What is CHAO and PAO?
Law firm AGTL specializes in dealing with the securities market and has accumulated extensive practice in creating and accompanying the activities of public companies.
Our advantages
equity law specialists will advise on the activities of the company, develop internal documents and shareholder agreements;
full range of services for the creation of AO: preparation of documents, registration of AO, registration of issue of shares, registration of prospectus of issue of shares;
Legal support at all stages of activity: help in registering additional issues of shares, in the organization of share buybacks.
Legal status of the company
Today, the company is one of the most common forms of doing big business. Economic activity in the form of AO allows to attract unlimited financial resources in the form of contributions to the share capital, both the founders and outsiders, in the creation of the AO and in its subsequent activities.
The company is an economic company whose share capital is divided into a certain number of shares of the same face value, the corporate rights for which are certified by shares.
A shareholder society can be created by founding, merging, dividing, issuing or transforming an entrepreneurial (entrepreneurial) society, state (public), communal (communal) and other enterprises.
The founders of a company may be the state, as well as the individuals and/or legal entities that have decided to base it.
The founders of a company can be one, two or more persons.
A company may be created by one person or may consist of one person if a single shareholder acquires all shares of the company.
A public company may not have another business company, of which one person is a member, as a sole participant. A company may not have only shareholders-legal entities whose sole membership is the same person.
The minimum share capital of the company is 1,250 minimum wages, based on the minimum wage rate, which is valid at the time of the establishment (registration) of the company. Payment of the value of shares, which are placed at the time of the founding of the AO, may be carried out by money or property, property and non-property rights, which have an assessment, securities (except for debt securities, the issuer of which is the founder, and bills). Each AO founder must pay the full value of the purchased shares before the date of approval of the results of the first issue of shares.
The company is not liable for shareholder obligations. The society and its authorities cannot be subject to any sanctions that restrict their rights in the event of wrongdoing by shareholders, and shareholders are not liable under the obligations of the company and are at risk of losses related to the activities of the society only within the appropriate shares.
Shareholders who have not fully paid the shares, in cases provided by the company’s charter, are liable for the obligations of the company within the unpaid part of the value of the shares they are responsible for.
The company is considered to have been created and acquires the rights of the legal person from the day of its state registration in accordance with the law.
The founding document of the company is the charter. The AO Charter, in addition to general information for all types of economic companies, should contain information about the types of shares that are placed, their face value, the ratio of shares of different types, the number of shares that are bought by the founders, the consequences of non-compliance with the obligations of the share buyback, the term and order of payment of dividends.
The founders may have a founding agreement, which determines how to carry out joint activities regarding the establishment of a company.
To protect the rights of existing shareholders, it is stipulated that in the case of additional issuance of shares, existing shareholders have an overwhelming right to acquire them.
The company’s charter may provide for the possibility of concluding a contract between shareholders, under which shareholders are subject to additional responsibilities, including the obligation to participate in general meetings of shareholders, and provides for liability for non-compliance.
The management of the company is carried out in accordance with its founding document. The highest body of the company is the general meeting of shareholders.
In addition, there is a body that protects the rights of shareholders – the supervisory board. In AO with the number of shareholders – owners of simple shares of 10 persons and the greater creation of a supervisory board are mandatory.
To manage the current activities of the AO is created an executive body, which can be both collegiate (board, management) and sole (director, CEO).
To check the financial and economic activities of the company, general assemblies elect an audit committee (the auditor).
If at the end of the second and next financial year the value of the net assets of the company is less than the share capital, the company is obliged to announce a reduction in the size of the share capital and register the relevant changes in the statute in due course. If the value of a company’s net assets becomes less than the minimum amount of statutory capital established by law, the society is subject to liquidation.
The company ceases to operate as a result of the transfer of all its assets, rights and responsibilities to other business successors (by merger, accession, separation, transformation) or as a result of liquidation.
Shareholders’ companies are divided by type into:
Public equity firms (PAOs);
Private equity firms (CHAO).
A private equity company (CHAO) is a company whose quantitative composition of shareholders may not exceed 100 shareholders.
A public company (PAO) is a public company whose shareholders can be more than 100 members, respectively.
The benefits of doing business by creating a company:
– A company is a convenient way to attract investment;
The possibility of generating income in the form of dividends;
Shares entitle them to participate in the distribution of AO’s assets when it is liquidated;
The ability of the owners of ordinary shares to take part in the management of the AO;
Shares, like other assets, can be collateralized, used in other transactions by their owners;
Shareholders are not liable under the liabilities of the company and bear the risks of losses related to the activities of the company within the value of the shares they are responsible for;
The extent to which the company itself is liable for its own liabilities is limited to the property it is responsible for;
– If AO is successful, the market value of its shares may be significantly higher than the nominal value.
Weaknesses of doing business by creating a public company:
– if the value of AO’s net assets becomes less than the minimum size of its share capital, such a society is subject to liquidation. At the same time, the mechanism of liquidation of AO due to the decrease in the value of its net assets at the legislative level is not sufficiently settled;
The issuance of shares and the turnover of shares require compliance with additional requirements of securities and stock market legislation;
A public company is required to go through the listing procedure and remain on the stock register on at least one stock exchange;
AOs are required to report to the government authorities that regulate the circulation of securities and the stock market;
– to ensure the turnover of shares and keep records of owners of simple name shares, it is necessary to establish relationships with professional participants of the stock market: registrars, traders, custodians, depository, and the like;
Relatively high creation costs;
– Double taxation: the first time taxes are paid before the income is distributed among shareholders, the second time shareholders pay with the dividends received.