January 01, 2024

Joint Stock Company: Legal Framework and Basic Provisions

Joint stock company represents one of the key forms of companies, which is characterized by specifics in terms of establishment, management, financial structure and responsibility. The following are elaborated key topics related to joint stock companies based on the Companies Act.

1. Establishment of a joint stock company

The establishment of a joint-stock company begins with the adoption and signing of the statute and the statement of the founder on the establishment of the company. The founders take over the shares by a statement with a notary public, and the company is considered established when it is entered in the court register. Successive establishment allows the founders to, after adopting the articles of association and taking over part of the shares, make a public invitation for the subscription of the remaining shares.

2. Stocks

Shares represent shares of ownership in a joint-stock company and can be ordinary or preferential. Ordinary shares give the holder the right to vote at the general meeting, the right to a share of the profit (dividend) and the right to a share of the liquidation estate. Preferred shares, on the other hand, provide some special rights such as the right to a fixed dividend.

3. Bodies of a joint stock company

The bodies of the joint stock company include the management, the supervisory board and the general meeting. The management may be one-member or multi-member, depending on the company’s articles of association. The Supervisory Board has the duty to oversee the work of the management, while the general meeting represents a gathering of shareholders and has the role of making key decisions in the company.

4. Increase in share capital

The share capital of a joint stock company can be increased by issuing new shares. This increase shall be based on the most recent financial statements and shall be permitted only if the available reserves are sufficient to cover the amount of new shares.

5. Reduction of share capital

The reduction of the share capital is carried out by reducing the nominal amount of shares. If the reduction results in a nominal share amount below the minimum allowed, a merger of shares shall be carried out. The reduction of share capital must be precisely defined in the reduction decision.

6. Nullity and voidability of decisions of the General Assembly

Decisions of the general meeting may be annulled or void for reasons such as non-compliance with the law, statute or serious violation of the decision-making process. The nullity of decisions on financial statements may affect the nullity of decisions on the use of profits. After registering the decision of the general meeting in the court register, the possibility of rebuttal is limited.

7. Termination of joint stock company

It is common for a joint stock company to terminate by liquidation, bankruptcy or merger/merger with another company.

Joint stock companies reflect the complex structure of corporate governance and financial organization, allowing capital attraction and risk distribution among a larger number of investors. A precise understanding of their legal basis enables effective management and compliance with the regulatory framework.

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