Focus on functions

1. Study more about types of legal entities in Belarus.

2.Think of some real examples of the Belarusian enterprises and give their names.

TYPES OF LEGAL ENTITIES

The three most common types of legal entities under the Belarusian Civil Code include joint-stock companies, limited liability companies and unitary enterprises. These are regulated by the Law “On business entities” and the Civil Code, respectively.

Establishment of banks and insurance companies is regulated by separate legislative acts. Only joint stock companies may issue shares, and are, therefore, subject to Belarusian securities law and the regulations imposed by the Department on Securities.

1. Joint Stock Companies

Joint stock companies are defined as companies whose capital is divided into a definite number of shares. A joint stock company may be either “open” or “closed.” A joint stock company is deemed open if its shares are distributed to the general public without the permission of other shareholders. A joint stock company is deemed closed if distribution of its shares requires the consent of other shareholders, and (or) shares are distributed only to certain categories of persons. Both types of joint stock companies may issue preferred shares making up to 25% of the statutory capital.

Open Joint-Stock Company (Otkrytoe Aktsyonernoye Obshchestvo, “OAO”)

An OAO is the “supreme” type of company, permitting an unlimited number of shareholders. Subject to elaborate disclosure requirements, an OAO is the only form of legal entity whose shares may be openly traded. The minimum charter capital is set at the amount equivalent to EUR 6,250.

Closed Joint Stock Company (Zakrytoe Aktsyonernoye Obshchestvo, “ZAO”)

The most common type of a joint stock company is a ZAO. Shareholders enjoy preemption rights to any shares offered for sale by a retiring member. There is no obligation to publish accounts. The shares are distributed only among its founders or another predetermined group of persons. A ZAO may not hold an open subscription of shares for an unlimited group of people. The minimum charter capital of a ZAO is set at the rate equivalent to EUR 1,500.

2. Limited Liability Company (Obshchestvo s Ogranichennoi Otvetstvennostyu, “OOO”)

An LLC is defined as a company founded by two or more persons, whose capital is divided into ownership interests, the amount of which is determined by statutory documents. An OOO (together with Unitary Enterprise) is the most flexible type of company, with the least onerous statutory obligations. Its capital is divided into “units,” which are not technically shares and fall outside the scope of the Belarusian securities law. A drawback of an OOO with minority participants is that any participant has the right to withdraw from the company and is entitled to require other participants to purchase/redeem his units at pro-rata value. The minimum charter fund of an OOO is set at the rate equivalent to EUR 800.

3. Unitary Enterprise

A Unitary enterprise is defined as a commercial organization that has no ownership rights to the assets transferred to the company by the owner of these assets, which essentially means that such company is not the owner of its property. Instead, the founder of such company remains the owner of the assets. The owner is simultaneously the founder of the company. These assets may not be divided into shares. A unitary company may have only one founder. As a wholly-owned subsidiary, however, its simple management structure often makes it the vehicle of choice for foreign investment.

3. Pretend you are experts in business.

1) Give your ideas about advantages and disadvantages of managing these forms of business.

2) Choose one of the currently existing firms as an example and describe its strengths, weaknesses, threats, and opportunities.

4. Give your arguments for or against of the following challenges to the Belarusian economy:

- The major threat to the stability of the Belarusian economyin the short-term and medium-term perspective is a price hike of energy resources supplied by the Russian Federation. Preferential terms and conditions of supplies and the existence of a formal trade union agreement between two countries were the key drivers of recent favourable Belarusian economic growth.

- One of the key problems of the Belarusian economy is a high intensity of power consumption. Growing costs of output produced by Belarusian enterprises amplify problems they face on the Russian market. The growth of the Russian economy and the consequent household income growth in Russia both lead to a changing character of competition on this market. Belarusian goods occupy a specific niche 'for the poor' of the Russian market.

- Between 2007 and 1H2008, Belarus took a significant step forward in liberalizing the economy and improving the investment climate. Increasing FDI attractiveness was set as a priority by the President. Several important presidential decrees and government resolutions have been adopted concerning improvement of the investment and business climate. These include abolition of the "golden share" right; gradual abolition of the ban imposed on trading securities acquired during preferential privatization; announcement of the first list of enterprises to be privatized.

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