in doubled form:
- As an independent commercial organization as a separate market participant.
- As a set of issued shares owned by shareholders.
AO today exists in two forms that are not separable from each other, although they are quite different. When speaking of an AO as a specific organization, one should always remember that it also exists in the form of a set of issued securities, and if we talk about them, we must not forget that they were issued by a certain company.
Externally, we can say that the joint-stock company is just another variety of commercial legal entities that are combined into a certain group by applicable law. This definition has its own distinctive features, advantages and disadvantages, in comparison with other commercial companies.
What are the differences?
If we talk about the main differences between standard AO from business partnerships there are several:
- Partnerships include not only the association of capital, but also are the association of persons engaged in joint activities in them.
- The joint-stock company is an exclusively association of capital.
- In partnerships, full-fledged partners bear subsidiary and joint liability for various obligations, but this is not provided for in the joint-stock company.
The activities of a joint-stock company in the same way as an LLC in its most mass form are based on a certain authorized capital, which is formed from invested funds on the part of participants bearing property responsibility, which directly depends on the size of the contribution made. Thus, we can distinguish several basic differences of the joint-stock company from the simple one:
- In exchange for the contribution made, the participant is given securities called shares, which can subsequently be freely resold in the special stock market. The authorized capital of a standard company is divided into contributions made by its participants, while in AO these are shares.
- The legislation establishes the minimum size of the charter capital of the joint-stock company, as well as the number of shareholders, which at the same time are the ultimate boundaries for a standard company.
- These two variants of society significantly differ in the order and right of exit of participants.
- The rights of shareholders who have shares of the same type are exactly the same, while additional obligations and rights may be determined for certain participants in a standard company.
- The joint-stock company has a more complex and regulated by the state, in accordance with the legislation, management structure, as compared to the usual one.
You can also list several key differences between AOs and production cooperatives:
- The cooperative combines capital and persons who must work in it.
- The members of the cooperative are assigned subsidiary liability according to his obligations.
- Each member of the cooperative can be excluded from it in case of failure to fulfill the obligations assigned to him or for any other violations of the charter, while in the AO there is no right to deprive a shareholder of his securities, regardless of the circumstances.
AO benefits
The Russian joint-stock company, as well as companies of many other countries, has a lot of advantages over other options for combining:
- The process of pooling capital is limitless.The joint-stock form provides for the unification of an almost unlimited number of investors and their capital, and the rights of the joint-stock company provide for attracting even small investors, due to which it is possible to raise large funds in a fairly short time, expand production and get all the advantages of a large enterprise.
- Shareholders independently choose their own risk. The charter of the joint-stock company allows you to buy any number of shares, that is, each person chooses in what amount the risk of loss of capital invested in the joint-stock company is acceptable to him. At the same time, limited risk also manifests itself in the fact that shareholders are not liable for property obligations to the creditors of this company.
- Sustainability of capital pooling. AO is the most stable form among all options for pooling capital. Thus, the management of a joint-stock company does not provide for the possibility of terminating its activities in the event that one of the shareholders leaves it.
- Professionalism of management, which is determined by the fact that ownership of capital is separated from management. In AO, not everyone can manage their own capital - this is the task of a team of professional specialists who manage all their capital as a whole.
- The possibility of free return on investment. A shareholder can at any time sell his own shares in order to partially or fully return his contribution.
What are they like?
In accordance with applicable law, modern types of joint-stock companies are divided into two types:
- Closed. It is an organization whose shares can be distributed exclusively among its founders, that is, a predetermined circle of persons.
- Open types of joint stock companies. These are companies whose participants have the opportunity to alienate their shares without the need to obtain the prior consent of the remaining shareholders.
Incomplete definitions
It is simple enough to notice that the basis for the above definitions is a variety of categories, and the first definition deals with the number and composition of participants, while the second one considers the presence or absence of the right to completely free disposal of shares by their owners.
The complete absence of a logical connection between what these types of joint-stock companies are, and the unresolved nature of this issue indicates a rather high level of conventionality for dividing modern companies into these types, as well as the lack of a reliable foundation and foundation for this distribution.
If, as the main differences between the existing types of joint stock companies, the presence of the right to the possibility of completely free disposal of shares and the total number of shareholders is considered, then in this case we can give them the following definitions:
- Open types of joint-stock companies are companies whose shares can be distributed among a previously unknown circle of people who are able to alienate their shares without the prior consent of the other members.
- Closed - these are organizations whose shares can be distributed among the founders, as well as a well-known circle of people who are not able to alienate their shares to people who are not members of this company, if the consent of other members has not been previously obtained. The procedure for such consent in the predominant majority of cases boils down to the fact that for a certain period of time, shareholders have a preemptive right over the purchase of tradable shares compared to other people who are not members of this company.That is why such types of joint stock companies have recently been widely used.
Modern legal practice provides a solution to the question of the form of a particular joint-stock company by establishing a certain number of shareholders in the law, and if this number is exceeded, the latter will have to be registered as an open joint-stock company.
Legal features of closed joint-stock companies
The current Federal Law on joint-stock companies provides for the following features of closed joint-stock companies:
- the possibility of distributing own shares exclusively between the founders or the circle of people indicated in advance, the total number of which cannot be more than 50;
- lack of the right to conduct an open subscription to own shares;
- each shareholder has a preemptive right to acquire shares that others intend to sell.
Signs of open JSC
The current federal law on joint stock companies also considers several key features of open organizations:
- the total number of shareholders is not limited by law;
- shareholders have the opportunity to alienate their shares without any need to obtain consent from other participants in advance;
- the right to introduce not only closed, but also open subscription to own shares;
- the obligation to provide the market with all the necessary information about its activities at such times and in such volumes as determined by applicable law and other regulatory acts (in particular, this applies to the annual publication of the annual report for the general public, as well as the loss account, profit balance sheet, balance sheet and other documents).
Differences between CJSC and LLC
We considered the types of joint-stock companies and their key features, but many often ask questions about what are the main differences between a closed joint-stock company and a limited liability company, because, in fact, this is a kind of intermediate option between it and the open joint-stock company. In total, there are several such key differences:
- A CJSC is a joint-stock company, since its authorized capital is not divided into units, but into shares, in contrast to LLC.
- A CJSC is an LLC, because the total number of its participants is strictly limited, and the sale of shares in the same way as shares is impossible without obtaining prior consent, or rather granting a preemptive right to purchase to other members of the company.
- The shares of the company are traded constantly on the state stock market, while in the case of the company, in the same way as the shares of the company, they will not be traded on the stock market, and therefore they do not have a clearly defined market price. The only way to obtain market value is to conduct a one-time transaction with the publication of the result of an individual procedure.
- Both LLC and ZAO can, if necessary, be transformed into OJSCs (or vice versa), but it must be understood correctly that the former will need to deal with complete re-registration, while the latter will simply need to change their type.
The main essence of ZAO
If we consider the differences between the LLC and the CJSC in how the authorized capital of the joint-stock company is used and such, then here you can see exclusively formal differences, since in the first case the invested funds are called shares, and in the second - shares, that is, a certain form of valuable documentation. But at the same time, one must correctly understand that the form of securities is exclusively from the outside, since the very essence of the stock is the possibility of its free circulation on the market, while a closed joint-stock company does not have such a property. Only in OJSC stock market can be created as a stock market.
It can be said that OJSC and ZAO significantly differ in terms of what rights the authorized capital of a joint stock company has, but there are practically no such differences between LLC and ZAO.
The need for their use
Considering the economic nature of AOs, it is possible to understand that it is open, since only in such a case can all the potential opportunities present that are incorporated into it as an unlimited form of pooling the capital of several market participants be fully realized. Only the work of OJSC allows the stock to truly become such, since without the possibility of its free circulation, it completely loses its status as a security and is only evidence of a contribution to the bodies of a joint stock company.
The desire of various market participants to use several options for combining various capitals, in terms of their scale, creates the need to create an intermediate form of organization that will be between LLC and OJSC, that is, the reason for the appearance of closed structures.
