Open Joint Stock Company: characteristics, features and advantages over other forms of business

Feb, 07 2024


An open joint stock company is one of the most common organizational and legal forms for large enterprises. JSC is characterized by the division of the authorized capital into a certain number of shares that can be purchased and sold by shareholders on the stock exchange. What is the peculiarity of JSC, we will tell you in this article.

What you need to know about open joint stock companies

Today, JSC in Russia is officially called a public joint stock company. The renaming to PJSC became possible as a result of the amendments to the Civil Code of the Russian Federation from September 1, 2014. The main reason for the renaming is to bring Russian terminology in line with international standards and unify the concept that is used in legislation. The term “public joint stock company” is used in many countries of the world to refer to companies whose shares can be freely bought and sold on stock or other markets.

The transition to a new terminology makes it possible to clarify the legal status of the company and make it more understandable in Russia and abroad. It also contributes to the formation of a unified terminology base for market participants and protects the interests of investors and shareholders. By itself, the renaming does not make serious changes to the legal status and work of the JSC. They are also legal entities managed in accordance with current legislation and corporate law.

In Russia, the work of PJSC is regulated by the Federal Law “On Joint Stock Companies”. Such companies are characterized by:

  • Openness. Shares of PJSC can be purchased by any person on the open market, since they are not limited by the pre-emptive right to purchase shares by other shareholders.
  • A large number of shareholders. PJSC has at least 50 shareholders who can participate in the general meeting of shareholders and vote on management issues.
  • The authorized capital of PJSC is divided into a certain number of shares of a certain nominal value. Shares can be saleable or non-transferable and can be divided into ordinary and preferred shares.
  • PJSC has a board of directors, which is elected by the shareholders at the general meeting. The Board of Directors manages the activities of PJSC, makes key decisions and controls the activities of the executive body.
  • PJSC is obliged to prepare financial statements and submit them to shareholders and state control bodies.
  • Shareholders of PJSC have certain rights, including the right to participate in management, the right to receive a share in profits, information about the company and participation in the distribution of property during liquidation.

A public joint stock company is a flexible form of enterprise that provides transparency and certain rights for shareholders. However, this form of business organization is subject to certain restrictions and requirements prescribed by law.

The composition of the open joint stock company

The peculiarity of JSC management in Russia is the presence of different management bodies. According to the norms of the law, this list includes:

  • The General Meeting of Shareholders is the supreme governing body where decisions are made on the main issues of the company. The General Meeting of Shareholders is held at least once a year. It makes decisions on the selection of the board of directors, approval of reports, distribution of profits, amendment of the articles of association and other important issues.
  • The Board of Directors is a collegial management body appointed by the General Meeting of Shareholders. Manages the activities of the company, makes strategic decisions, controls financial activities and approves key decisions affecting the long-term activities of a commercial organization.
  • The Audit Commission is an internal control body that verifies financial and economic activities, reconciles accounting and financial statements, and oversees compliance with rules and legal requirements. The Audit Commission consists of independent members.
  • The Audit Committee is formed by the Board of Directors, which performs an independent audit of the financial statements and activities of the Company and interacts with an external auditor.

The structure of the management bodies of an open joint stock company may vary depending on the specific requirements of the charter and regulation, as well as on the characteristics of each company. All management bodies have an individual set of functions and powers that are aimed at effective management and control of the activities of the joint-stock company.

Advantages of JSC

Like any organizational and legal form, an open joint stock company has its “advantages”, which determine the effectiveness and relevance. The advantages include:

  • Distribution of risk. An open joint stock company allows investors to distribute risk through the purchase of shares and becoming a co-owner of the company. This can be especially important when implementing large projects where large investments are involved.
  • Raising capital. Open companies have the opportunity to raise capital in the securities market. Through the placement of shares at public auction, the company can gain access to a significant number of potential investors and raise significant funds for the development of its business.
  • Liquidity of shares. Securities issued in PJSC provide investors with the opportunity to buy and sell them, which ensures high liquidity of investments. Investors who need a quick conversion of assets into money can take advantage of this.
  • Professional management, which allows you to conduct more effective activities than in non-corporate forms of business organization.
  • Access to capital or the possibility of raising capital by issuing shares and selling them on the market. This allows the company to raise large amounts of money to finance business expansion, investments in new projects, asset purchases and other strategic goals. As a publicly traded company, PJSC can attract investments from a wide range of investors, including institutional and private investors.
  • Brand promotion and transparency, which implies increased attention from the public and investors. Frequent financial activity reports, participation in investment conferences and press conferences, as well as other communication events help promote the company’s brand and enhance its reputation. Greater openness and transparency in reporting and management affect investor confidence and allow building long-term relationships with shareholders.

Disadvantages of JSC

  • Creation and maintenance costs. The process of opening and maintaining the operation of PJSC requires significant financial costs. Company registration, auditing, compliance with financial reporting requirements — all this involves attracting investments on an ongoing basis.
  • Obligations to shareholders. When shareholders are involved in the PJSC, obligations arise to them. This concerns the payment of dividends, ensuring information transparency and democracy in management. Failure to comply with these obligations can lead to legal liability, litigation and loss of trust on the part of investors.
  • A flawed reputational risk. The joint-stock companies are in the center of public attention. They are more susceptible to reputational risks – problems with compliance with legislation, financial fraud, or violations of environmental/ethical standards. Such situations can significantly affect creditworthiness and reputation.
  • Limitations in management. In a public company, public activity may cause limitations for management decisions. The company’s actions are subject to some degree of state and public control. This can be a limitation for quick and flexible decision-making.
  • Loss of control over the company. After the increase in the number of shareholders in the company, the main owners may lose control over the management of the company. This may be due to making decisions that do not coincide with the interests of the main shareholders.
  • The possibility of state intervention. Particularly large societies and strategically important companies may be subject to government interference. This can happen through influencing decision-making, appointing their own managers, or introducing state regulation.
  • The risk of manipulation in the stock market. Joint-stock companies may be subject to manipulation in the stock market. This may include artificially increasing or decreasing the value of shares, manipulating information about the company and other mechanisms that may negatively affect investors, the share price and the reputation of the company.
  • Increased requirements for financial reporting and openness. Joint-stock companies are required to submit reports in accordance with the requirements of regulatory legal acts, as well as to ensure the openness and accessibility of information for shareholders and the general public. This requires compliance with certain procedures and standards, which can be time-consuming and involves additional costs.

Joint stock companies have certain advantages and disadvantages. Every entrepreneur should carefully weigh the factors before deciding on the choice of an organizational and legal form. The correct use of tools, taking into account shortcomings and the ability to manage them, can contribute to the successful development of the company in the long term.


JSC is one of the most common forms of organization for large–scale entrepreneurial activity in Russia. Its features and legal status make it attractive to investors and entrepreneurs. The company has access to capital, which allows it to attract additional investments for the development of the company. This is due to the fact that shares can be freely sold and purchased on the open market.

To ensure transparency and accessibility of information, the Company must disclose certain information about its activities and financial position. This creates conditions for more transparent interaction with shareholders and stakeholders. However, decision-making in a joint stock company may require time and coordination between shareholders, as well as compliance with legal requirements and regulations.

Question and answer

How does the issue of securities of JSC take place?

The issue of shares or bonds takes place in several stages:

  • A decision is made on the placement of equity securities. It can be adopted by the general meeting of shareholders or the Board of Directors, depending on the provisions of the articles of association.
  • A decision is made on the issue of securities. It is adopted by the general meeting of shareholders or the Board of Directors, depending on the provisions of the articles of association.
  • Registration of the issue of securities is taking place. The issue is assigned a state registration number by the Bank of Russia.
  • Placement of securities on the stock market. The stage involves making transactions on the stock exchange.
  • Issue of a report on the results of the issue. The final stage, at which a report on the placement of securities is submitted to the division of the Bank of Russia. It contains information, for example, on the timing and methods of placement, the number of shares placed. The register of shareholders of Russian joint stock companies is maintained by the registrar. This is a legal entity with an appropriate license issued by the securities market regulator, the Bank of Russia.
Author of the article
Open Joint Stock Company: characteristics, features and advantages over other forms of business
Valentina Khlavich
Managing Partner
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