Federal law on joint stock companies

Article 2. Legal Status of Joint-Stock Company

1. A commercial organization whose charter capital is divided into a specified number of stocks certifying the rights of obligation of the participants of the company (stockholders) with respect to the company shall be deemed to be a joint-stock company (hereinafter: company).

Stockholders shall not be liable for obligations of the company and shall bear the risk of losses connected with its activity within the limits of the value of the stocks belonging to them.

Stockholders who have not fully paid up stocks shall bear joint and several responsibility for obligations of the company within the limits of the unpaid portion of the value of the stocks belonging to them.

2. The company shall be a juridical person and shall have in ownership solitary property taken into account on its autonomous balance sheet, may in its own name acquire and effectuate property and personal non-property rights, bear duties, and be a plaintiff and defendant in a court.

 

Article 3. Responsibility of Company

1. A company shall bear responsibility for its obligations with all of the property belonging to it.

2. A company shall not be liable for the obligations of its stockholders.

3. If the insolvency (or bankruptcy) of a company is caused by the actions (or failure to act) of its stockholders or other persons who have the right to give instructions binding upon the company or otherwise have the possibility to determine its actions, then subsidiary responsibility for its obligations may be placed on the said stockholders or other persons in the event of the insufficiency of the property of the company.

The insolvency (or bankruptcy) of a company shall be considered to be caused by the actions (or failure to act) of its stockholders or other persons who have the right to give instructions binding upon the company or otherwise have the possibility to determine its actions only if they have used the said right and/or the possibility for the purposes of the performance of actions by the company knowingly knowing that as a consequence thereof the insolvency (or bankruptcy) of the company shall ensue.

Article 7. Open and Closed Companies

1. A company may be open or closed, which shall be reflected in its charter and firm name.

2. The stockholders of an open company may alienate the stocks belonging to them without the consent of the other stockholders of this company. Such a company shall have the right to conduct an open subscription for stocks issued by it and shall effectuate the free sale thereof taking into account the requirements of this Federal Law and other legal acts of the Russian Federation. An open company shall have the right to conduct a closed subscription for the stocks to be issued by it except for instances when the possibility of conducting a closed subscription has been limited by the charter of the company or requirements of legal acts of the Russian Federation.

The number of stockholders of an open company shall not be limited.

3. A company whose stocks are distributed only among its founders or other previously determined group of persons shall be deemed to be a closed company. Such a company shall not have the right to conduct an open subscription for stocks to be issued by it or otherwise to offer them for acquisition to an unlimited group of persons.

The number of stockholders of a closed company must not exceed fifty.

If the number of stockholders of a closed company exceeds the limit established by this point, the said company within one year must be transformed into an open company. If the number of its stockholders is not reduced up to the limit established by this point, the company shall be subject to liquidation in a judicial proceeding.

The procedure and periods for the effectuation of the preferential right to acquire stocks being sold by stockholders shall be established by the charter of the company. The period for the effectuation of the preferential right may not be less than 30 or more than 60 days from the moment of the offer of the stocks for sale.

 

Article 16. Merger of Company

1. The merger of a company shall be deemed to be the arising of a new company be means of the transfer to it of all the rights and duties of two or several companies with the termination of the last.

2. The companies participating in a merger shall conclude a contract concerning the merger in which the procedure and conditions of the merger shall be determined, and also the procedure for converting the stocks of each company into the stocks and/or other securities of the new company. The Board of directors (or supervisory board) of the company shall submit for decision of the general meeting of stockholders of each company participating in the merger the question concerning reorganization in the form of merger, confirmation of the contract concerning the merger, and confirmation of the act of transfer.

4. In the event of the merger of companies, all the rights and duties of each of them shall pass to the company which newly arose in accordance with the act of transfer.

Article 17. Accession of Company

1. The accession of a company shall be deemed to be the termination of one or several companies with the transfer of all their rights and duties to the other company.

2. The acceding company and the company to which the accession is being effectuated shall conclude a contract concerning accession in which shall be determined the procedure and conditions of the accession, and also the procedure for converting the stocks of the acceding company to the stocks and/or other securities of the company to which the accession is being effectuated. The council of directors (or supervisory council) of each company shall submit for decision of the general meeting of stockholders participating in the accession the question concerning reorganization in the form of accession and concerning confirmation of the contract concerning the accession. The council of directors (or supervisory council) of the acceding company shall also submit for decision of the general meeting of stockholders the question on confirmation of the act of transfer.

Article 23. Distribution of Property of Company Being Liquidated Among Stockholders

1. The property of the company being liquidated remaining after the completion of the settlement of accounts with creditors shall be distributed by the liquidation commission among the stockholders in the following priorities:

· in the first priority shall be effectuated the payments relating to stocks which must be purchased in accordance with Article 75 of this Federal Law;

· in the second priority shall be effectuated payments for dividends credited but not paid with regard to preferred stocks and the liquidation value of preferred stocks determined by the charter of the company;

· in the third priority shall be effectuated the distribution of property of the company being liquidated among the stockholders-possessors of common stocks and all types of preferred stocks.

2. The distribution of property of each priority shall be effectuated after the full distribution of property of the preceding priority. The payment by the company of the liquidation value of preferred stocks determined by the charter of the company being liquidated shall be effectuated after the payment in full of the liquidation value of the preferred stocks of the previous priority determined by the charter of the company being liquidated.

If the property existing in the company is insufficient for the payment of dividends credited but not paid and the liquidation value determined by the charter of the company for all stockholders-possessors of preferred stocks of one type, the property shall be distributed among the stockholders-possessors of this type of preferred stocks in proportion to the quantity of stocks of this type belonging to them.

Article 35. Funds and Net Assets of Company

1. A reserve fund in the amount provided for by the charter of the company, but not less than 15% of its charter capital, shall be created in the company.

The reserve fund of a company shall be formed by means of obligatory annual deductions until the attainment of the amount established by the charter of the company. The amount of annual deductions shall be provided for by the charter of the company, but may not be less than 5% of net profit until the attainment of the amount established by the charter of the company.

The reserve fund of a company shall be earmarked for the covering of its losses, and also for the cancellation of bonds of the company and the purchase of stocks of the company in the event of the absence of other means.

The reserve fund may not be used for other purposes.

3. The value of net assets of the company shall be valued according to the data of bookkeeping records in the procedure established by the Ministry of Finances of the Russian Federation and the Federal Commission for Securities and the Stock Market attached to the Government of the Russian Federation.

4. If at the end of this and each subsequent financial year in accordance with the annual bookkeeping balance sheet proposed for confirmation to the stockholders of the company or the results of an auditor verification the value of net assets of the company proves to be less than its charter capital, the company shall be obliged to declare a reduction of its charter capital up to the amount not exceeding the value of its net assets.

5. If at the end of the second and each subsequent financial year in accordance with the annual bookkeeping balance sheet proposed for confirmation to the stockholders of the company or the results of an auditor verification the value of net assets of the company proves to be less than the amount of the minimum charter capital specified in Article 26 of this Federal Law, the company shall be obliged to adopt a decision concerning its liquidation.

6. If in the event provided for by point 5 of this Article the decision concerning the reduction of charter capital of the company or liquidation of the company was not adopted, its stockholders, creditors, and also agencies empowered by the State shall have the right to demand the liquidation of the company in a judicial proceeding.

 

Vocabulary:

 

charter capital	- уставный капитал
stock	- акционерный капитал, акции
stockholder	- акционер, держатель акций
plaintiff	- истец
insolvency	- неплатежеспособность
ensue	- происходить, получаться (в результате чего-либо), следовать
alienate	- отчуждать собственность
open (closed) subscription	- открытая (закрытая) подписка на акции, распределение акционерного капитала
preferential rights	- преимущественное право
accession	-присоединение (собственности)
preferred stock	- привилегированные акции
liquidation value	- ликвидационная стоимость
attainment	- приобретение

 

Exercises:

 

Exercise 1. Find equivalents in English:

Выносить на решение, привилегированные акции, ликвидационная стоимость, обыкновенные акции, начисленные дивиденды, раздельная и солидарная ответственность, отдельный баланс, истец и ответчик, переуступка права, резервный фонд, обязательные вычеты, чистая прибыль, отчетный год.

Exercise 2. Translate into English:

Статья 16. Слияние

1. Слияние Компании понимается как создание новой компании путем переуступки всех прав и обязательств двух или более компаний с последующей ликвидацией последних.

2. Компании, принимающие участие в слиянии заключают договор о слиянии, который определяет процедуру и условия слияния, а также процедуру перевода акций компаний в акции создаваемой Компании. Правлением Компании выносится на решение общего собрания акционеров каждой компании, участвующей в слиянии, вопрос о реорганизации в форме слияния, утверждении договора о слиянии, и утверждении акта перевода акций.

4. В случае слияния компаний, все права и обязанности участвующий компаний переуступаются создаваемой Компании, согласно договору о переводе.