Creation of a closed joint stock company

Contents:

• Characteristics of a non-public joint-stock company
• How is the work of NPJSC s regulated?
• Procedure for establishing a non-public company
• Step No. 1: Resolution of organisational issues
• Step No. 2. Hold a constituent meeting
• Step No. 3. Preparation and submission of registration documents to the Federal Tax Service
• Step No. 4. Formation of authorised capital and issue of shares
• Steps after NPJSC registration
• Obligations of a company after registration of a NPJSC

The process of opening a Closed Joint Stock Company (CJSC) is similar to the procedure of opening a Public Joint Stock Company. However, there are significant differences in structure between the companies themselves. It is important to recall that since 1 September 2014, it is not possible to open a CJSC in Russia. Instead, it is possible to register a non-public joint stock company – NPJSC.

The peculiarity of a non-public joint stock company (NPJSC) is the limited access to the acquisition of its shares. They are strictly managed by the participants of the joint stock company, whether they are individuals or corporations. The procedure for the sale of shares includes the mandatory consent of all members of the joint stock company.

In this article, we will look at the peculiarities of registering a CJSC (NPJSC) and what to consider when preparing for the process.

Characteristics of a non-public joint-stock company

A non-public joint stock company (formerly CJSC) is a form of company’s operation within the corporate structure. The company is characterised by the following features:

• A limited number of shareholders – no more than 50 people. Often these people are directly related to the management of the company.
• Restriction on transfer of shares. NPJSC  shares cannot be freely transferred or sold to other people without the consent of the shareholders. Transfer is only possible under certain conditions, which are set out in the firm’s articles of association. This allows for better control over ownership and management structure.
• The minimal authorised capital of an NPJSC  is equal to that of an LLC and amounts to 10,000 roubles. The money is contributed by personal or other contributions. The founders then receive shares representing their share in the company.
• Closed nature. NPJSC  shares are not placed on the open market. Also, the company may not disclose data on financial activities, as it is obliged to do so PAO.

NPJSC s are an excellent choice for those business people who want to limit the number of shareholders, have a great deal of control over the company’s affairs and have the flexibility to transfer shares within the structure. However, it is important to consider the existing restrictions on raising capital and access to investment due to the closed nature of NPJSC s from the securities market.

How is the work of NPJSC s regulated?

The work of NPJSC s in Russia is regulated by various legal and regulatory documents:

• The Civil Code of the Russian Federation. The Code contains the main norms that regulate the work of all joint stock companies in Russia. It concerns the creation, operation, reorganisation and liquidation.
• Law “On Joint-Stock Companies”. The law introduces general provisions on the opening and functioning of companies. It establishes norms regarding management bodies and constituent documents etc.
• The charter of a company is a constituent document containing data on the organisation, objectives, rules of operation, management bodies, issue and transfer of shares, and other equally important provisions. The charter of any NPJSC  is developed by the founders and approved at the general meeting of shareholders.
• Decision on the establishment of a JSC. It is adopted at the general meeting of shareholders, which is assembled on the basis of the rules in the charter and other regulations.
• Resolutions and documents of the Central Bank of the Russian Federation. The regulatory body develops and adopts acts that regulate the financial activities of the company. It is important for NPJSC  to strictly comply with these rules to reduce the risk of receiving a fine.   

Procedure for establishing a non-public company

Similar to the procedure for establishing a joint stock company, the establishment of a non-public company goes through similar stages, but with certain specific features. In general, the procedure will be described below.

Step No. 1: Resolution of organisational issues

If the founders are chosen, at this stage it is necessary to:

• Come up with a name for the company
• Determine the legal address
• Select a taxation system
• Appoint an applicant or registrar
• Appoint a share issuer

Step No. 2. Hold a constituent meeting

The constituent meeting leads to the approval of the decision to establish the NPJSC . The articles of association of the company are then adopted. It should be noted that the company’s charter should specify the form of organisation – namely, a non-public joint stock company. The charter should determine how the shares will be distributed, how and under what conditions the shares can be sold or transferred to a new participant of the company.

If there are two or more founders, minutes on the establishment of the company must be adopted and signed; if there is only one founder – relevant resolution.  

Step No. 3. Preparation and submission of registration documents to the Federal Tax Service

At this stage, the necessary documents are prepared in accordance with the rules specified in the Tax Code of the Russian Federation. Deficiencies in preparation may result in the need to resubmit the documentation. The registration of the organisation is carried out in an inspectorate of the Federal Tax Service (FTS). A state duty of 4,000 rubles is provided for, but it does not need to be paid when submitting documents via the Internet. The set of documents includes:

• Articles of Association in two copies
• Resolution or minutes on the establishment of the JSC
• Application in Form 11001
• State fee payment receipt
• Original passport of the applicant (if submitted)
• Confirmation of the legal address of the company
• Confirmation of issuance of shares

Step No. 4. Formation of authorised capital and issue of shares

In order to form the authorised capital, it is necessary to issue securities, which requires the submission of a package of documents to the Central Bank of Russia. These documents include:

• Decision or minutes on the establishment of a non-public joint stock company (NPJSC)
• A document reflecting the terms and conditions of the issue and placement of shares
• Extract or order from the decision or protocol of the issuer approving the decision to issue shares.
• Extract or order from the decision or protocol of the issuer, where the terms of placement of shares are confirmed.
• Document containing information on calculation of net asset value

To successfully open a non-public joint stock company (NPJSC ), it is necessary to issue shares. In this case, the articles of association must necessarily contain data on their number and value.

NPJSC s are characterised by the fact that their shares cannot be purchased on the open market – they are owned by a limited number of persons or corporations and can only be resold with their permission.

Steps after NPJSC registration

After submitting the documents to the Federal Tax Service, the applicant can receive the documents in three working days. The founder will receive:

• List of entry with main State Registration Number (ОГРН)
• Tax identification number
• Charter of the company

If the applicant has chosen the simplified system of taxation for work, then it is necessary within 30 days to submit an application for transition to this system. Then you can engage in the manufacture of a seal. These are engaged in separate firms. To do this, it is necessary to submit copies of the constituent documents. The cost is no more than 5000 rubles per seal.

To open a current account, personal presence of director at bank is required. Some financial institutions allow you to open an account remotely.

Any NPJSC presupposes the presence of employees. This means that registration with the funds – social and medical funds. Registration is automatic after the tax office sends the relevant information. A message about registration will be sent to the legal address. The paperwork will also be available in person at the offices when copies of the registration documents are submitted.

Obligations of a company after registration of a NPJSC  

1. The authorised capital of NPJSC  must be contributed in the form of cash, property or other assets within 4 months after NPJSC set up.
2. NPJSC  is obliged to keep accounting and tax records in accordance with applicable law. This includes keeping accounting records, paying taxes and reporting to the tax authorities.
3. NPJSC must comply with all applicable laws and regulations, including corporate relations, tax and labour laws, as well as other laws governing its activities.

All requirements are based on Russian law and are subject to change in accordance with updates to laws or regulations. It is important to consult with a professional legal or financial advisor to ensure that all requirements and procedures are in place for the establishment and management of NPJSC .

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