Wednesday, September 22, 2010

Joint-Stock Companies - a basic outline

Recently I wrote about registering a limited liability company in Moldova. It was said then that LLC is the most common form of companies in Moldova. Today’s post is dedicated to another form of companies that are less spread, however, very important - joint-stock companies (JSC).

Under art. 2-(1) of the Law on Joint-Stock Companies JSC (societate pe actiuni, or SA) is a company whose share capital is divided up into stock shares and whose obligations are secured with its property. The main peculiarity of joint-stock companies comparing to other types of companies (limited liability companies in the first place) is the right to issue securities that can be traded at stock exchange - stock shares and bonds, though there is a number of other differences. Although JSCs are less spread than LLCs, certain types of companies can only be registered under this form like, for example, banks, insurance companies, investment funds. Likewise, limited liability companies that have more than 50 shareholders should be reorganized into JSCs within 6 months period (or consolidated to reduce the number of shareholders, or liquidated). 

A JSC can be founded by one or more natural persons or legal entities. Constituent documents are: constituent agreement (in case of founding by 2 or more persons; or declaration on the foundation of the company in case of one founder) and articles of association. The first document stipulates the conditions during the establishment of a new company whereas articles of association are company's basic document providing for all major conditions of company's activity and structure.

The minimum share capital of a JLC should not be less than 20 000 (twenty thousand) Moldovan lei (about 1270 euro), what determines the minimum volume of company's net assets.  

One of the most important stages in creating a joint-stock company is the initial stock placement. The stock shares of a newly created company is divided between its founders. The money paid for stock shares is introduced into the temporary bank account. After the money is introduced the constituent meeting may take place in which all founders should take part. During the meeting all necessary decisions on the company registration, election of its managing bodies, etc. should be taken. After the meeting the respective documents (bylaws, decision on the registration and so on) are submitted to the State Registration Chamber which adopts the decision on JSC's registration. 

The company is considered created from the moment of its registration. However, unlike in limited liability companies for which all major constituent proceedings are finished at the moment of its registration, in case of joint-stock companies some further actions are required.

Within 15 days a package of respective documents should be submitted to the National Commission on Financial Market for the state registration of stock shares placed when creating the company. Failure to perform this obligation gives rise to the right of any stockholder to lodge a claim with the court for the dissolution of the company. 

In case no inaccuracies are revealed the state registration of stocks is carried out, what includes declaring the stock subscription valid, conferring a state registration number to each class of stocks placed and introducing the respective records into the state securities registry. 

After that, within 15 days from the state registration of stocks, the company must ensure the formation of stockholders registry, provide first records therein on stockholders, their legal representatives and nominal stockholders.

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