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Unit 1. Company Law.

Vocabulary
authorization n 1 ; 2
balance sheet n
bylaw n ;
capital gain n ; pl
cease v
collateral adj
investment (trust) company . : ,
, ,
.

.
sister company (
)
conform n
constitute v
continuity n ,
corporate body n
debenture n ,
duty of care n
entity n ,
corporate entity ,
legal entity 1 ; 2 ; syn. legal person
equity n 1 ; 2 ; 3
; 4 ; ()

equities
fiduciary duty n , ;

flexibility n
gains n ,
interest n ()
interest in a business
interest in profits
issuance n
lift the veil
liquidator (, )
nominal value of the shares ;
;
perpetrate fraud v /
perpetual adj
preclude n
profit- and- loss account n
promoter v ()
proprietor n
proxy n ;
receiver n ( ); official receiver

reduce v ;
Registrar of Companies
reluctant adj
securities n ;
share n
ordinary share
stock n . , ; ; . ;
;
stockholder n . ;
trader n 1 ; 2

Text
Introduction to Company Law
This text provides an introduction to the key terms used when talking about
companies as legal entities, how they are formed and how they are managed. It
also covers the legal duties of company directors and the courts role in policing
them.

1 Read the text quickly, then match these phrases (a-f) with the paragraphs

(1-6).

a directors duties b management roles c company definition


d company health e partnership definition f company formation
1 A company1 is a business association which has the character of a legal
person, distinct from its officers and shareholders. This is significant, as it
allows the company to own property in its own name, continue perpetually
dispute changes in ownership, and insulate the owners against personal
liability. However in some instances, for example when the company is
used to perpetrate fraud or acts ultra vires, the court may lift2 the
corporate veil and subject the shareholders to personal liability.

2 By contrast, a partnership is a business association which, strictly speaking,


is not considered to be a legal entity but, rather, merely an association of
owners. However, in order to avoid impractical results, such as the
partnership being precluded from owning property in its own name, certain
rules of partnership law treat a partnership as if it were a legal entity.
Nonetheless, partners are not insulated against personal liability, and the
partnership may cease to exist upon a change in ownership, for example,
when one of the partners dies.

3 A company is formed upon the issuance of a certificate of incorporation3


by the appropriate governmental authority. A certificate of incorporation is
issued upon the filing of the constitutional documents of the company,
together with statutory forms and the payment of a filing fee. The
constitution of a company consists of two documents. One, the
memorandum of association4, states the object of the company and the
details of its authorized capital. The second document, the articles of
association5, contain provisions for the internal management of the
company, for example, shareholders annual general meetings6, or AGMs,
and extraordinary general meetings7, the board of directors, corporate
contracts and loans.

4 The Management of a company is carried out by its officers, who include a


director, manager and/or company secretary. A director is appointed to carry
out and control the day-to-day affairs of the company. The structure,
procedures and work of the board of directors, which as a body govern the
company, are determined by the companys articles of association. A
manager is delegated supervisory control of the affairs of the company. A
managers duties to the company are generally more burdensome than those
of the employees, who basically owe a duty of confidentiality to the
company. Every company must have a company secretary, who cannot also
be the sole director of the company. This requirement is not applicable if
there is more than one director. A companys auditors are appointed at
general meetings. The auditors do not owe a duty to the company as a legal
entity, but, rather, to the shareholders, to whom the auditors report is
addressed.
5 The duties owed by directors to a company can be classified into two
groups. The first is a duty of care and the second is a fiduciary duty. The
duty of care requires that the directors must exercise the care of an ordinarily
prudent and diligent person under the relevant circumstances. The fiduciary
duty stems from the position of trust and responsibility entrusted to
directors. This duty has many aspects, but, broadly speaking, a director must
act in the best interests of the company and not for any collateral purpose.
However, the courts are generally reluctant to interfere, provided the
relevant act or omission involves no fraud, illegality or conflict of interest.

6 Finally, a companys state of health is reflected in its accounts 8, including its


balance sheet and profit-and-loss account9. Healthy profits might lead to a
bonus10 or capitalization issue11 to the shareholders. On the other hand,
continuous losses may result in insolvency and the company going into
liquidation.

1 5
(US) corporation (US) bylaws
2 6
(US) pierce (US) annual meetings of the shareholders
3 7
(US) generally no official certificate is issued; (US) special meetings of the shareholders
companies are formed upon the filing of the
8
articles/certificate of incorporation (see footnote 4) (US) financial statements
9
4
(US) articles of incorporation or certificate of (US) profit-and-loss statement or income statement
incorporation 10
(US) stock dividend
11
(US) cash dividend

Answer the following questions:


1. What is a company?

2. What are the main traits of a company?

3. When may the court lift the corporate veil?

4. What is a partnership?

5. When may the partnership cease to exist?

6. How is a company formed?

7. What document does the constitution consist of?

8. What does the company`s articles of association determine?

9. What are the duties owed by directors of a company?


10. What are the main accounts of a company?

11. What leads to capitalisation issue?

12. What may results in insolvency?

Vocabulary exercises
I. Complete the following sentences by translating the phrases into E.

1. A company is a business association which has the character of . ,


.

2. states the object of the company and the


details of its .

3. The main duties owed by directors are


.

4. However, the courts , provided the relevant act or


omission involves no ,
.

5. The court and subject


.

6. Company`s accounts include


.

Check your answers

1. A company is a business association which has the character of a legal person,


distinct from its offers and shareholders.

2. Memorandum of association states the object of the company and the details of
its authorized capital.

3. The main duties owed by directors are duty of care and fiduciary duty.

4. However, the reluctant of interfere, provided the relevant act or omission


involves no , fraud, illegality or conflict of interest.

5. The court may lift corporate veil and subject


.

6. Company`s accounts include balance sheet and profit-and-loos account.


II. Match the roles in company management (1-10) with their definitions (a-j).

1 auditor a person appointed by a shareholder to attend and vote


at a meeting in his/her place when the shareholder is
unable to attend
2 company secretary b company director responsible for the day-to-day
operation of the company
3 director c person elected by the shareholders to manage the
company and decide its general policy
4 liquidator d person engaged in developing or taking the initiative
to form a company (arranging capital, obtaining
personnel, making arrangements for filing corporate
documentation)
5 managing director e person appointed by the company to examine the
companys accounts and to report to the
shareholders annually on the accounts
6 official receiver f companys chief administrative officer, whose
responsibilities include accounting and finance
duties, personnel administration and compliance
with employment legislation, security of
documentation, insurance and intellectual property
rights
7 promoter g member of the company by virtue of an acquisition
of shares in a company
8 proxy h officer of the court who commonly acts as a
liquidator of a company being wound up by the
court
9 receiver i person appointed by creditors to oversee the
repayment of debts
10 shareholder j person appointed by a court, the company or its
creditors to wind up the companys affairs
Check your answers

1-e/ 2-f / 3-c/ 4-j/ 5-b/ 6-h/ 7-d/ 8-a/ 9-i/10-g/

III. Match each verb (1-5) with the noun in collocates with (a-e).

1. violate a affairs
2. call b representation
3. overturn c a meeting
4. gain d a decision
5. conduct e a law
Check your answers

1-e/ 2-c/ 3-d/ 4-b/ 5-a

IV. Choose the correct word or phrase to complete the sentence.

1. The constitution of a company comprises/consists of two documents.


2. The memorandum of association states/sets up the object of the company and
details its authorised capital.
3. The articles of association contain arguments/provisions for internal
management of a company.
4. The company is governed by the board of directors, whilst the day-to-day
management is delegated for/to the managing directors.
5. In some companies, the articles of association make/allow provision for rotation
of directors.
6. Many small shareholder do not bother shareholders` meetings and will often
receive proxy circular from the broad, seeking authorization to rote on the basic of/
on behalf of the shareholders.
Check your answers

1. The constitution of a company consists of two documents.


2. The memorandum of association states the object of the company and details its
authorised capital.
3. The articles of association contain provisions for internal management of a
company.
4. The company is governed by the board of directors, whilst the day-to-day
management is delegated to the managing directors.
5. In some companies, the articles of association make provision for rotation of
directors.
6. Many small shareholder do not bother shareholders` meetings and will often
receive proxy circular from the broad, seeking authorization to rote on behalf of the
shareholders.
Unit 2. Business organizations
Business organizations in the UK
Text
Types of BO in the UK
Concept
Business activity is organized in statutory forms. Each form, or type of
business organization, provides the responsibilities, rights and liabilities of
business owners. The major types of business organizations are: sole ownership
(sole proprietorship - US), partnership and limited liability company (corporation -
US).
Businesses and companies are created by people coming together tor mutual
benefit. There are different ways in which an organization can be created The form
selected will depend on the type of organization and the country it is in. It is
important to ensure that the right type of organization is created for the intended
activity: production of goods or rendering services.
Money raised for business creation is the capital or stock. Naturally, a sole
owner has the whole capital and partners have certain parts, or stakes. Company
members, who have invested their money into this business, have shares of the
capital.
Every business is supposed to grow and bring profits. Profits are divided
between the partners in partnership, or between shareholders m a company, and
only a sole owner gets all the profits. The liability for losses or debts is
proportionable to capital interest.
Sole Trader
In the United Kingdom the oldest form of business is sole trader. It means
that there is only one owner who, having invested his own money, is in charge of
the business, gets all the profits and bears the burden of the losses. In case of
bancruptcy he alone is liable for his debts.
Sole owner / trader may be a shopkeeper, a landlord, a window cleaners, a
painter, a decorator etc.
Partnerships
Two or more people may become partners, investing their money into
business so that each has his interest. They form a partnership by the agreement.
They agree to .distribute the profits and losses, so they are also liable for their
debts. A partnership agreement is not a legal requirement in Britain but is usually
considered to be essential as means of distribution of profits and costs.
Partnerships are usually formed by groups of accountants, solicitors,
architects, auditors, consultants, and other professionals.
Legally sole traders and partners are natural persons. In any legal
wrongdoing they can be charged and sued.
Limited Liability Company (Ltd.)
A limited liability organization is a company created with the money
invested by shareholders, who own shares and receive a share certificate, which
confirms ownership of the shares. The shareholders do not own the company but
they own the shares and control the business by appointing the directors. This
separation of ownership limits the liability of shareholders so that in the event of
bankruptcy the shareholders cannot be sued for the debts of the business.
Shareholders may lose the money they have invested in the business but their
personal income is not at risk.
Thus, a limited liability company is a legal entity, and its liability is limited
by the nominal value of the shares. The liability may be limited by guarantee, that
is, the liability of each member is limited to the amount he/she has personally
guaranteed (promised) to pay in the event of the company liquidation for debts.
In Britain there are two types of limited liability company:
Private limited companies (Ltd.)
Public limited companies (plc)

Most companies are private and recognised by the Ltd. in their title.
Public limited companies are recognised by the pic in their title.
A private limited company restricts the right to transfer its shares, limits its
members to fifty (but minimum of two), and must not invite the public to subscribe
for its shares and debentures.
A public limited company can offer its shares and debentures to the public;
there is no restriction to transfer the shares to other persons. There is no limit to the
total number of its members except that there must be at least seven.
Manufacturing and most services are private limited companies: banks,
insurance companies, hotels etc. Airlines and private utilities are also in this
category. When state-owned utilities (gas, electricity, water and telecoms) are
privatized they are usually created as public limited companies.

Answer the following questions:


1. What is the aim of companies creation?

2. What are the major types of business organizations?

3. Who does the capital belong to?

4. How are profits of a business organization devided?

5. What are business organizations in the UK?

6. What is sole trader?


7. What is partnership?

8. How is partnership formed?

9. What is a limited liability company?

10. What is the liability of shareholders in a company?

11. What are the two types of limited liability company?

12. What is plc?

13. What is Ltd?

14. How many members are there in each type of business organizations?

15. What business activity is typical for each type of business organizations?

Vocabulary exercises
I. Make the following sentences complete by translating the phrases in
brackets.

1. A limited liability company is (.), and its liability is limited by


( ).

2. A public limited company can offer its ( ) to the public.

3. Shareholders own shares and receive ( ) which


confirms ( ).

4. This separation of ownership ( ) so


that in the event of () the shareholders cannot be sued for (
).

5. The liability for ( ) is proportionable to capital interest.

6. Subsidiaries of the same holding are also called (-,


).

Check your answers

1. A limited liability company is legal entity, and its liability is limited by nominal
value of shares.

2. A public limited company can offer its shares and debentures to the public.
3. Shareholders own shares and receive share certificate which confirms
ownership of the shares.

4. This separation of ownership limits the liability of shareholders so that in the


event of bankruptcy the shareholders cannot be sued for the debts of the business.

5. The liability for debts and losses is proportionable to capital interest.

6. Subsidiaries of the same holding are also called affiliate, sister or daughter
company.

II. Find the following E word combinations and translate them into Russian.

1. statutory forms

2. subscribe for shares

3. raise money

4. capital interest

5. bring profit

6. bear the burden

7. nominal value of the shares

8. state-owned unilities

9. invest money

10. form a company

Check your answers

1.

2.

3.

4.

5.

6.

7.
8.

9.

10.

III. What type of organization will be appropriate for:

1. a photographer who intends to open a photoshop;

2. a family who dream to join in a restaurant business;

3. three solicitors who specialize in business law;

4. two businessmen who are going to start manufacturing gifts;

5. two truckdrivers and a barge capitain intending to start a shipping business;

6. some architects and two owners of small construction firms who have decided to
join in a perspective development business.

IV. Complete the text using the phrases from the box.

mutual benefit The form selected intended activity invested money


rendering services the capital or stock bring profits

Business and companies are created by people coming together for


1) ______________ . There are different ways in which an organization can be
created. 2) ______________ will depend on the type of organization and the
country it is in. The right type of organization is created for 3) ______________ :
production of goods or 4) ______________ . Money raised for business creation is
5) ______________ . A sole owner has the whole capital and partners have certain
parts, or stakes. Company members, who have 6) ______________ into this
business, have shares of the capital. Every business is supposed to grow and 7)
______________.
Check your answers

1 - mutual benefit, 2 - The form selected, 3 - intended activity, 4 - rendering


services, 5 - the capital or stock, 6 - invested money, 7 - bring profits.
Test 1. Company Law.
Chose the correct version to complete the sentences.

1. ______________ requires that the directors must exercise the care of an


ordinary prudent and diligent person.
1. the duty of fidelity 2. the duty of care 3. fiduciary duty

2. The court may lift the corporate veil and subject the shareholders to
______________.
1. criminal liability 2. corporate liability 3. personal liability

3. A company is formed upon the issuance of ______________.


1. a certificate of incorporation 2. bylaws 3. articles of association

4. A person appointed by creditors to oversee the repayment of debts is


______________ .
1. director 2. receiver 3. liquidator

5. ______________ means the director must act in the best interests of the
company.
1. fiduciary duty 2. duty of care 3. duty of fidelity

6. A company`s state of health is reflected in its ______________.


1. certificate of incorporation 2. bylaws 3. accounts

7. The auditors do not owe a duty to the company as a legal entity, but to
______________ .
1. officers 2. shareholders 3. board of directors

8. The constitution of a company consist of ______________ documents.


1. ten 2. four 3. two

9. A manager is delegated ______________ of the affairs of the company.


1. supervisory control 2. judicial control 3. public control
10. A person appointed by a shareholder to attend and vote at meetings in his/her
place when the shareholder is unable to attend is ______________.
1. auditor 2. promoter 3. proxy
Check your answers

1 2, 2 3, 3 1, 4 2, 5 1, 6 3, 7 2, 8 2, 9 1, 10 3.
Test 1. Business organizations in the UK
Chose the correct version to complete the sentences.

1. Each form or type of business organization provides rights, responsibilities and


______________.
1. capital 2. liabilities 3. profit

2. A private limited company restricts the right to transfer its shares, limits its
members to ______________ .
1. fifty (but minimum to two) 2. at least 7 3. one hundred

3.The limited liability company is a legal entity and its liability is limited by the
______________.
1. ammount of capital 2. resolution of the general meaning
3. nominal value of shares

4. Legally sole trades and partners are ______________.


1. company 2. natural person 3. legal entity

5. The shareholders do not own the company but they own the shares and control
business by ______________.

1. setting policy company 2. selecting employees


3. appointing directors

6. Most companies are private and recognized by the ______________ in their


title.
1. plc 2. Ltd 3. CEO

7. Manufacturing and most services are ______________.


1. partnership 2. private limited company 3. sole traders

8. Joint stock companies is a special type of ______________.


1. partnership 2. trust 3. holding company
9. Shares express ownership interest and decision making power and are free
______________.
1. to transfer their shares 2. to pay dividends 3. approve loans

10. The companies whose share capital is in the holding are called
______________.

1. trust 2. subsidiaries 3. joint stock companies

Check your answers

1 2, 2 1, 3 3, 4 2, 5 3, 6 2, 7 2, 8 1, 9 1, 10 2.
Unit 3. Types of BO in the USA
Vocabulary
sole proprietorship

general partnership

limited partnership

transfer the interest ,

non-profit corporation

enterprise n.

statutory requirement

statutory authorization

charter n. ,

income tax

net profits

association n. ,

corporate law ,

close corporation

nonprofit corporation ,

Text
Business Organizations in the USA

In the USA business may be conducted through a variety of organizational


structures. A specific business structure is generally chosen for liability and/or tax
reasons. The three most common types of business organizations are sole
proprietorships, partnerships and corporations.
Sole Proprietorship
This is the simplest form of business. The owner has unlimited liability for
debts of the business.
This is a very common business in the US. Usually these are small
enterprises, like a home workshop or office, but they may be quite big, especially
in restaurant or hotel business. These are quite easy to start, but rather risky to run.
The proprietor is responsible for his/her business so he/she gets all the profits but is
liable for his/her debts.
Profits are taxed as income to the owner personally. The owner has complete
control of the business but faces unlimited liability for its debts. Since this is a
fairly simple type of legal structure, there is very little government regulation and
reporting. A sole proprietorship applies for a business permit at the local office.
Partnership
Two or more individuals are the owners who have agreed to establish and
run a business for profit and form a partnership. There are two types of partnership:
general partnership - a partnership in which each partner has managerial
power and unlimited liability for partnership debts;,,
limited partnership - a partnership that must conform to state statutory
requirements and have one or more general partners and one or more limited
partners who have limited liability and do not share the management.
A partnership exists when two or more persons join together in the operation
and management of a business venture. Partnerships, like sole proprietorships, are
subject to relatively little regulation and are fairly easy to establish. A formal
partnership agreement is recommended in order to foresee potential conflicts
before they arise; for example, who will be responsible for performing each task,
what, if any, consultation is needed between partners before major decisions are
made, etc. Under a general partnership, each partner is liable for all debts of the
business. All profits are taxed as income to the partners based on their percentage
of ownership. A general partnership, like sole proprietorship, registers a business
name with the country/city clerk`s office in which the business is located.
Like a general partnership, a limited partnership is established by an
agreement between two or more individuals. In a limited partnerships however,
there are two types of partners. A general partner, unlike a limited partner, has all
rights in management and greater control in some aspects of the partnership; for
instance, only a general partner can decide to dissolve the partnership. Profits are
shared according to the agreement, so limited partners only receive a share of
profits based on the amount on their investment. General partner's liability is
unlimited, as for limited partners their liability is limited in proportion to their
investment.
Corporation
A distinct legal entity that exists separately from its shareholders and created
under state law. Four traits of the corporation are: limited liability centralized
management, continuity of life and free transferability of interests.
A corporation consists of shareholders, who elect the board of directors to
manage the business, and the board employs people to work for the company. So,
the corporation is a complex form of business organization that consists of three
groups: shareholders, directors and employees. The corporation can own assets,
borrow money, and perform business functions without directly involving the
owner(s) of the corporation. The liability of the owners is limited to their
investments: in case of liquidation for debts the shareholders receive the share they
invested in the enterprise. The corporation, therefore, is subject to more
government regulations than proprietorships or partnerships. It is created by
statutory authorization. Corporations are subject to "double taxation" - the
corporation as a legal entity pays income tax on net profits, and shareholders pay
income tax on their dividend earnings.
An LLC combines selected corporate and partnership characteristics while
still maintaining status as a legal entity apart from its owners. As a separate entity,
it can acquire assets, incur liabilities and conduct business. As the name implies,
however, it provides limited liability for the owners. LLC owners risk only their
investment. Personal assets are not at risk.

Answer the following questions:


1. How is a specific business structure chosen?

2. What are common types of business organizations?

3. What is sole proprietorship?

4. Why is sole proprietorship a simple type of legal structure?

5. What is a partnership?

6. What are the types of partnership?

7. Why is formal partnership agreement recommended?

8. What is the different between general and limited partnership?

9. What is corporation?

10. What are the four traits of the corporation?

11. What are subtypes of the corporation?

12. What legal entity or individual has: 1) limited liability,

2) unlimited liability.
Vocabulary exercises
I. Find in the text below E equivalents for the following words and
expressions.

1
, 2, 3 ,
4
, 5, 6 ,
7
, 8

Sole proprietorship
In this form, the owner is the business. Sole proprietorships are very
common constitute over two-thirds of all American businesses. They are also
usually small enterprises. Sole proprietors can own and manage any types of
business from home-office undertaking to a huge restaurant or construction firm. A
major advantage of sole proprietorship is that the proprietor receives all the profits
(because he/she takes all the risks). It is easier and less costly to start sole
proprietorship. The sole proprietor is free to make any decision. He/she pays only
personal income taxes on profit. But the major disadvantage of the sole
proprietorship is that the proprietor alone, as sole owner, bears the burden of any
losses or liabilities.
Check your answers

1. the burden
2. the owner
3. home-office undertaking
4. small enterprises
5. the profits
6. income taxes on profit
7. manage business
8. takes all the risks

II. Complete the following text by using an appropriate word or phrase from the
box.
income general partners limited liability management
joint undertaking carry on business statute shared
agreement

General partnership
A partnership is a 1) ______________ that is created by 2) ______________,
written or not, between two or more persons to 3) carry on business for profit.
Partners take part in the 4) ______________ of the business. Partner`s profit is
taxed as individual 5) ______________.
Limited partnership
A special and popular form of partnership, which consists of at least one or more 6)
______________and one or more limited partners. General partners have all rights
in management, limited partner has no right in management. Profits are 7)
______________ according to the agreement. The advantage of becoming a
limited partner is 8) ______________. Unlike the general partnership, the limited
partnership is created by 9) ______________.
Check your answers

1) joint undertaking
2) agreement
3) carry on business
4) management
5) income
6) general partners
7) shared
8) limited liability
9) statute

III. Write down English equivalents for R. words and expressions.

Corporations consist of ______________ (). A ______________


( ), elected by the shareholders, manages the business. The board
of directors employs ______________ () to oversee the day-to-day
operation. One of the key features of a corporation is that the ______________
( ) is limited to their ______________
(). The corporation is created by stature and becomes a
______________ (.). The major disadvantage of a corporation is double
taxation corporations pay income tax on ______________ ( )
and shareholders pay income tax on their ______________ ().

Check your answers

Corporations consist of shareholders. A board of directors, elected by the


shareholders, manages the business. The board of directors employs officials to
oversee the day-to-day operation. One of the key features of a corporation is that
the liabilities of the owners is limited to their investments. The corporation is
created by stature and becomes a entity. The major disadvantage of a corporation is
double taxation corporations pay income tax on net profit and shareholders pay
income tax on their dividends.
Unit 4. Business organizations in the RF
Vocabulary
charter capital

public placement
,

private placement ;

join-stock company

first refusal right ,

branch office

accredited representative office

subsidiary n.

branch n. ,

legal entity

leeway n.

Limited liability company


()

Privately held, closed joint-stock company


()

Publicity held, open join-stock company


()

Individual private entrepreneur ()

Text
Russian law offers the following forms of businesses:
- Limited liability company ();
- Privately held, closed joint-stock company (ZAO ();
- Publicly held, open joint-stock company ();
- Partnerships - general and limited;
- Individual private entrepreneur ();
- Representative or branch office of a foreign company.

A limited liability company is a company with a charter capital divided into


members' participatory shares.
Member's shares may be of equal of different par value (portion of charter
capital).
Both individuals and legal entities, including foreign citizens and foreign
companies, may become company members. State bodies may become members
only in cases specifically provided by the law. The total number of the company's
members may not exceed 50 (Art. 7 of the Law on Limited Liability Companies).
Minimal charter capital of 100 minimal statutory monthly wages (MSW) is
required for a limited liability company (Arts. 14 and 16 of the Law on Limited
Liability Companies). For companies engaged in certain types of business higher
amounts of charter capital are required.
There are two types of corporations in Russian law: open and closed joint-
stock companies. The basic distinction is that open joint-stock companies may
carry out public and private placement (subscription) of shares, their shareholders
may freely trade shares! Closed joint-stock companies (analogous to closely held
corporations) may only carry out private placements of shares. ^Shareholders of
closed joint-stock companies have the first refusal right in case of sale of shares by
a shareholder to outsiders.
A minimal capital investment equal to 1000 minimal statutory monthly
wages (MSW) is required to incorporate a joint-stock company and 100 MSW to
incorporate the closed joint-stock company. For companies engaged in certain
types of business higher amounts of charter capital are required.
A charter of a joint-stock company is the only constituent document. It
defines the name and address of the corporation, categories and a number of shares
of each category, amount of charter capital, structure and competence of
management bodies, shareholders rights, procedure of preparing and carrying out
the shareholder's general meeting, information on branch and representative offices
of the company.

Branch offices and accredited representative offices are both legally distinct
from Russian corporations, which may be established by foreign firms either as
joint-stock companies with partial Russian ownership, or as wholly-owned
subsidiaries of the foreign firm. Foreign ownership can be as high as 100 percent,
except in certain sectors. For example, foreign stakes are restricted to 25 percent at
defense-related enterprises.
Branch Offices
In Russian terminology, branches are not considered independent legal
entities, though they can negotiate, market or provide other business support on
behalf of firms based outside Russia. However, they can not technically generate a
profit on their operations in Russia. Setting up a branch may be worthwhile if a
foreign company has started to pursue business in Russia and is exploring
opportunities. Many large US firms originally began their Russian operations as
locally established branches. The US firms should not use the term branch with
registration authorities if the purpose is to register as a company. Branches could
be accredited from a one to five-year term.
Accredited Representative Offices
Like branches, accredited representative offices are not independent legal
entities and can hot earn profit in Russia. Advantages of an accredited office
include annual (rather than monthly) reporting requirement for some activities
(including some tax payments), and greater leeway in issuing invitations for the
US partners to visit Russia on business visas. Up to five foreign employees may
work with an accredited office of a foreign company. Offices are usually accredited
for one to three years term.

Answer the following questions:


1. What forms of businesses does Russian law offer?

2. What is a limited liability company?

3. Who can become company members?

4. What is the total number of the company`s members?

5. What minimal charter capital is required for LLC?

6. What the main types of corporations in Russian Law?

7. What minimal capital investment is required to incorporate a joints tock


company?

8. What are branch offices and accredited representative offices?

9. What are branch offices?

10. What are advantages of an accredited office?


Vocabulary exercises
I. Complete the sentences by translating R. word combinations into E.

1. A charter of a joint-stock company is the only ______________


( ).

2. ______________ ( ) may
become company members.

3. Shareholders of ______________ ( ) have


______________ ( ).

4. Branch offices cannot technically ______________ ( ) of


their operations in Russia.

5. State bodies may become only in cases ______________ (


).

6. Foreign ownership can be as high as 100 percent ______________ (


).
Check your answers

1. A charter of a joint-stock company is the only constituent document.


2. Both individuals and legal entities may become company members.
3. Shareholders of closed joint-stock company have the first refusal right.
4. Branch offices cannot technically generate profit of their operations in Russia.
5. State bodies may become only in cases specifically provided by the law.
6. Foreign ownership can be as high as 100 percent except in certain sectors.

II. Complete the following sentences.

1. A limited liability company is a company . .

2. For companies engaged in certain type of business . .

3. For example, foreign stakes are restricted to 25 percent . .

4. Offices are usually accredited for . .


5. Closed joint-stock companies may only carry out . .

6. The basic distinction is that open joint-stock companies may only carry out
. .

Check your answers

1. A limited liability company is a company with a charter capital divided into


members` participatory share.

2. For companies engaged in certain type of business higher amounts of charter


capital are required.

3. For example, foreign stakes are restricted to 25 percent at defense-related


enterprises.

4. Offices are usually accredited for one to three years term.

5. Closed joint-stock companies may only carry out private placement of shares.

6. The basic distinction is that open joint-stock companies may only carry out
public and private placement of shares.

III. Find the E equivalents in the text and match them with the R equivalents.

1. pursue business 1.

2. earn profit 2.

3. report requirement 3.

4. exceed the number 4.

5. define a name 5.

6. carry out a meeting 6.

Check your answers

1 c, 2 d, 3 a, 4 b, 5 f, 6 e.

IV. Complete the text using the expressions from the box.
five-year term business support generate a profit
pursue business registration authorities legal entities locally established
Branch Offices
In Russian terminology, branches are not considered independent 1)
______________, though they can negotiate, market or provide other 2)
______________ on behalf of firms based outside Russia. However, they can not
3) ______________ on their operations in Russia. Setting up a branch may be
worthwhile if a foreign company has started 4) ______________ in Russia and is
exploring opportunities/Many large US firms originally began their Russian
operations as 5) ______________ branches. The US firms should not use the term
branch with 6) ______________ if the purpose is to register as a company.
Branches could be accredited from a one to 7) ______________.
Check your answers

1. legal entities
2. business support
3. generate a profit
4. pursue business
5. locally established
6. registration authorities
7. five-year term
Test 2. Types of BO in the USA
Chose the correct version to complete the sentences.

1. In the USA a specific business structure is generally chosen for


______________.
1. net profit 2. liability or tax reasons 3. statutory requirement

2. ______________ must have one or more general partners and one or more
limited partners.
1. limited liability company 2. joint venture 3. limited partnership

3. Corporation is a complex form of BO that consists of three groups


______________.
1. shareholders managers workers 2. shareholders directors employees
3. shareholders directors employees

4. Limited partners who have ______________ and do not share the management.
1. limited liability 2. unlimited liability 3. the right of ownership

5. Only a general partner can decide ______________ the partnership.


1. to sell 2. to dissolve 3. to found

6. Sole proprietor has complete control of the business but faces


______________for its debts.
1. responsibility 2. criminal liability 3. unlimited liability

7. Partnership is created by ______________.


1. agreement of parties 2. guarantee of partners
3. registration of the name

8. Partnership is terminated by______________.


1. sale 2. court decision 3. terms of agreement
9. Limited partners only receive a share of profits based on the amount on their
______________.
1. shares 2. investment 3. debt

10. Under a general partnership each partner is liable for all ______________ of
the business.
1. debts 2. insolvency 3. investments

Check your answers

1 2, 2 3, 3 2, 4 1, 5 2, 6 3 , 7 1, 8 3, 9 2, 10 1.
Test 2. Types of BO in Russia
Chose the correct version to complete the sentences.

1. A LLC is a company with ______________ divided with member`s


participatory shares.
1. circulating capital 2. charter capital 3. stock capital

2. State bodies may become members of a company only in cases provided


______________.
1. by law 2. by guarantee 3. by rule

3. ______________ of a joint-stock company is the only constituent document.


1. registration 2. charter 3. agreement

4. Branch offices cannot generate ______________ on their operations in Russia.


1. profit 2. income 3. losses

5. Up to five foreign employees may work with an ______________ of a foreign


company.
1. branch office 2. accredited office 3. central office

6. A minimal capital investment equal to 1000 minimal statutory monthly wages is


required to incorporate a ______________ in Russia.
1. joint-stock company 2. limited partnership 3. trust

7. Shareholders of closed joint-stock companies have ______________ in case of


sale of shares by a shareholder to outsiders.
1. right of ownership 2. the first refusal right 3. right of privacy

8. Closed joint-stock companies may only carry out ______________.


1. private placements of shares 2. private and public placement of shares
3. share in profits

9. Branch offices could be accredited from ______________.


1. one to five-year term 2. two to ten-year term 3. perpetually

10. Branch offices are not considered independent ______________.


1. natural persons 2. legal entities 3. companies

Check your answers

1 2, 2 1, 3 2, 4 1, 5 2, 6 1, 7 2, 8 1, 9 1, 10 2.

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