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 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

One of the organizational and legal forms, which until September 1, 2014 was provided for by the legislation of the Russian Federation (Civil Code of the Russian Federation, Article 95) for commercial organizations. A company established by one or several persons, the authorized capital of which is divided into shares of the size determined by the constituent documents; Participants of such a company jointly and severally bear subsidiary liability for its obligations with their property in the same multiple of the value of their contributions, determined by the constituent documents of the company.

Additional liability company– a commercial organization with a number of participants of at least two and no more than fifty, the authorized capital of which is divided into shares of sizes determined by the constituent documents.

Control. The supreme body is the general meeting of participants; The executive body is the board or directorate and (or) director or general director. The control body is the audit commission or auditor.

Rights:-receive part of the profit, vote at the general meeting of participants; -receive information about the activities of the company; - leave the company regardless of the consent of other participants and receive part of the value of the company’s property corresponding to the share in the authorized capital; -sell your share to other participants or third parties; -to receive, upon liquidation of the company, part of the property remaining after settlements with creditors.

Responsibilities: - make a contribution to the authorized capital; -take part in the management of the company; - not to disclose confidential information about the activities of the company.

Peculiarities. In general, additional liability companies were subject to the provisions of the legislation of the Russian Federation on limited liability companies, with the exception of the subsidiary liability provided for the participants of such a company, which they bore for the obligations of the company jointly with all their property in the same multiple of the value of their contributions, determined by the founders documents of the company. Thus, for participants in companies with additional liability, there was no limitation of liability, which is provided to participants (shareholders) of other forms of business partnerships and companies.

Responsibility. Participants in such a company bear subsidiary liability for its obligations with their property in the same multiple of the value of their contributions, determined by the constituent documents of the company. In the event of bankruptcy of one of the participants, his liability for the obligations of the company is distributed among the remaining participants in proportion to their contributions, unless a different distribution procedure is provided for by the constituent documents of the company. The rules of the Code of the Russian Federation on LLCs apply to a company with additional liability.

Non-public joint-stock company (NAO) (Closed joint-stock company, CJSC)

This is a joint stock company, the shares of which are distributed only among its founders or other predetermined circle of persons.

Features of the JSC. Its advantage is that the founders bear limited liability for the debts of the organization they created within the value of the contributions made to the authorized capital. CJSC is today one of the most common organizational and legal forms of commercial organizations in the field of small and medium-sized businesses. The form of a closed joint stock company often gives rise to dangerous misconceptions. Shareholders believe that they are reliably protected from unwanted partners entering their business, because the law states that a shareholder, before selling shares to a third party, must offer other shareholders to buy the securities alienated to them. Unfortunately, this requirement is easy to circumvent. The rule is mandatory only in case of alienation for compensation; if a gift or inheritance occurs, then this rule does not apply.

Responsibilities. Before selling shares to a third party, a participant in a closed joint-stock company must offer other shareholders to buy the securities alienated by him. In cases provided for by the law on joint stock companies, a closed joint-stock company may be required to publish an annual report, balance sheet, and profit and loss account for public information.

Profit distribution. In a closed joint-stock company, shares are distributed only among a pre-determined (closed) circle of persons (for example, only among its participants). If there is 1 participant, then this must be reflected in the charter (clause 6 of article 98 of the Civil Code of the Russian Federation). In a closed joint-stock company, the possibility of new shareholders appearing in the company cannot be completely ruled out. Before selling shares to a third party, the shareholder must offer other shareholders to buy the securities alienated by him. The number of participants in a closed joint stock company must not exceed the number established by the law on joint stock companies.

A new criterion for classifying companies in the Civil Code of the Russian Federation is the criterion of their publicity. According to clause 1 art. 66.3 A public corporation is a joint stock company whose shares and securities convertible into its shares are publicly placed (by open subscription) or publicly traded under the conditions established by securities laws. The rules on public companies also apply to joint stock companies, the charter and company name of which indicate that the company is public. Accordingly, a company that does not meet the above criteria is considered non-public.

Although in law it talks about public companies in general, but in reality we can only talk about applying this classification to joint-stock companies. The literature correctly notes that only joint-stock companies can be subjected to such classification, meaning the establishment of more stringent requirements for the status of public joint-stock companies whose shares are listed on stock exchanges, and whose participants (shareholders) need increased protection from various abuses. But in relation to limited liability companies, it loses its meaning, since LLCs under no circumstances can become public business companies - they have nothing to list on stock exchanges *(23) .

A public joint stock company may, by ceasing the circulation of shares on the market, become non-public and vice versa. Consequently, the adoption by a majority of shareholders at a general meeting of a decision to change the name of a joint-stock company, namely the inclusion of an indication of its public nature, as well as a decision to make appropriate changes to the charter, allows changing the status of this joint-stock company, According to clause 11 art. 3 Law No. 99-FZ, joint-stock companies created before the entry into force of this Law and meeting the characteristics of public joint-stock companies are recognized as public, regardless of the indication. At the same time, joint-stock companies created before September 1, 2014 (the date of entry into force of changes in the Civil Code ) and meeting the characteristics of public joint stock companies ( paragraph 1 of article 66.3 Civil Code of the Russian Federation) are recognized as public joint-stock companies, regardless of the indication in their corporate name that the company is public.

Information about the public status of a joint stock company must be known to all third parties directly from the name of this legal entity. Thus, a public joint-stock company is obliged to submit information about the company’s corporate name, containing an indication of its public status, for inclusion in the Unified State Register of Legal Entities. Also, this status must be reflected in the charter, approved by a decision of the shareholders meeting.

The following characteristics of public societies can be distinguished:

Firstly, the responsibilities for maintaining the register of shareholders of a public company and performing the functions of its counting commission should be assigned to a professional independent organization. The same organization will have to confirm the accuracy of the minutes of general meetings of public joint stock companies.

Secondly, in a public joint stock company the number of shares owned by one shareholder, their total par value, as well as the maximum number of votes granted to one shareholder cannot be limited.

Thirdly, public companies have a public reporting obligation.

As for non-public joint stock companies, their activities are less regulated by law. Yes, according to clause 3 art. 66.3 The Civil Code, by decision of the participants (founders) of a non-public company, adopted unanimously, the following provisions may be included in the company’s charter:

1) on transfer to the collegial management body of the company for consideration ( paragraph 4 of article 65.3) or the collegial executive body of the company on issues within the competence of the law general meeting participants of a business company, with the exception of issues:

making changes to the charter of a business company, approving the charter in a new edition;

reorganization or liquidation of a business company;

determining the quantitative composition of the collegial management body of the company ( paragraph 4 of article 65.3) and the collegial executive body (if its formation is within the competence of the general meeting of participants of the business company), election of their members and early termination of their powers;

determining the quantity, par value, category (type) of authorized shares and the rights granted by these shares;

increasing the authorized capital of a limited liability company disproportionately to the shares of its participants or by admitting a third party to the membership of such a company;

approval of internal regulations or other internal documents that are not constituent documents ( paragraph 5 of article 52) business company;

2) on assigning the functions of the collegial executive body of the company to the collegial management body of the company ( paragraph 4 of article 65.3) in whole or in part or on refusal to create a collegial executive body, if its functions are carried out by the specified collegial management body;

3) on the transfer to the sole executive body of the company of the functions of the collegial executive body of the company;

4) about the absence of an audit commission in the company or about its creation exclusively in cases provided for by the company’s charter;

5) on a procedure different from the procedure established by laws and other legal acts for convening, preparing and holding general meetings of participants of a business company, making decisions by them, provided that such changes do not deprive its participants of the right to participate in the general meeting of a non-public company and to receive information about it;

6) on requirements that differ from the requirements established by laws and other legal acts for the quantitative composition, procedure for the formation and holding of meetings of the collegial management body of the company ( paragraph 4 of article 65.3) or the collegial executive body of the company;

7) on the procedure for exercising the pre-emptive right to purchase a share or part of a share in the authorized capital of a limited liability company or the pre-emptive right to acquire shares placed by a joint-stock company or securities convertible into its shares, as well as on the maximum share of participation of one participant of a limited liability company in the authorized capital capital of the company;

8) on the assignment to the competence of the general meeting of shareholders of issues not related to it in accordance with this Code or by law about joint stock companies;

9) other provisions in cases provided for by laws on business companies.

The question of the need to divide business companies into public and non-public arose quite a long time ago. In fact, such a division existed before, but it was not legally formalized.

This is due to the fact that the overwhelming number of open joint-stock companies, despite their organizational and legal form, have always been non-public companies in their essence. They did not carry out public subscriptions for securities, and their securities were not traded on exchanges. However, the largest joint stock companies could be classified as public companies, since their shares were publicly subscribed and traded on the stock exchange.

However, due to the fact that at one time, as part of the privatization of state and municipal property, the organizational and legal form of an open joint stock company was essentially imposed on most of them, they were forced to comply with legal requirements for information disclosure, while incurring various types of costs . Many joint stock companies were faced with the threat of penalties for violation or improper fulfillment of these requirements by the regulator. And this despite the fact that the information coming from such joint stock companies into the information field of the securities market was of little interest to its participants, thereby clogging it.

The fundamental difference between public and non-public companies is that mandatory regulation is applied to a greater extent to public companies, excluding freedom of discretion for companies that attract funds from an indefinite number of investors. Whereas in relation to non-public companies GK RF, taking into account the changes made by law N 99-ФЗ, allows for dispositive (permissive) regulation, providing the opportunity to choose one or another option.

There are few public companies in Russia; the vast majority of joint stock companies are non-public. Combined with the predominant organizational and legal form of a limited liability company in Russia (94% of the total number of commercial organizations *(24) ) non-public companies make up the vast majority of legal entities in the business sector. The application of discretionary regulation to all these subjects allows us to draw a conclusion about the liberalization of Russian legislation in the field of entrepreneurial activity.

The concept and characteristics of a public society

Public and non-public societies are organized and operate in accordance with the law.

The activities of organizations are regulated by regulations and provisions of the Civil Code Russian Federation.

The division into public and non-public companies became relevant after the adoption of changes to legislation in 2014.

The main differences between public and non-public companies concern manipulation of shares.

A public company is a form of functioning of a legal entity, which implies the free circulation of company shares on the market. Shareholders, members of the company, have the right to alienate shares that belong to them.

Characteristic features of a public society:

• Shares are traded freely on the market.
• There is no need to open a savings account.
• Before registration, you do not need to deposit funds to form the authorized capital.
• There are no restrictions on the number of shareholders.
• Investment processes are transparent and public.

The governing body of the company is the meeting of shareholders. The meeting can make decisions and regulate the activities of the company within the framework provided by the law.

The competence of the meeting of shareholders includes important issues of the activities of a legal entity. Current management is carried out by the director or directorate, who are the executive branch of the company.

The board of directors also has the right to resolve all issues, with the exception of problems within the competence of the meeting of shareholders.

The audit commission performs the control function.

Feature: members of the board of directors cannot be members of audit commission.

A meeting of the company's shareholders is held annually - the dates must be specified in statutory document organizations.

The concept and characteristics of a non-public company

Non-public company is a form of organization of a legal entity, distinctive feature which is the lack of possibility of free alienation of shares. Shares are distributed only among the founders.

Signs and features of a non-public company:

• Limited number of society members (the number should not exceed 50).
• Capital can be money, securities, property.
• The closed nature of the distribution of shares.
• There is no indication of the public nature of the company in the charter document.
• A restriction on the authorized capital has been introduced - no less than 10,000 rubles.
• Shares cannot be listed on stock exchanges.

The registrar maintains the register of company participants. Shareholder decisions must be confirmed by a registrar or notary.

Features of public and non-public companies

Features of the activities of public and non-public companies are determined by legal norms.

The main law regulating the activities of legal entities is the Civil Code.

Recent changes in legislation concern the organization and features of the work of societies:

• Decisions made by members of the society must necessarily be confirmed by a registrar or notary - thus, the procedure has become more complicated, since before the introduction of such changes confirmation was not mandatory.
• A provision has been introduced requiring an annual audit.
• Liquidation of this legal entity is impossible if the company has not paid all obligations to creditors.
• If a reorganization is carried out, it is necessary to secure all changes in the transfer deed - without this, it is impossible to transfer rights and obligations to the legal successor.
• One organization, by law, can have several directors.
• When registering, do members of the company have to pay? authorized capital, the remaining amount - within a year after the moment of official registration.
• If capital is contributed not by money, but by property, it is necessary to use the services of an independent property appraiser. Capital can be formed by securities.
• Financial responsibility lies with the managers - if necessary, creditors can demand that the manager cover losses.

Charter of the company, list of provisions that may be included in it

The charter of the company is the main document on which the activities of the partnership are based, has a regulatory nature and determines the features of the functioning of the legal entity.

The provisions of the document are accepted by shareholders upon registration of the company.

The document must indicate the norms and rules of internal and external relations of the company.

The Charter contains a general and a special part.

The first contains general provisions of activity and their relationship with the laws of the state.

The special part reflects individual characteristics and signs of the activities of a legal entity, therefore this part cannot be identical for two different companies.

The text of the document must indicate:

• Name of company.
• Address/Metro of registration of the company.
• Type of legal entity.
• Features of the organization's capital.
• Rights of society participants.
• Features and controls.
• Responsibility of participants.

The charter must reflect the specifics of electing the audit commission, holding meetings of shareholders, and paying income on shares.

Concept and functions of a corporate agreement

Corporate agreement (agreement) - characteristic economic society. For the legal field of the Russian Federation, this documentation is an innovation. The purpose of signing a corporate agreement is to fix an agreement on the implementation of certain corporate rights.

The text of the agreement may indicate actions and methods for exercising corporate rights by legal means. Participants of a company who have decided to enter into a corporate agreement must notify the company of which they are members.

A corporate agreement is concluded between members of an organization and represents the interests of this category of participants of a legal entity.

Information presented in the contract is publicly available if we're talking about about public societies. In non-public companies, the information specified in the contract is confidential - this is an important feature of this type of company.

The information specified in the corporate agreement can expand and clarify the provisions of the organization's charter.

The parties to the agreement, by signing this document, can regulate certain aspects of the management of the organization, exercise rights or refuse to exercise them, in certain circumstances.

Participants may, in accordance with the agreement, acquire or alienate shares of the authorized capital. The provisions of the agreement must not contradict the law.

A corporate agreement cannot:

• Force a participant to vote in a certain way;
• Determine or change the structure and features of management of a legal entity;
• Change the competence of functional units of a legal entity, whose functions are defined by the constituent documents;
• Create certain obligations for persons who did not participate in signing the document;
• Disclose the information contained in the document, unless otherwise permitted by law.

The presence of contradictions between the text of the agreement and the charter of the company does not make the agreement invalid.

Also, the validity of the contract is not interrupted if one of the participants withdraws from this agreement and terminates the right of a party to the contract.

If all participants of the company are members of the corporate agreement, a decision that contradicts its provisions may be declared invalid.

An important feature of the document is that it is drawn up in writing and must be signed by the parties to this agreement.

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Types of joint stock companies

Comparison Public and non-public joint stock companies

Doner 12/20/2018 21:24

Good afternoon The main difference is the different placement and circulation of shares. PJSC: all of its securities and shares are offered by public offering and are publicly traded in accordance with applicable securities laws. NAO: operate closed, their shares or securities cannot be placed by public subscription, since they are not publicly traded. Minimum authorized capital PJSC: 100 thousand rubles. NAO: 10 thousand rubles. Differences in controls PJSC: A board of directors (collegial management body) must be assembled, which includes at least 5 members. At the general meeting, only those issues that fall within its competence in accordance with the law are discussed. It is impossible to delegate certain powers of the general meeting to the board of directors. NAO: it is not necessary to assemble a board of directors. If it is created, it can assume all the functions of the board. The General Meeting is able to independently resolve issues that are not provided for by law. However, it is better to spell this out in the charter in advance. If any issues relate to the competence of the general meeting, they can be referred to the board of directors. Scope of Disclosure PJSC: they must disclose the information completely, plus they do not have the right to hide the content of the corporate agreement. NAO: are not required to disclose information or may provide it incompletely. The importance of confirming the adoption of a certain decision by shareholders, and is it necessary to indicate which shareholders were present? PJSC: information can only be confirmed by the holder of the register, just like the composition of shareholders. NAO: The registry holder can also confirm the information, but his duties can be delegated to a notary. Who usually gives consent to the alienation of a block of shares? PJSC: No one’s consent is needed, and it is also impossible to establish a rule requiring it to be obtained. NAO: No one's consent is required. But sometimes, the charter contains information about obtaining the consent of certain shareholders or the company to alienate shares. Who has the right to purchase shares? PJSC: shareholders cannot receive any preference to purchase shares. But there are exceptions - this right applies to additionally issued shares, as well as securities convertible into shares. NAO: provides in advance in its own charter the rights of shareholders, incl. for the purchase of shares if they are sold by other shareholders. What is the purpose of limiting the number of shares a particular shareholder owns? Do such shares have a par value, and is the maximum number of votes granted to one shareholder taken into account? PJSC: All of the above restrictions are absent. NAO: Some of the restrictions can be prescribed in the charter, taking into account the decision of the shareholders, which they made unanimously. What determines the name of a joint stock company? PJSC: It is impossible to do without the word “public”; accordingly, the abbreviated name of the company will begin with the word “PJSC”. NAO: The concept of “non-public” is not specified, it is not added anywhere, that is, you can get by with the phrase “JSC”. How is the placement of preferred shares carried out? PJSC: You cannot issue any preferred shares if their price is lower than the price of ordinary shares. NAO: on the contrary, they are able to place preferred shares if their price is less than ordinary shares.

Dubrovina Svetlana Borisovna 21.12.2018 14:31

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I agree with my colleague.

Zakharova Elena Alexandrovna 22.12.2018 10:00

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In connection with the reform of corporate law, the classification of business companies, which has become customary over a fairly long period of existence, has changed. Now there are no JSC and JSC. They were replaced by public and non-public ones. Next, let's look at the changes in more detail.

New categories: first difficulties

So, instead of OJSC and CJSC, public and non-public companies appeared. The law changed not only the definitions themselves, but also their essence and characteristics. However, the categories did not become equivalent. Thus, a closed joint-stock company cannot automatically become non-public, just as an open joint-stock company cannot become public. The accepted wording of the norms can be interpreted in two ways. There are not enough explanations today, and arbitrage practice absent at all. It is therefore not surprising that companies may encounter difficulties in the process of self-determination.

Goals of the new classification

Why was it necessary to introduce public and non-public companies? The rules for regulating intra-corporate relations that existed for closed joint stock companies and open joint stock companies, according to the rule-makers, turned out to be insufficiently clear. The new classification should presumably establish differentiated management regimes for companies that differ in the nature of their turnover and shares, as well as the number of participants.

The essence and characteristics of software

A joint stock company should be considered public in which shares and securities convertible into them are placed through open subscription or public circulation in accordance with the conditions established by regulations. The turnover is carried out within an indefinite circle of participants. Public society is distinguished by a dynamically changing and unlimited subject composition. Openness means that the company is focused on a wide range of participants. It is typical for a public society big number diverse shareholders. To maintain a balance of interests of participants, activities in such JSCs are regulated primarily by imperative norms. They prescribe standard, unambiguous rules of conduct for corporate participants. The use of provisions that cannot be changed at the discretion of the dominant entities of the company guarantees the attraction of investment.

PO activities

Public companies borrow on the stock market from an unlimited number of persons. These corporations cover a wide range of diverse investors. In particular, software interacts with the state, banks, investment companies, collective and pension investment funds, small individual subjects. The activities carried out by public companies, as mentioned above, are regulated by imperative norms. This indicates relatively little freedom within the corporate organization.

The essence of BUT

A company that does not meet the criteria established by law for a public company is considered non-public. The specified criteria are given in Art. 66.3 Civil Code. BUT - corporations that place securities within a predetermined circle of entities. They do not go into open circulation. In addition, BUT are based on a low-current asset - shares of an LLC. Public and non-public companies differ in the mechanisms used to manage internal corporate relations. Thus, non-profit organizations can use a special subject composition of participants. They have greater freedom of internal corporate self-organization.

Features of the functioning of NO

Activities carried out by non-public companies are regulated primarily by dispositive norms. They allow the introduction of individual rules of conduct for company participants at their discretion. Non-public companies do not borrow on the stock market.

Regulatory separation

Today, the border between imperative and discretionary management passes between JSC and LLC. The Civil Code reform has shifted it somewhat. However, according to some critics who analyze the order in which public and non-public joint stock companies exist today, there is some confusion when classifying them into any of the categories. However, there is another opinion on this matter. When corporations are included in public and non-public joint stock companies, the fundamental differences between the entities are not questioned. The features of the turnover of securities and shares are quite clearly expressed, which is the main feature for classification. The division into public and non-public societies is reduced solely to an attempt to form common governance regimes. At the same time, the expansion of the influence of dispositive norms does not apply to the features that distinguish the circulation of securities. Due to insufficient practice and the absence of a number of clear formulations, classifying some joint-stock companies as public and non-public companies is difficult.

Comparative characteristics

Public and non-public companies mainly differ in the method used to issue securities. How these procedures are carried out in NO and software is described above. Public offering of securities means alienation through open subscription. It is a way to increase the authorized capital of a corporation. The software carries out paid placement of an additional number of shares during the issue process among an unlimited number of entities. The method of alienation of securities is included in the decision on their issue. This document is approved by the board of directors and is registered with the state market regulator. Previously, it was the Federal Financial Markets Service of the Russian Federation and the Federal Commission for the Securities Market of the Russian Federation. Currently, the state regulator in the market is the Central Bank of the Russian Federation. After registration, the document must be kept by the issuer. Based on the text of the decision, it can be determined whether an open subscription of an additional number of shares was carried out or not. Public and non-public companies also differ in the method of circulation of securities. Turnover is the process of concluding civil transactions. They entail the transfer of ownership of shares (securities) after their first alienation following their release by the issuer (outside the issue procedure).

The sign is open appeal. What does it mean? This term should be understood as the turnover of securities (shares) within organized trading. Public circulation can also be carried out by offering them to an unlimited number of subjects. Among the ways to implement this opportunity is advertising. These provisions are established in Art. 2 Federal Law No. 93, which regulates the functioning of the securities market. It should be noted that shares can be circulated using different methods. In particular, it may be a one-time event. In this case, the appeal has a time limit. This, for example, could be a sale at auction to a wide range of people. Also, the appeal can have an unlimited duration. For example, this occurs when trading occurs on securities exchanges.