For profit companies

Home assignment 5
Statute on State Enterprise
Statute on Non-
Commercial Organizations
Revise Chapters 2, 9 & 10, Civil Code

Terms
State enterprise – государственное предприятие
Business Partnerships – Хозяйственные товарищества
General Partnership – Полное товарищество
Limited Partnership – Командитное товарищество
Limited Liability Partnership (LLP) – ТОО
Corporation = Joint Stock Company – АО
General Partner – Полный товарищ
Limited partner – Вкладчик
Partner – участник
Interest - доля

Plan (Peculiarities of organizational forms)
Sale of Interest to the Third Parties
Sale of Interest to the Company itself
Forced Sale of Interest
Liabilities of Companies for the debts of its Owners

Remark
Legal Entity = Union of
People = Partnerships
Capital = Corporation
Work = Cooperative

Remark

5. Sale of Interest/Shares to the Third Parties

Example
Let’s assume that Alexei found his friend
Boris who is willing to buy his interest for
KZT 20,000.
Maxim does not want Boris as Boris does
not have a lot of money.
Alexei wants to send Maxim to hell, and
proceed with the deal.
Can Alexei sell his interest to Boris?
Alex
Max
Tanya

A. General Partnership
Max: against
Tanya: ran away
Can Alexei sell
his interest to Boris?
Yes
Yes, however, he needs to offer his stake first to Max & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Max
No, he needs consents of Tanya & Max
Alex
Max
Tanya

B. Limited Partnership
Max, limited partner: against
Tanya, general partner: ran away
Can Alexei sell
his interest to Boris?
Yes
Yes, however, he needs to offer his stake first to Max & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Max
No, he needs consents of Tanya & Max
Alex
Max
Tanya

B. Limited Partnership
Alex, general partner: against
Tanya, general partner: ran away
Can Maxim sell
his interest?
Yes
Yes, however, he needs to offer his stake first to Alex & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Alex
No, he needs consents of Tanya & Alex
Alex
Max
Tanya

C. Limited Liability Partnership
Max: against
Tanya: ran away
Can Alexei sell
his interest to Boris?
Yes
Yes, however, he needs to offer his stake first to Max & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Max
No, he needs consents of Tanya & Max
Alex
Max
Tanya

D. Additional Liability Partnership
Max: against
Tanya: ran away
Can Alexei sell
his interest to Boris?
Yes
Yes, however, he needs to offer his stake first to Max & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Max
No, he needs consents of Tanya & Max
Alex
Max
Tanya

E. Corporation
Max: against
Tanya: ran away
Can Alexei sell
his interest to Boris?
Yes
Yes, however, he needs to offer his stake first to Max & Tanya at the same price
No, he needs consent of Tanya
No, he needs consent of Max
No, he needs consents of Tanya & Max
Alex
Max
Tanya

5. Sale of Interest/Shares to the Company itself

Example
Tired of constant obstacles created by
Maxim’s attitude & Tanya’s absence, Alex
says, “Fine! I quit! Take your interest
back. I do not want to be part of the firm!
Let the firm take the interest back! Give
me back my part of the interest in the firm!”
Let’s assume that the firm has the assets
left.
Does the firm have to buy back its interest?
Alex
Max
Tanya

A. General Partnership
Does the firm have to buy back its interest?
Yes, provided he notifies other partners on 6 months prior notice
Yes, there is no need for prior notice.
No.
Alex
Max
Tanya

B. Limited Partnership
Alex is general partner.
Does the firm have to buy back its interest?
Yes, provided he notifies other partners on 6 months prior notice
Yes, there is no need for prior notice.
No.
Alex
Max
Tanya

C. Limited Liability Partnership
Alex is general partner.
Does the firm have to buy back its interest?
Yes, provided he notifies other partners on 6 months prior notice
Yes, there is no need for prior notice.
No.
Alex
Max
Tanya

D. Additional Liability Partnership
Alex is general partner.
Does the firm have to buy back its interest?
Yes, provided he notifies other partners on 6 months prior notice
Yes, there is no need for prior notice.
No.
Alex
Max
Tanya

E. Corporation
Alex is general partner.
Does the firm have to buy back its interest?
Yes, provided he notifies other partners on 6 months prior notice
Yes, there is no need for prior notice.
No.
Alex
Max
Tanya

6. Forced Sale of Interest/Shares against the will of owner

Example
Let’s assume that everything is fine with
the law firm.
In fact, the firm is very good. However,
Alex as a professional is very bad. He
made a bad job on a few contracts, and
now the firm is facing a huge liability suit
in the amount of KZT 1 bln.
Can Max & Tanya get rid of Alex as a partner/shareholder?
Alex does not want to leave.
Alex
Max
Tanya

A. General Partnership
Alex: against
Max & Tanya: do not want him as a partner
Can Max & Tanya get rid of Alex as
a partner/shareholder?
Yes
Yes, through the court, provided there is (1) decision of all partners, and (2) good reason
Yes, through the court, provided there is (1) decision of the General Meeting, and (2) Alex grossly violated his obligations to the Partnership.
No, not against his will
Alex
Max
Tanya

B. Limited Partnership
Alex: against
Max & Tanya: do not want him as a partner
Can Max & Tanya get rid of Alex as
a partner/shareholder?
Yes
Yes, through the court, provided there is (1) decision of all partners, and (2) good reason
Yes, through the court, provided there is (1) decision of the General Meeting, and (2) Alex grossly violated his obligations to the Partnership.
No, not against his will
Alex
Max
Tanya

C. Limited Liability Partnership
Alex: against
Max & Tanya: do not want him as a partner
Can Max & Tanya get rid of Alex as
a partner/shareholder?
Yes
Yes, through the court, provided there is (1) decision of all partners, and (2) good reason
Yes, through the court, provided there is (1) decision of the General Meeting, and (2) Alex grossly violated his obligations to the Partnership.
No, not against his will
Alex
Max
Tanya

D. Additional Liability Partnership
Alex: against
Max & Tanya: do not want him as a partner
Can Max & Tanya get rid of Alex as
a partner/shareholder?
Yes
Yes, through the court, provided there is (1) decision of all partners, and (2) good reason
Yes, through the court, provided there is (1) decision of the General Meeting, and (2) Alex grossly violated his obligations to the Partnership.
No, not against his will
Alex
Max
Tanya

E. Corporation
Alex: against
Max & Tanya: do not want him as a partner
Can Max & Tanya get rid of Alex as
a partner/shareholder?
Yes
Yes, through the court, provided there is (1) decision of all partners, and (2) good reason
Yes, through the court, provided there is (1) decision of the General Meeting, and (2) Alex grossly violated his obligations to the Partnership.
No, not against his will
Alex
Max
Tanya

7. Liability of Companies for the debts of the Owners

Example
Let’s assume now that the firm is really fine,
and it is Alex who has lots of debts. The
creditors come to the firm, and demand to
pay Alex’s debt.
Alex’s debt is 50 mln, and the firm net
assets are 50 mln. Alex owns 20% of it.
Is the firm liable for the debts of Alex?
Alex
Max
Tanya

A. General Partnership
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

B. Limited Partnership
Alex: general partner
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

B. Limited Partnership
Alex: limited partner
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Firagainst
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

C. Limited Liability Partnership
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Firagainst
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

D. Additional Liability Partnership
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Firagainst
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

E. Corporation
Alex’s debt: 50 mln.
Firm’s net assets: 50 mln.
Alex’s stake: 20%
Firagainst
Is the firm liable for the debts of Alex?
Nothing
10 mln., that is 20% of 50 mln debt.
50 mln.
Alex
Max
Tanya

2. Legal Entity = Union
Legal Entity = Union of
People = Partnerships
Capital = Corporation
Work = Cooperative

Practice Questions

Example
Stariko raises KZT 1 bln. capital by issuing:
Bonds (облигации); or
Equity or common shares (обычные акции).
Aibek bought these securities.
What are the differences?

Problem
Voting
Assets vs. liabilities
Order of claim

Problem 1
Let’s assume that we have
transportation company
Shipco.
Property Structure
Assets: USD 300 mln.
Is it likely that it will receive
the loan of USD 30 mln?

Problem 1
Let’s assume that we have
transportation company
Shipco.
Property Structure
Assets: USD 300 mln.
Liabilities: USD 390 mln.
They made losses this year, and
they urgently need additional
30 mln. to launch one important
project.
How legally can they solve the
problem?

Problem 2 (Risks)
Let’s assume that there is a
KZ oil company called Oilco.
It would like to obtain a loan
of USD100 mln.
Let’s assume that Bank A is
willing to give them the loan
at 11% interest.

Problem 2 (Risks)
The structure of the interest is
the following:
Country risk - 5%
Price risk – 3%
Default risk – 1%
2% are the rest.
How legally can they
reduce the risk, i.e., reduce
the interest?