LAW ON BUSINESS COMPANIES - ebrd.com

1 DRAFT. LAW ON BUSINESS COMPANIES . I GENERAL PROVISIONS. 1. Basic definitions Scope of this law Article 1. This Law shall regulate the legal status of BUSINESS COMPANIES and entrepreneurs and in particular their incorporation, managing, status changes, changes of legal form, as well as their dissolution. The provisions hereof are also applied to all forms of private businesses which have been incorporated and which operate under a separate law, unless that law provides otherwise. The definition of a company Article 2. A BUSINESS company (hereinafter referred to as the company) is a legal entity conducting an activity with the aim of gaining profit. Acquisition of legal entity status Article 3. A company acquires the status of legal entity through registration in accordance with the law which regulates the registration of BUSINESS COMPANIES (hereinafter referred to as: the law on registration).

2 BUSINESS activities Article 4. A company, entrepreneur and a branch of a foreign legal entity have their core BUSINESS activity, but they may also conduct all other legally allowed activities, regardless of whether they have been provided in the company's memorandum of association or articles of association. A separate law may condition the registration or conducting a certain activity by the existence of a preliminary approval, consent or other competent authority's act. Registration Article 5. Registration of BUSINESS COMPANIES and entrepreneurs, or registration of data and documents provided under this law is carried out in keeping with the law on registration. 1. The effect of registration on third parties Article 6.

3 Third parties which rely on registered data in legal transactions shall not bear adverse legal consequences of misregistered data. It is considered that third parties are informed about the registered data starting from the day after the day of registration of these data in keeping with the law on registration. As an exemption from Paragraph 3 of this Article, third parties may argue, that it was not possible for them to become aware of these data within the period of 15 days of the date of publication of registered data. The company may argue that the third parties were aware or had to be aware of the company documents and data even before their registration, in line with the law on registration.

4 The territorial jurisdiction of the court Article 7. The commercial court with location according to the seat of the company, entrepreneur, according to the place of BUSINESS operation of the foreign legal entity, is competent to act in disputes and out-of-court proceedings initiated in cases provided herein, as well as for disputes arising herefrom, except if this law provides territorial jurisdiction of another court. Legal forms Article 8. The legal forms of BUSINESS COMPANIES are: 1) general partnership;. 2) limited partnership;. 3) limited liability company;. 4) joint stock company. Company shareholders Article 9. Persons who incorporate a company and persons who subsequently join it are as follows: 1) in a partnership - partners.

5 2) in a limited partnership general and limited partners;. 3) in a limited liability company limited liability company shareholders;. 4) in a joint stock company - stockholders. A common name for persons listed under Paragraph 1 of this Article is company shareholders. A company shareholder may be a natural person and a legal entity. Duration of a BUSINESS company Article 10. A BUSINESS company may be incorporated for a definite or an indefinite period. It is considered that a company is incorporated for an indefinite period, unless it is provided otherwise by the memorandum of association, or articles of association. 2. Unless the memorandum of association stipulates otherwise, a company incorporated for a definite period may extend the duration of the company or continue its operation as a company incorporated for an indefinite period, if, until the expiry of the period for which it is incorporated, or until the completion of the liquidation procedure and in keeping with this law, the resolution on this is adopted by: 1) in case of a general and limited partnership unanimously by all partners, or general partners.

6 2) in case of a limited liability company and joint stock company by the shareholders, or stockholders' meeting resolution adopted by a two-third majority of all shareholders, or stockholders of the company. Resolution from Paragraph 3 of this Article is registered in line with the law on registration. 2. Company constitution documents and agreements with regard to the company Memorandum of association and other documents Article 11. A memorandum of association is a constitution document that takes the form of articles of incorporation if the company is incorporated by s single person, or the form of a corporation charter if it is incorporated by several persons. On company incorporation, signatures on the memorandum of association are certified in keeping with the law which regulates signature certification.

7 In a general partnership, limited partnership and a limited liability company, a memorandum of association is also the company's by-law which regulates the management of a company, company's internal organisation and other issues in keeping with this law for each individual legal form of a company. A joint stock company has articles of association as the company's by-law which regulates the management of a company, company's internal organisation and other issues in keeping with this law, unless a separate law provides otherwise. The memorandum of association and articles of association are registered in line with the law on registration. Amendments to the memorandum of association and articles of association Article 12.

8 The memorandum of association of a general partnership, limited partnership and limited liability company is amended by the resolution partners, general partners and limited partners, or the shareholders' meeting in keeping with this law. The resolution from Paragraph 1 hereof must be signed by persons who voted for it, and this resolution is certified in keeping with the law if it is provided in the memorandum of association and if this obligation was registered in keeping with the law on registration. A joint stock company's memorandum of association shall not be amended. 3. A joint stock company's articles of association shall be amended by the resolution of the stockholders' meeting, or by that of another corporate body provided in this law, in keeping with the provisions hereof.

9 Following each amendments to the memorandum of association, or articles of association, the company's legal representative is obliged to draw up and sign the consolidated text of these documents. Amendments to the memorandum of association and articles of association, as well as consolidated texts of these documents are registered in line with the law on registration following each such amendment. Nullity of a memorandum of association Article 13. A Memorandum of association is null and void if: 1) it does not have the form provided under this law; or 2) the company's BUSINESS activity is contrary to the imperative regulations or public order; or 3) it does not include provisions on the company's BUSINESS name, shareholders'.

10 Contributions, the amount of the share capital or the company's core activity; or 4) all signatories, on entering a memorandum of association, were legally or commercially incapable. Except for reasons provided under Paragraph 1 hereof, a memorandum of association may not be pronounced null and void on other grounds. The procedure of establishing and effectiveness of nullity Article 14. Nullity of a memorandum of association shall be established by the competent court. If reasons for nullity are not removed by the conclusion of the main hearing, the court shall establish the nullity of a memorandum of association by means of a court decision. If a BUSINESS company is registered, the court decision establishing the nullity of a memorandum of association is delivered, as it comes into effect, by the court to the BUSINESS COMPANIES ' register, for the purpose of initiating the procedure of forced liquidation of the company, in keeping with this law.