Corporate Law: LLC or JSC?
Today I am sharing with you a summary of the webinar where I recently talked about choosing the legal form of a company in Belarus. I chose 10 criteria and compared a limited liability company with a closed joint stock company and an open joint stock company:
| Criteria | LLC | CJSC | OJSC |
| 1. Founder | The number of founders ranges from 1 to 50 individuals and/or legal entities. Anyone can obtain the list of participants of the LLC from the Unified State Register of Legal Entities and Individual Entrepreneurs of the Republic of Belarus. |
The number of founders is not limited. Information on the list of shareholders is closed, but not for the State. |
The number of founders is not limited. Information on the list of shareholders is closed, but not for the State. |
| 2. Address | Non-residential premises. It cannot be a virtual address or a post office box. | ||
| 3. Types of economic activity | As a general rule, the company may carry out any type of economic activity, except for certain cases. For instance, only JSCs established by a minimum of two founders may carry out banking business in Belarus. | May carry out any type of economic activity. | May carry out any type of economic activity. |
| 4. Authorized capital | The minimum and maximum size of the authorized capital is not regulated. The founders determine its size themselves. |
The minimum size of the authorized capital of CJSC is 3 700 BYN (approximately 1 230 USD or 1 105 EUR on July 28, 2023). REVERA recommend to form the authorized capital in excess of the minimum size (with a margin), because the size changes slightly every year. The CJSC may carry out only private placement of shares under the Articles of Association. |
The minimum size of the authorized capital of OJSC is 14 800 BYN (approximately 4 920 USD or 4 420 EUR on July 28, 2023). REVERA recommend to form the authorized capital in excess of the minimum size (with a margin), because the size changes slightly every year. The OJSC may carry out public placement of shares (open subscription, open sale) through the Stock Exchange to attract investment. |
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The contribution to the authorized capital may be money, property or property rights. The share of property rights can not exceed 50 per cent. Contributions to the authorized capital must be paid within 12 months after registration of the company. |
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| 5. Rights of shareholders | The participants of LLC own stakes in the authorized capital and have the right to vote at the general meeting, to participate in distribution of the profits, etc. |
There are two types of shares – ordinary and preferred. The ordinary shares give the shareholder the right to vote at the general meeting, to receive dividends, etc. The preferred shares give the shareholder the priority right to receive dividends and other rights under the Articles of Association, however, as a general rule, the shareholder cannot vote at the general meeting. |
There are two types of shares – ordinary and preferred. The ordinary shares give the shareholder the right to vote at the general meeting, to receive dividends, etc. The preferred shares give the shareholder the priority right to receive dividends and other rights under the Articles of Association, but, as a general rule, the shareholder may not vote at the general meeting. |
| 6. Dividends |
Under the decision of the general meeting. However, restrictions apply, for example, if the net assets will be less than the authorised capital. The share of dividends may be disproportionate to the participant’s stake in the authorized capital. |
Under the decision of the general meeting. But there are restrictions, for instance, if the net assets will be less than the authorized capital. If the shareholders with preferred shares do not get dividends, they will get the right to vote at the general meeting until dividends are paid. |
Under the decision of the general meeting. But there are restrictions, for instance, if the net assets will be less than the authorized capital. If the shareholders with preferred shares do not get dividends, they will get the right to vote at the general meeting until dividends are paid. |
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The general tax rate is 15% for non-residents of the Republic of Belarus. There are exceptions, for instance, the tax rate for residents of Hi-Tech Park is 5%. REVERA provide services to obtain residency in HTP. |
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| 7. Bodies of the company | Two-tier management structure consisting of the general meeting and the executive body or three-tier management structure including the board of directors. The executive body may be executive director or collective executive body (directorate) or managing company. | ||
| The number of votes at the meeting may be disproportionate to the participant’s stake in the authorized capital. | One ordinary share is one vote at the general meeting. | One ordinary share is one vote at the general meeting. | |
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REVERA provides services as a managing company. REVERA drafts the Articles of Association, shareholder’s agreement and employment contract which reduce the risk of corporate disputes and withdraw of assets through affiliates by the director. |
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| 8. Information disclosure | In certain cases a LLC is obliged to disclose information on transactions with affiliated persons. However, there is no penalty for failure to fulfil this obligation. | A CJSC is obliged to disclose information on major transactions, transactions with affiliates, etc. to the securities market. Failure to fulfil this obligation is subject to a fine. |
An OJSC is obliged to disclose information on the securities market in the same way as a CJSC. In addition, a JSC must disclose an annual report on its financial and economic activities and the results of an annual independent audit. |
| 9. Company registration procedure | The company is registered on the day of filing the documents, including the articles of association, to the registration authority. | The procedure for registering a CJSC is similar to that for registering an LLC. In addition, a CJSC is obliged to conclude an agreement with a depositary and register shares with the Securities Department within 2 months after the registration of the company. | The procedure for registration of an OJSC is similar to the procedure for registration of an LLC. In addition, an OJSC is obliged to conclude an agreement with a depositary and register shares with the Securities Department within 2 months after the company's registration. An OJSC is obliged to have a certified specialist in the field of securities market. |
| In case of providing knowingly false information in the application to the registration body, the income of the organisation may be charged to the budget of the Republic of Belarus within 3 years after registration of the company. | |||
| 10. Exit strategies |
The participants of LLC have the priority right to purchase the stake. The procedure for the sale is stipulated by the Articles of Association. LLC is obliged to submit documents to the registration body to register amendments to the Articles of Association within 2 months. |
The shareholders of CJSC have the priority right to purchase the share only if this provision is stipulated under the Articles of Association. The purchase and sale agreement must be registered by the depositary. The shareholders do not have the right to withdraw from the CJSC by submitting the application. |
The shareholders of OJSC do not have the priority right to purchase the share. The purchase and sale agreement must be concluded through the Stock Exchange. In some cases three are restrictions on entering into purchase and sale agreement within 6 months after the acquisition of shares. |
| Post scriptum |
REVERA law group is 25 years on the market with offices in Belarus, Georgia, Poland, Ukraine, Kazakhstan and Cyprus, and legal panels in Curacao and UAE with more than 80 lawyers, including specialists on the securities market, tax consultants, auditors, patent attorney. REVERA provides services as a managing company and as a liquidator in Belarus. REVERA unique team solves business objectives of our clients of any level of complexity, reduces the risks and prevents losses. |
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