In the modern economy of the Russian Federation, there are several forms of activity of business entities. Each enterprise chooses which one to choose to organize its activities. Joint stock companies have a number of features. Such organizations are usually divided into open and closed varieties.
In order not to get confused in concepts, you need to understand the abbreviations. Closed joint stock company (CJSC) and open joint stock company (OJSC) have a number of organizational differences. The first form of business entities has now been renamed JSC - joint stock company. But what it means is a closed type.
How a JSC differs from an OJSC is a very interesting question. This determines a number of features of the functioning of enterprises. Companies have the opportunity to reorganize the company and create a JSC instead of an OJSC. This may be necessary for a number of reasons. How this happens, as well as why it is needed, should be considered in more detail.
What is a joint stock company?
To understand the difference between a JSC and an OJSC, it is necessary to consider this form of economic activity in a general sense. Such an organization is formed by several founders. The authorized capital is formed from a certain number of shares, which are distributed among the owners. They are issued when a company is created. Moreover, the number of securities and their nominal value are immediately specified. The rules for their distribution indicate the type of organization of the enterprise.
These securities share certain rights with their owners. For the fact that the shareholder contributed a certain amount of his funds to the authorized capital (this is fixed by the share) at the end of the reporting period to receive the corresponding part of the net profit. This remuneration corresponds to the share of the securities owner in the total authorized capital. This return to the shareholder is called dividends.
The owner also has the right to take part in voting in the process of making important decisions for the company, as well as to receive part of the property in the event of its liquidation.
Stock
The difference between a PJSC and a JSC is that in the first case the number of shareholders is not limited at all by current legislation. If we are talking about a non-public organizational and legal form, then the legislator clearly limited the number of possible shareholders - no more than 50 people. However, a JSC can be organized by one person.
Federal legislation carefully checks public companies, because any person can become a shareholder. Therefore, the requirements for such societies are much greater.
Another difference between JSC and PJSC is that shareholders of public organizations are not required to agree with anyone on the alienation of the company’s shares that they hold. If we are talking about a non-public form of JSC, then the charter may provide for certain restrictions. First of all, all other founders have a pre-emptive right to purchase shares.
Shareholders of public companies cannot have pre-emptive rights to purchase shares. There are only two exceptions to this rule:
- if securities are converted into shares;
- if an additional issue is carried out.
In a PJSC, there cannot be restrictions on the number of shares that one shareholder can own, there cannot be a limit on the number of votes that a particular shareholder can have, or the par value of the shares cannot be set. The NAO has the right to establish certain restrictions, which must be enshrined in the charter of the enterprise.
PJSC does not have the right to place preferred shares at a price lower than the cost of ordinary shares. There is no such prohibition for non-public companies.
Rights and obligations of shareholders
When studying how a JSC differs from an OJSC, it is necessary to pay attention to the rights and responsibilities of shareholders. They are limited by certain legislative frameworks. Their liability is limited only by the value of the securities.
The risk of loss does not apply to all property of the owners. But if, in the event of bankruptcy of an enterprise, the fault of, for example, a hired director or a certain group of shareholders was established, then they bear increased responsibility. If a company does not have enough funds to pay off its debts, the perpetrators may be subject to subsidiary liability.
Shareholders may also be jointly and severally liable if the authorized capital of the enterprise consists of a certain part of unpaid securities.
All decisions are made at the meeting of shareholders. Voting rights have the same weight as how many shares the founder has. If he has 50%+1 share, this enterprise is controlled by one individual or legal entity.
What is the difference between a closed joint stock company and an open joint stock company?
A closed joint stock company (CJSC) is a company whose shares are distributed only among its founders. A closed joint stock company does not have the right to conduct an open subscription for the issue of shares. Shareholders of a closed joint stock company have a pre-emptive right to purchase shares sold by other shareholders of the company.
An open joint-stock company (OJSC) is a company whose participants can sell their shares without the consent of other shareholders. The JSC conducts an open subscription for the issue of shares and their free sale; is obliged to publish annually for public information: an annual report, a balance sheet, and a profit and loss account.
Constituent document of closed and open joint stock companies - charter,
approved by the founders; must contain information about the categories of shares issued by the company, their nominal value and quantity, the size of the company's authorized capital, the rights of shareholders, the composition and competence of the company's management bodies and the procedure for their decision-making.
Promotion
certifies the fact that its owner, the shareholder, has made a certain contribution to the capital of the joint-stock company. It can be the subject of purchase and sale, donation, pledge, and generate income in the form of a share of profit (dividend) received by the joint-stock company; gives the right to participate in management.
The main feature of OJSC–
its property and monetary capital is formed through the open, free sale of its shares.
Shares are sold either in the primary market at face value
upon issue, or in the secondary market through resale at
market prices.
JSC is one of the most widespread and civilized modern forms of collective business organization; provides a real opportunity for millions of ordinary citizens to become involved in enterprise ownership.
Differences between open joint stock companies and closed ones. Closed and open joint stock companies are liable for their obligations, incur possible losses, and take risks within limited limits, not exceeding the value of the block of shares owned by them. At the same time, joint-stock companies are not liable for the property obligations of individual shareholders accepted by them privately.
An OJSC differs from a CJSC in that in an OJSC the number of shareholders is not limited, and in a closed joint stock company the number of participants should not be more than 50. If the number of shareholders of a closed joint stock company exceeds 50 people, then within a year the JSC must transform into an open joint stock company. Another difference is the procedure for issuing and placing shares - in an OJSC it is of a public nature, while in a CJSC it is limited to specific individuals and legal entities.
14. How does a production cooperative differ from business societies and partnerships?
A production cooperative differs from partnerships and societies in that:
· a production cooperative is based on a voluntary association of individuals - citizens who are not individual entrepreneurs, but who participate in the activities of the cooperative through personal labor. Each member of the cooperative has one vote in the management of its affairs, regardless of the size of his property contribution;
· the profit received in the cooperative is distributed among its members taking into account their labor participation, and not their property contribution. Therefore, a production cooperative is characterized in the Civil Code (CC) as an artel;
The Civil Code supplemented this classic design of the cooperative-artel with two important provisions: Members of the cooperative bear additional responsibility for its debts, although not with all their property, but in an amount predetermined in the charter. Usually this amount is a multiple of the share contribution or equity participation of a member of the cooperative, but cannot be lower than the minimum prescribed by law.
The advantages of a production cooperative are that the profit of the cooperative is distributed among its members not in proportion to their shares, but in accordance with their labor contribution. The property remaining after the liquidation of the cooperative and satisfaction of the claims of its creditors is distributed in the same manner. The legislation does not limit the number of members of a cooperative, which gives individuals the opportunity to organize cooperatives of the required size. Equal rights of all members in managing the cooperative (since each of them has only one vote) increases the interest of cooperators in the successful activities of their organization and stimulates their personal initiative.
The disadvantages of a production cooperative are that the number of members in the cooperative must be at least 5 people, and this significantly limits the possibilities of their creation. Each member of the cooperative bears limited subsidiary liability for the debts of the cooperative.
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Distinctive features
A company is organized as a closed joint stock company if the number of shareholders does not exceed 50 people. This form is typical for medium-sized businesses. The difference between a JSC and an OJSC lies primarily in the method of distribution of shares.
In a closed joint-stock company they are purchased by a limited number of persons. The authorized capital in this case is less than 100 times the minimum wage (minimum wage).
In an OJSC the number of shareholders is unlimited. This form of management is characteristic of large businesses. Securities are sold through free sale. Information about the state of the company and its financial activities in this case is provided publicly.
The shares are freely traded on the stock market. The size of the authorized capital in this case is not less than 1000 minimum wages.
Differences between OJSC and CJSC
We have identified the main difference between an open and closed joint stock company, but it is far from the only one. The remaining differences may not be so important and fundamental, but you should not lose sight of them either, especially if you are thinking about creating your own joint stock company.
The differences may not be so important and fundamental, but you shouldn’t lose sight of them either, especially if you are thinking about creating your own joint stock company
Number of shareholders
An unlimited number of individuals and legal entities can simultaneously own shares of an open joint stock company. No more than fifty people at a time can be shareholders of a closed joint-stock company, and these can only be individuals. If, for some reason, it was decided to expand the number of shareholders beyond fifty people, then such a closed joint-stock company must be re-registered as an open joint-stock company, and this must be done within one year.
Amount of authorized capital
The minimum amount of the authorized capital of OJSC and CJSC is determined depending on the minimum wage in the Russian Federation in a given period of time. To open a closed joint-stock company, you will need an authorized capital of one hundred times the minimum wage, and to open an open joint-stock company – one thousand times.
An open joint stock company is obliged to report on the results of its activities every period, and do so publicly in the media. There are no such requirements for a closed joint stock company. Both information about the company’s activities and data about the founders of the closed joint-stock company, as a rule, always remain within the company.
Investor attitude
Due to the fact that the closed joint-stock company has a certain separation from the outside world due to its closed nature, its attractiveness to investors is minimal. But an open joint-stock company, with its ability for any person to join the ranks of shareholders and public placement of reports, can enjoy a higher degree of loyalty from potential investors and the external business world.
Due to the fact that the closed joint-stock company has a certain separation from the outside world due to its closed nature, its attractiveness for investors is minimal, unlike the open joint-stock company
It is impossible to say unequivocally which form - CJSC or OJSC - is more profitable and promising. Each of them has its own disadvantages and advantages. Due to its closed nature and limited number of shareholders, a closed joint-stock company is less susceptible to property seizures than an open joint-stock company. At the same time, the OJSC has a significant advantage in that it places its shares on the open market, and thus can attract good investment from outside. Shareholders often seriously compete for a controlling stake in an OJSC, which can lead to both positive and negative consequences. Closed joint stock companies, as a rule, are more stable than open ones, but they also have much less opportunities for development. OJSCs are developing more dynamically, but also have more risks in their activities.
We also note that from September 1, 2014, the names “open joint-stock company” and “closed joint-stock company” were abolished. Now, instead of them, the names “public joint-stock company” (PJSC) and “joint-stock company” (JSC), respectively, have been introduced into circulation. All the main differences between these two forms of enterprise remain the same for now.
Fundamental differences
The difference between OJSC and JSC is quite significant. First of all, the approach to the sale of shares is fundamentally different. If the JSC decides to sell part of the securities, the consent of all shareholders will be required. Moreover, they have an advantage when purchasing. OJSC sells shares freely, without notifying other participants. Therefore, the number of security holders is not limited.
JSC does not publish its financial statements in the public domain. The JSC is obliged to provide such information openly. This gives everyone the opportunity to evaluate the results of the company’s activities. For this reason, investors are much more likely to provide their temporarily free funds to open-ended organizations. The closed joint-stock company is not expanding to the level of a large business.
State as founder
To understand how a JSC differs from an OJSC, it is necessary to consider the case when part of the shares is owned by the state. The founders of the company can be the governing bodies of the Russian Federation at various levels of subordination.
In this case, the organization can only be an open issue type. Information about the results of the activities of such an enterprise is required to be publicly posted. If part of the shares is owned by subjects of the governing bodies of the Russian Federation, its municipal organizations, the formation of a closed joint stock company is strictly prohibited.
This is another significant difference between the two forms of management presented. The shares are publicly traded and quoted on the stock market.
Reorganization
For certain reasons, it may be necessary to reorganize an OJSC into a JSC. This conversion can also be performed in the opposite direction. In this case, the volume of the authorized capital changes, as well as the rights and obligations of the owners of securities.
If, based on the results of the company’s activities, its authorized capital does not exceed 1000 minimum wages, documents for reorganization should be prepared. This provides a number of benefits to the enterprise. But the reduction of own sources leads to a decrease in production.
This is a negative trend, but with a significant drop in sales volume and the market value of the company's shares, this is a necessary measure to prevent bankruptcy. The reorganization process is taken very seriously. The decision to change the form of business is made at a meeting of shareholders based on the results of the financial statements.
Preparation of documents
In the process of changing the form of business from open to closed joint stock company, no transformation is carried out. An OJSC can only be reorganized into a JSC. If there is a need for this, the board of directors prepares the necessary documentation.
For this purpose, a project is drawn up, which includes a number of mandatory items. The company's management in this document discloses the procedure and conditions of the reorganization. Next, the process of exchanging shares of the old company for deposits and securities of the new organization is discussed.
Conclusion
So, CJSC and OJSC, what is the difference? In general, the differences come down to the number of shareholders. In essence, a closed joint stock company is more similar to a limited liability company.
In addition, there are differences in the possibilities of selling shares to third parties. For a closed joint stock company such opportunities are minimal. This can be considered a negative feature of a closed joint stock company, since it limits the attraction of investment capital.
In this regard, we can conclude that open joint-stock companies are a more profitable form of ownership. This is due to greater opportunities to attract capital by issuing additional shares and placing them on the stock exchange. These opportunities increase the stability of the company and allow it to develop more successfully in the market.
Creation of a new society
The circle of persons among whom new securities are distributed does not exceed 50 people. A complete list of property that becomes the property of the reorganized joint-stock company is also compiled.
The meeting of shareholders approves the size of the authorized capital and appoints the managers of the new company.
Next, the state registration authorities establish the fact of termination of the existence of an open company of shareholders, and then a new closed organization is created. This will allow the company to operate in accordance with the market share it occupies. During this process, relevant documentation is recorded.
Dissolution of OJSC and CJSC
OJSC and CJSC were liquidated due to amendments to the Civil Code of the Russian Federation. According to the changes made, now closed and open joint-stock companies (CJSC and OJSC), as well as additional liability companies (ALC), are being transformed into public and non-public companies:
- public joint-stock company (PJSC) is a company whose shares are publicly placed on the securities market (clause 1 of Article 66.3 of the Civil Code of the Russian Federation). Such companies are now required to indicate in the charter and in the Unified State Register of Legal Entities (USRLE) that they are public. These organizations will need to change their name from “Open Joint Stock Company” to “Public Joint Stock Company”.
- non-public JSC is a company whose shares are not placed on the securities market. At the same time, an LLC is considered a non-public organization (clause 2 of Article 66.3 of the Civil Code of the Russian Federation). Also, such a form of organization as an additional liability company (ALS) has been abolished. From September 1, 2014, the provisions on an open joint-stock company will apply to ALCs;
According to the changes made, the state increases control over JSC. Now all companies will be forced to undergo a mandatory annual audit. Previously, according to Article 5 of the Federal Law of December 30, 2008 No. 307-FZ “On Auditing Activities,” an annual mandatory audit was provided only for JSCs. In accordance with the new amendments to the Civil Code of the Russian Federation, a mandatory audit of accounting (financial) statements is being introduced for all joint-stock companies without exception (clause 5 of Article 67.1 of the Civil Code of the Russian Federation).
Required Documentation
There is a significant difference between a newly created and a reorganized enterprise. The main document denoting the difference between these two organizational forms of companies is succession. This document represents a transfer deed or separation balance sheet. This depends on the form of the reorganization itself.
Re-registration of an OJSC into a JSC requires the collection of a certain list of documents. If shares are distributed among individuals, it is necessary to provide the commission with copies of passports and identification codes. If the owner of the securities is a legal entity, a copy of its registration documentation will be required.
Next, data on the receipt of funds or property of shareholders is prepared. After this, the type of activity of the company is determined. It is assigned the appropriate OKVED codes. In order to assign a legal address to an organization, it is necessary to provide a lease agreement. If it is not there, representatives of the commission go to the location of the main production facilities of the enterprise. It is assigned a legal address.
What does the reorganization give?
Changing an OJSC to a JSC entails significant changes for the organization. First of all, the balance sheet currency is significantly reduced. With a decrease in own financial sources, the investment rating falls.
Society will be able to attract fewer credit funds. It has the right not to publicly disclose the results of its activities, but this also repels investors. All ownership of shares is recorded in the Federal Tax Service database. Wanting to sell his securities, the owner notifies the other shareholders in writing of his decision.
If they do not agree to purchase the shares, they can be sold to a new owner. The documentation collected during the creation of the company is subject to change. New data is added to it. This is a longer process.
Having considered how a JSC differs from an OJSC, it is worth noting a number of advantages of each business form. Depending on the volume of business, one or another type of object is chosen. This allows companies to organize their activities most efficiently. In constantly changing market conditions, it is possible to reorganize an OJSC into a JSC and vice versa. In some cases, this is a necessary measure that cannot be avoided.
