Public and non-public companies: law and regulation

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

In connection with the reform of corporate law, the classification of business entities has changed, which has become familiar over a fairly long period of existence. Now there is no OJSC and CJSC. They were replaced by public and non-public business companies. Let's take a closer look at the changes below.

New categories: first challenges

So, instead of OJSC and CJSC, public and non-public companies appeared. The law changed not only the definitions directly, but also their essence and features. However, the categories are not equivalent. Thus, a CJSC cannot automatically become non-public, just like an OJSC cannot become public. The adopted wording of the norms can be interpreted in two ways. Explanations today are not enough, and there is no judicial practice at all. In this regard, it is 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-publicsociety? Rules for regulating intra-corporate relations that existed for CJSCs and OJSCs, according to the rule-makers, were not clear enough. The new classification is supposed to establish differentiated management regimes for companies that differ in the nature of the turnover of securities and shares, as well as the number of participants.

The essence and features of software

A public joint-stock company should be considered a joint-stock company in which the shares and securities convertible into them are placed through an open subscription or public circulation in accordance with the conditions established by regulatory enactments. The turnover is carried out within an indefinite circle of participants. A 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. A public company is characterized by a large number of diverse shareholders. In order to maintain a balance of interests of the participants, activities in such joint-stock companies are regulated mainly by imperative norms. They prescribe standard, unambiguous rules for the behavior of corporate participants. The use of provisions that are not allowed to be changed at the discretion of the dominant subjects of the company guarantees the attraction of investments.

Software activities

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

Essence BUT

A company is considered non-public if it does not meet the criteria established by law for a public company. These criteria are given in Art. 66.3 of the Civil Code. BUT - corporations that place securities within a predetermined circle of entities. They are not released to the public. In addition, BUT are based on a low-turnover asset - shares of the authorized capital of an LLC. Public and non-public companies differ in the mechanisms used to manage internal corporate relations. Thus, DOs can apply special methods of control of the subject composition of participants. They have greater freedom of internal corporate self-organization.

Features of functioning BUT

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

Normative separation

Today, the border betweenimperative and dispositive management takes place between JSC and LLC. The reform of the Civil Code 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 between different types of companies when they are assigned to 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 entities are not called into question. 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 regimes of governance. 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, it is difficult to classify some JSCs as public and non-public companies.

Comparative characteristics

Public and non-public companies mainly differ in the way that is used when placing securities. How these procedures are carried out in DOs and software is described above. Under the public offering of securities understand the alienation through an open subscription. It is a way to increase the share capital of a corporation. The SO carries out paid placement of an additional number of shares in the process of issue among an unlimited number of subjects. Methodalienation 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, the Federal Financial Markets Service of the Russian Federation and the Federal Securities Commission of the Russian Federation acted as it. 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. According to the text of the decision, it is possible to establish whether an open subscription of an additional number of shares was carried out or not. Public and non-public companies also differ in the way of circulation of securities. Turnover is a process of concluding civil law transactions. They entail the transfer of ownership of shares (securities) after their first alienation, following their release by the issuer (outside the issue procedure).

A sign of a public joint stock company is open circulation. 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 mass of subjects. Among the ways to implement this feature, there is also advertising. These provisions are established in Art. 2 of the Federal Law No. 93, which regulates the functioning of the securities market. It should be noted that the circulation of shares can be carried out by different methods. In particular, it may be a one-time event. In this case, the appeal has a time limit. This, for example, may be a sale at auction, an auction to a wide range of people. Also, the call may haveunlimited duration. For example, this happens when the turnover is carried out on stock exchanges.