The right of ownership of legal entities: how it is formed, to whom it is transferred

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Legal entities, by definition, are created in order to be independent units of market or social relations. Therefore, the ownership of legal entities is legally separated from the ownership of individuals. By creating a commercial organization in any legal form (whether it is a limited liability company or a business partnership), an individual transfers certain of his property (most often it is monetary contributions - authorized capital) to the ownership of the new organization. Consequently, this property, including financial, cash receipts and funds, intangible assets, falls under the ownership of legal entities (as market participants).

The right of private property of legal entities is designed to ensure, first of all, the observance of the interests of creditors. This is the reason for the legal requirements that a legal entity own property. In many countries, a prerequisite for the formation of a company is the presence of a certain material support - authorized capital or property - and the sizethis material support, as a rule, has only a lower limit. That is, the ownership of legal entities implies that there are no upper limits (they cannot be, by definition), while the minimum level of authorized capital is determined differently everywhere (from 1 pound in the UK to several tens of thousands of euros, say, in Germany). At the same time, the subjects of ownership of legal entities are either the legal entity itself, or its branches, divisions, subsidiaries.

Legislators, in order to ensure the fulfillment of obligations of legal entities, also determine the immutability of the monetary expression of tangible and intangible assets. For example, in theory, the property rights of legal entities can also extend to know-how, knowledge, experience, developments, intellectual property and copyright. However, intangible assets cannot be the only property! Such measures are designed to exclude abuses and the formation of empty organizations, one-day, fraudulent firms that assume obligations that they obviously cannot fulfill, since they do not have the appropriate material support.

If a legal entity functions normally in the market, generating profit that can already be divided between investors, owners, owners, then everything that the organization acquires (including land, real estate, means of transport,equipment, right of claim, bank accounts, etc.) or receives from individuals and legal entities - remains in its ownership. The situation is more complicated when the organization becomes insolvent and is forced to undergo bankruptcy proceedings. In this situation, ownership is of particular importance. Legal entities are not affected by the automatic transfer of the right to the owners of the company, which may be individuals. First, the property of the organization is assessed, then a bankruptcy estate is formed, from which debts and obligations to creditors are paid off first. And only from the amount that remains after the payment of all debts (liquidation quota) can the property of the owner - an individual who previously transferred it to the ownership of a legal entity, be reimbursed in property or money terms. If we are talking about a non-profit organization (i.e., originally created not for the purpose of making a profit), then a private person will not be able to receive back contributions or property transferred to it.