the problem of criminal liability of legal persons in russia

8/12/2019 The Problem of Criminal Liability of Legal Persons in Russia

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US-CHINA LAW REVIEW

VOL. 10 December 2013 NO. 6

527

ARTICLES

THE PROBLEM OF CRIMINAL LIABILITY

OF LEGAL PERSONS IN RUSSIA

Pavel Nikolaevich Biriukov*

The article deals with the questions of liability of legal persons inRussia. The author outlines contemporary civil and criminal legislation of

Russia. The main attention is paid to the description of the existing types of

legal persons and to the order of legal persons state registration.

INTRODUCTION............................................................................................ 527I.TYPES OF LEGAL PERSONS IN RUSSIA...................................................... 528II.REGISTRATION OF LEGAL PERSONS........................................................ 540III.ADMINISTRATIVE LIABILITY OF LEGAL PERSONS.................................. 544IV.PROBLEM OF CRIMINAL LIABILITY OF LEGAL PERSONS........................ 547CONCLUSION............................................................................................... 548

INTRODUCTION

The basic acts that govern the establishment, registration and operation

of legal entities in Russia are as follows: the Civil Code of the Russian

Federation 19941, the Federal Act On Public Associations 1995

2, the

Federal Act n Non-profit organizations 19963, the Tax Code of the

Russian Federation 19984, the Federal Act On State Registration of Legal

Persons and Individual Entrepreneurs 20015.

*Doctor of Legal Sciences, Professor, the Head of the International and European Law Department,Voronezh State University (Russia). Research fields: http://intern.law.vsu.ru/eng/birukov.html.1(Collection of Laws of the Russian Federation). 1994. N 32. .(Article) 330. Hereinafter: the text currently in force of the act can be found at site -

http://www.pravo.gov.ru.2Collection of legislation of the Russian Federation. 1995. N 21. Art. 1930.3Collection of legislation of the Russian Federation. 1996. N 3. Art. 145.4Collection of legislation of the Russian Federation. 1998. N 31. Art. 3824.5Collection of legislation of the Russian Federation. 2001. N 33 (part I). Art. 3431.


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528 US-CHINA LAW REVIEW Vol. 10:527

The Civil Code provides the basic regulation in respect of the relations

between citizens and legal persons. The state and its subjects as well as the

municipal persons may also be parties of the relations regulated by the Civil

Code.According to Art. 52 of the Civil Code, a legal person is to operate on

the basis of the rules, or of the constituent agreement and the rules, or only

of the constituent agreement. A legal person, which is not a non-profit

organisation, may operate on the basis of the general provisions on the given

type of organisations. The constituent agreement of a legal person must be

signed, and the rules are to be approved by its founders (participants). A

legal person created in conformity with the Civil Code by one founder is to

operate on the basis of the rules approved by this founder.

I.TYPES OF LEGAL PERSONS IN RUSSIA

Russian law covers commercial and noncommercial organizations.

Legal persons that are profit-making organisations can be set up in the

form of economic partnerships and production cooperatives, as well as state

and municipal unitary enterprises. Legal persons of non-profit organisations

can be established in the form of consumer cooperatives, public or religious

organisations (associations), financed by the owner of the institution or by

charity and other funds, and also in other forms laid down by Act on Non-profit Organizations can engage in business activity only in so far as it helps

them to achieve their goals, under the name of which they have been

established, and in a way that corresponds to these goals.

In accordance with Art. 48 of the Civil Code, a legal person is

recognized as an organization, which has its ownership, economic

management or operative management set-apart property and which is

answerable to its obligations with this property and which may on its own

behalf acquire and exercise property and personal non-property rights,

discharge duties and act as a plaintiff and as a defendant in court. Legalpersons must have an independent balance or an estimate.

According to Art. 49 of the Civil Code, a legal person enjoys the civil

rights that correspond to the goals of its activity, as stipulated in its

constituent documents, and has to discharge the duties related to this activity.

The legal capacity of a legal person emerges upon its creation and

terminates when deleted from the Unified State Register of Legal Persons.

Legal persons may be organizations getting profit as the basic purpose

of their activity (commercial organizations) or not having profit as such a


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2013 THE PROBLEM OF CRIMINAL LIABILITY 529

purpose and not distributing profit received among their participants (non-

commercial organizations).

Legal persons that are commercial organizations may be created in the

form of economic partnerships and companies, business partnerships,cooperatives, state and municipal unitary enterprises.

In the constituent instruments of a legal person must be indicated the

name of the person (and its organizational form), the place of its seat, the

way in which the legal persons activity is managed, and other information,

required by the Act for legal persons of the corresponding type. In the

constituent instruments of a non-profit organization and of unitary

enterprises, and in law stipulated cases also of other profit-making

organizations must be defined the object and the goals of the legal persons

activity. In the constituent agreement, the founders have to assume theobligation of creating the legal person, and have to delineate the order of

their joint activities, involved in its creation, and the terms for the transfer to

it of their property and for their participation in its activity. The agreement

must also define the terms and procedure for the distribution of profits and

losses among the participants, for the management of the legal persons

activity and for the founders (the participants) withdrawal from its

structure.

Amendments, made in the constituent instruments, come into force in

respect of third persons from the moment of their state registration, and incertain cases, established by the Act from the moment of notifying such

amendments to the body performing the state registration.

However, legal persons and their founders (participants) do not have

the right to refer to the absence of the registration of such amendments in

their relationships with third persons, who have taken into account such

amendments.

The types of profit-making legal persons in Russia are as follows:

1. Economic partnerships ( ) and

companies () (Art. 66 of the CC). Business partnerships andcompanies are commercial organizations with divided into shares (deposits)

of the share capital of their participants. Property created at the expense of

the contributions of the founders (or the participants) and produced or

acquired by the business partnership or company in the process of its

activity as well shall belong to it by the right of ownership. The company

may be created by one person who is its only participant.

Business partnerships may be created in the form of general

partnerships (Art. 69 of the CC) ( ) and Limited

partnerships (commandite partnerships) (Art. 82 of the CC) [


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one or more participants with the addition of the words and company and

the words full partnership.

General partnership is established and acts on the basis of the

memorandum. The Memorandum of Association is signed by all theparticipants. The Memorandum of Association of a full partnership must

contain in addition to the general information (paragraph 2 item 52 of the

civil code) the terms on the amount; composition of the contributed capital

of the partnership; the terms on the amount of and procedure for change in

the shares of each of the participants in the contributed capital; the terms on

the amount, composition, terms and order of their contributions; the terms

on the liability of participants for violation of obligations on making

deposits.

Profits and losses of a full partnership shall be distributed among itsparticipants in proportion to their shares in the contributed capital, unless

otherwise provided by the memorandum or by other agreement of the

participants. Participants in a full partnership jointly bear subsidiary liability

with their property for the obligations of the partnership. A participant who

left a partnership is liable for the obligations of the partnership that arose up

to the time of his equally with the remaining participants for two years from

the date of approval of the report on the activities of the partnership for the

year in which he left the partnership.

2. Partnership on faith (limited partnership). It is a partnership in whichalong with participants conducting business and being liable for the

obligations of the partnership with their property (General partners) on

behalf of the partnership there are one or several participantsinvestors (the

limited partners). They bear the risk of losses connected with the activity of

the partnership within the limits of their contributions and do not participate

in the partnership of entrepreneurial activity. The position of General

partners participating in the partnership of faith and their liability for the

obligations of the partnership shall be determined by rules of the Civil Code

concerning participants in a full partnership. A person may be a Generalpartner only in one partnership on faith. A participant in a full partnership

may not be a General partner in the partnership on faith. A General partner

in the partnership on faith may not be a participant in a full partnership.

The brand name of a partnership must contain either the names (or

designations) of all the General partners and the words partnership on

faith or limited partnership or the name (designation) of not less than one

General partner with the addition of the words and company and the

words partnership on faith or limited partnership.

Partnership on faith is established and acts on the basis of the


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memorandum. The Memorandum of Association is signed by all the

General partners. The Memorandum of Association of the partnership on

faith must contain in addition to the General information (paragraph 2 Item

52 of the Civil Code) the terms on the amount and composition of thecontributed capital of the partnership; the terms on the amount of and

procedure for change in the shares of each of the General partners in the

contributed capital; the terms on the amount, composition, terms and order

of their contributions; their liability for violation of obligations on the

introduction of Deposit of the total amount of contributions of the depositors.

3. The peasant (farmer) economy. Citizens having cooperative activity

in the sphere of agriculture without formation of a legal person on the basis

of the agreement on the establishment of the peasant (farmer) economy (Art.

23 of the Civil Code), may establish a legal entitya farm. It is as avoluntary association of citizens on the basis of membership for cooperative

production or other economic activities in the sphere of agriculture based on

their personal participation and combining the property contributions of the

members of the peasant (farm). The property of the peasant (farm) has a

property right. A person can be a member of only one of the peasant (farm)

as a legal entity. Members of the peasant (farm) as a legal entity shall bear

the obligations of the peasant (farm) subsidiary liability. Features of the

legal status of the peasant (farm) as a legal entity shall be determined by law.

4. Limited liability companies ( ). A limited liability company (LLC) is a company which

authorized capital is divided into shares. The participants in a limited

liability company are not liable for its obligations but bear the risk of losses

connected with the activity of the company within the value of shares

belonging to them. A firm name of a limited liability company must contain

the name of the company and the words limited liability. The legal

position of a LLC and rights and duties of its participants shall be

determined by Code and the Act On limited liability companies 1998.6

Features of the legal status of credit organizations established in theform of LLC, rights and duties of their participants are defined by the Acts

regulating the activities of credit organizations (the Federal Act On Banks

and Banking Activity 19907).

The number of participants of the LLC must not exceed 50. Otherwise,

it is subjected to transformation into a joint-stock company within a year

and upon expiration of this period to liquidation by a judicial procedure if

the number of its participants is not reduced to a statutory limit.

6

Collection of legislation of the Russian Federation. 1998. N 7. Art. 785.7Collection of legislation of the Russian Federation. 1996. N 6. Art. 492.


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The founders shall make an agreement on the establishment of the LLC

that determines the order of their joint work on the establishment of the

company, the size of the authorized capital of the company, the size of their

shares in the memorandum capital and other statutory conditions.The memorandum of a LLC along with General information should

contain information on the amount of the authorized capital of the company,

the composition and competence of its management bodies, the procedure

for their making decisions (including decisions on the issues to be taken

unanimously or by a qualified majority of votes) and other statutory

information.

The authorized capital of the company is composed of the nominal

value of shares of the participants. The size of the memorandum capital

must be not less than 10,000 rouble. The payment of interests in theauthorized capital of the company may be money, securities, other things or

property rights or other rights which have monetary value. The monetary

value of the property contributed to pay for the shares in the memorandum

capital of the company, is approved by the decision of General meeting of

participants of the company and taken unanimously by the company

participants. Each founder of the company must pay its share in full by of

the authorized capital of the company within the period defined by the

contract on company founding or in case of the establishment of a company

by one person through the decision on the establishment of the company andmay not exceed one year from the moment of state registration of the

company. At the moment of state registration of the company, its authorized

capital should be paid by the founders not less than half.

A member has a right to sell or dispose his share or a part of a share of

the authorized capital of the company to one or several participants of that

company. The consent of other participants of the company or to such a

transaction is not required unless otherwise stipulated by the company

memorandum. The participants of the company have a priority right to buy a

share or a part of a participants share of the company at the price offered tothe third party.

5. An additional liability companies (

) is a company, which authorized capital is divided into

shares; the participants of such a company jointly and severally bear

subsidiary liability for its obligations with their property for everybody in

the same fold amount of the value of their shares specified in the company

memorandum. In case of the bankruptcy of one of the participants its

liability for the obligations of the company shall be distributed among the

remaining participants in proportion to their contributions unless another


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procedure for distributing liability is provided by the constituent documents

of the company.

The name of the company must contain the name of the company and

the words additional liability company.The rules of the Civil Code concerning LLC applied to the society with

the additional responsibility

6. A Joint-stock company ( ) is a company

which memorandum capital is divided into a certain number of shares; its

participants (stockholders) are not liable for its obligations and bear the risk

of losses connected with the activity of the company within the value of

shares owned by them. Shareholders that have not paid their shares in full

are jointly and severally liable for the obligations of the company within the

unpaid part of the shares belonging to them. The name of the joint-stockcompany must contain its name and an indication that the company is a joint

stock.

The legal status of joint-stock company and the rights and duties of the

stockholders shall be determined in accordance with the Civil Code and the

Act On joint stock companies 1996.8

The features of the legal status of credit organizations established in the

form of a JSC, the rights and duties of their shareholders are defined by the

laws regulating the activities of credit organizations.

A JSC (joint stock company) which participants can alienate theirshares without the consent of other shareholders is an open JSC. The

company has a right to conduct an open subscription to shares issued by it

and conduct their free sales on the conditions established by the

memorandum and other legal acts. An open society has a right to carry out

the closed subscription for the shares issued by it, except when the

possibility of a closed subscription is limited by the memorandum of the

company or by the requirements of the legal acts of the Russian Federation.

The number of shareholders of an open company is not limited. The

establishment of preemptive rights of the company or its shareholders topurchase the shares alienated by the shareholders of this society is not

allowed in the open JSC. An open company must publish an annual report,

balance sheet, profit and loss account each year.

A joint stock company which shares are distributed among its founders

only or other previously defined circle of people is considered to be closed

JSC ( ). Such a society has no right to

conduct open subscription to shares issued by it or otherwise to offer them

8Collection of legislation of the Russian Federation. 1996. N 1. Art. 1.


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for acquisition to an unlimited circle of persons.

The number of participants of a CJSC may not exceed 50 members. In

case if the number of shareholders of a company exceeds the limit, the

company should be transformed into an OJSC within one year. If thenumber of shareholders is not reduced to the limit, the company is subjected

to liquidation in the judicial order.

CJSC shareholders have a preemptive right to purchase shares sold by

other stockholders of this company at the price offered to a third party in

proportion to the number of shares held by each of them, if the company

memorandum does not provide for another procedure for exercising this

right. The memorandum of a closed company may be provided for a

preemptive right to purchase shares sold by its shareholders, if the

shareholders do not exercise their preemptive right to purchase shares.The minimum share capital of a JSC must be no less than a thousand-

fold amount of the minimum wage established by the Federal law on the

date of registration of the company, as for a closed JSC is not less than the

amount of hundred-fold of the minimum wage established by the Federal

law on the date of state registration of the company. In accordance with Art.

5 of the Federal Act On the minimum wage 20009, the calculation of taxes,

fees, penalties and other payments applied in accordance with the legislation

of the Russian Federation depending on the minimum wage, which is

calculated on the basis of a basic amount, equal to 100 rubles. Thus, theminimum authorized share capital for a JSC is 100,000 rubles, for a CJSC is

10,000 rubles.

The authorized capital of the company is composed of the par value of

the shares acquired by the shareholders. The par value of all ordinary shares

of the company should be the same.

The company places ordinary shares and has a right to place one or

several types of preference shares. The par value of the placed preference

shares may not exceed 25 per cent of the memorandum capital of the

company. When founding a company, all its shares shall be placed amongthe founders. All the shares of the company are registered.

The founders of a JSC conclude a contract which determines the order

of their joint work on creation of the company, the size of the authorized

capital of the company, categories of shares to be issued and the order of

their placement, and other conditions provided by the Act on joint-stock

companies.

The contract establishing the JSC is concluded in written form. The



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founding document of the joint stock company is its memorandum approved

by the founders. The memorandum in addition to the general information

must contain the conditions on the categories of issued shares, their par

value and number, the conditions on the size of the authorized capital of thecompany, the conditions on the rights of stockholders, the conditions on the

composition and competence of the company management bodies and the

procedure for their making decisions, including the conditions on questions

which decisions are taken unanimously or by a qualified majority of votes.

The memorandum of the company shall contain other information provided

by the Act on joint-stock companies.

The procedure of execution of other actions to establish a JSC

including the competence of the constituent assembly is determined by the

Act on joint stock companies.A JSC may be created by one person or may consist of one person in

case of acquisition by one shareholder of all shares of the company. Such

information should be fixed in the memorandum of the company, be

registered and published for general information.

The authorized capital of the JSC is composed of the par value of

shares acquired by the shareholders.

The memorandum capital defines the minimum amount of the property

of the company guarantying the interests of its creditors. It may not be less

than the amount provided by the Act on joint stock companies.The Act or the memorandum of the company may establish limitations

on the number, the total par value of the shares or the maximum number of

votes belonging to one shareholder.

The body of management of a JSC is the General meeting of its

shareholders. The exclusive competence of the General meeting of

shareholders is a) changing of the memorandum of the company including

changing the size of its authorized capital; b) the election of the members of

the Board of Directors (Supervisory Board) and the auditing Committee

(auditor) of the company and the early termination of their powers; c) theformation of the Executive bodies of the company and the early termination

of their powers if the solution is not within the competence of the Board of

Directors (Supervisory Board) according to the memorandum; d) the

approval of annual reports, balance sheets, profit and loss accounts of the

company and distributing its profits and losses; and e) the decision on a

reorganization or liquidation of the company.

The Board of Directors (Supervisory Board) is created in a company

with the number of shareholders more than fifty. When the Board of

Directors is created, the Charter of the company in accordance with the Act


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on JSC should determine its exclusive competence. Questions assigned by

the memorandum as the exclusive competence of the Board of Directors

may not be delegated to the Executive bodies of the company.

The Executive body of the company may be collegial (a Board, aDirectorate) and (or) individual (a Director, a General Director). It manages

the company and is accountable to the Board of Directors (Supervisory

Board) and the General meeting of shareholders. The competence of the

Executive body includes the decision of all matters not constituting the

exclusive competence of other management bodies of the company

determined by a Statute or the memorandum of the company.

A special kind of CJSC is so called public enterprises. The

peculiarities of creation and legal status of national enterprises, the rights

and duties of their shareholders are regulated by the Act On thepeculiarities of the legal status of joint stock companies employees (public

enterprise) 1998.10

A public enterprise provides an increased protection of

the rights and interests of its workers and minority shareholders against

dismissal and hostile takeovers.

The rules of the Federal Act On joint stock companies shall apply to

the national enterprises as close companies. A national enterprise may be

created through the conversion of any commercial organization (except for

state unitary enterprises, municipal unitary enterprises and JSC), employees

owned less than 49% of the authorized capital. Participants of suchcommercial organization shall make a decision on its transformation into a

national enterprise.

A national enterprise may have only ordinary shares. The employees of

a public enterprise should have a number of shares of the enterprise the

nominal cost of which is more than 75% of its share capital.

7. Affiliated company (). The company is declared

affiliated if another (principal) business company or partnership in virtue of

dominant participation in its memorandum capital or in accordance with an

agreement concluded between them, or otherwise has a power to determinedecisions taken by this company (Art. 105 of the CC). An affiliated

company is not liable for the debts of the principal company. The principal

company (partnership) that has a right to give the affiliated company

including the contract with it instructions obligatory for it is responsible

jointly and severally liable with the affiliated company for transactions

concluded by the latter in the performance of such instructions. In case of

the insolvency (bankruptcy) of the subsidiary company through the fault of



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the principal company (partnership), the latter shall bear subsidiary liability

for its debts. The participants (shareholders) of an affiliated company shall

have a right to demand compensation by the principal company (partnership)

for losses caused by its fault to the affiliated company if otherwise is notstipulated by the Acts on the economic companies.

8. Dependant company (). A company is declared

as dependent if another (prevailing) company has more than 20 % of voting

shares of the JSC or 20 % of the share capital of LLC (Art. 106 of the CC).

A business entity that has acquired more than 20% of voting shares of the

JSC or 20 % of the authorized capital of the LLC is obligated to publish

information on this immediately in the manner prescribed by the Acts on

business companies.

9. A Production cooperative ( ) is avoluntary association of citizens based on membership for cooperative

production or other business activity (production, processing, distribution of

industrial, agricultural and other products, execution of work, trade, services,

other services) that bases on their personal labour and other participation

and combining its members (participants) of property share contributions.

The constituent documents of a production cooperative may provide for

participation in the activity of the legal persons. Production cooperative is a

commercial organization. The members of the production cooperative shall

bear the liabilities of the cooperative subsidiary liability in the amount andin the order stipulated by the Federal Act On Production Cooperatives of

199611

and the memorandum of the cooperative. The brand name of a

cooperative must contain its name and the words production cooperative

or artel. The legal status of production cooperatives and the rights and

duties of their members shall be determined by statutes (Art. 107 of the CC).

10. State and municipal unitary enterprises (

).

Legal status of state and municipal unitary enterprises is determined by

the Civil Code of the Russian Federation and the Federal Act On state andmunicipal unitary enterprises 2002.

12

A unitary enterprise is a commercial organization without ownership of

the property, assigned to it. The property of a unitary enterprise is

indivisible and cannot be allocated to investments (shares, units) including

among the employees of the company (Art. 113 of the CC).

The memorandum of a unitary enterprise must contain the information

about the subject and purposes of activity of the enterprise, as well as on the

11



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amount of authorized fund of the company, procedure and sources of its

formation, except for state-owned enterprises in addition to the general

information.

State and municipal enterprises can be created only in the form ofunitary enterprises. The property of a state or municipal unitary enterprise is

respectively in state or municipal ownership and belongs to the enterprise

according to the act on economic jurisdiction or operative management. The

brand name of a unitary enterprise must contain an indication of the owner

of its property.

The authority of the unitary enterprise is the head who is appointed by

the owner or the authorized body and shall be accountable to them.

A unitary enterprise is liable for its obligations with all property

belonging to him. A unitary enterprise does not bear responsibility forobligations of the owner of its property.

Now let us consider the question about the types of non-profit legal

persons.

The legal status, procedure of creation, activity, reorganization and

liquidation of non-profit organizations as legal persons, the creation and

disposal of their property, founders rights and obligations, management and

possible support from state and municipal bodies are provided for by the

Federal Act on Non-profit Organizations.

Legal entities which are non-commercial organizations may be createdin the form of consumer cooperatives, public or religious organizations

(associations), institutions, charitable and other foundations and in other

forms provided by a Statute. Non-commercial organizations may manage

the entrepreneurial activity as it serves the purposes for which they are

created and correspond to these purposes. The establishment of associations

of commercial and (or) non-profit organizations in the form of associations

and unions is also possible.

The types of non-profit organizations in Russia are the following:

1. Consumer cooperatives are the Federal Act On HousingAccumulative Cooperatives 2004

13etc. There are seven types of consumer

cooperatives in Russia;

2. Homeowners associations (Civil Code, Housing Code of the

Russian Federation 200414

);

3. Religious organizations (Civil Code, Federal Act On Freedom of

Conscience and Religious Associations). In Russia, the religious

associations can be established in two forms (religious groups and religious

13

Collection of legislation of the Russian Federation. 2005. N 1 (part 1). Art. 41.14Collection of legislation of the Russian Federation. 2005. N 1 (part 1). Art. 14.


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organizations 199715

).

4. Public organizations (Civil Code, Federal Act On Public

Associations 199516

). In Russia there are six types of public associations: a

public organization, a public movement, a social fund, a public institutionthe body of public initiative, a political party. Functioning of parties in

Russia are also regulated by the Federal Act On political parties 2001.17

5. Funds (Art. 118 of the Civil Code etc.). It is allowed to create private

pension funds and other funds in Russia (see in details the Federal Act On

the formation and use of non-profits endowment 200618

);

6. Institutions (the Federal Act On Autonomous Institutions 200619

).

In Russia, there are three types of Autonomous institutions;

7. Trade Unions (the Federal Act On Trade Unions, Their Rights and

Guarantees 199620

).

II.REGISTRATION OF LEGAL PERSONS

A legal person is subject to registration with the authorized state body

in conformity with the procedure specified by the Act on the state

registration of legal persons. The data on state registration is to be entered

into the Unified State Register of Legal Persons, which is open to the

general public (Art. 51 of the Civil Code). In accordance with the

Regulation of the Government of 2002 No. 438 on the Unified StateRegister of Legal Persons21

, the website of the Federal Tax Service contains

the data on legal persons, such as the name of the person; its identification

number as a taxpayer; the public registration number and date of its entry in

the registry and address.

A legal person is considered to be created from the day when the

respective record was made in the Unified State Register of Legal Persons.

State registration of legal persons is regulated by the Federal Act on State

Registration of Legal Persons and Individual Entrepreneurs 2001.

According to Art. 1 of this Act, the state registration of legal personsare acts by an authorized federal executive body, which are effected by

means of including in the state register information about the creation,

reorganization or liquidation of legal persons. According to the Government

15Collection of legislation of the Russian Federation. 1997. N 39. Art. 4465.16Collection of legislation of the Russian Federation. 1995. N 21. Art. 1930.17Collection of legislation of the Russian Federation. 1995. N 21. Art. 1930.18Collection of legislation of the Russian Federation. 2007. N 1 (part 1). Art. 38.19Collection of legislation of the Russian Federation. 2007. N 1 (part 1). Art. 38.20



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Resolution On the Adopting of the Regulations on the Federal Tax

Service of September 30th, 2004 (No. 506)22

, the Federal Tax Service23

and its territorial bodies are authorized to register legal persons.

State registration of a legal person is to be effected within five workingdays after the date when documents are filed with the registration body at

the location of the permanent executive body specified by the founders in

their state registration application, or if there is no such executive body, at

the location of another body or person entitled to act in the name of the legal

person with no powers of attorney pursuant to Art. 8 of the Federal Act on

State Registration of Legal Persons and Individual Entrepreneurs. The state

registration as an act of entry into the Unified State Register of Legal

Persons is under the sole responsibility of the tax authorities. However, in

accordance with the Federal Act on State Registration of Legal Persons andIndividual Businessmen, a special order of registration of certain legal

persons can be established by federal Acts. For instance, in compliance with

the federal Acts on banks and banking activity, or on non-profit

organizations, a special order of registration exists. In such cases, the

registration application is decided upon by the competent body (e.g. the

Bank of Russia, or Rosregistration) but the action to enter data into the

registry is carried out by the tax authority.

The following natural persons are entitled to represent a legal person at

registration: the head of a permanent executive body of the legal person oranother person entitled to act in the name of the legal person with no powers

of attorney, an incorporator (incorporators) of the legal person, the head and

founder, a competition administrator or the head of a liquidation

commission (liquidator) at the liquidation of the legal person, another

person acting under powers stipulated by a federal act or an act of a state or

municipal body specifically authorized to do so. The application presented

to the registering body is to be certified with the signature of the applicant,

which must be certified by a notary. The applicant has to indicate the data of

his/her identification document.For registration purposes, the following documents are to be submitted:

a state registration application signed by the applicant, in which the

applicant must confirm that the documents filed comply with the standards

required by act, a decision whereby the legal person is incorporated

(minutes, agreement etc), the articles of association (originals or copies

certified by a notary), extract from the registry of foreign legal persons in

case of a foreign legal person being an incorporator and a document

22

Collection of legislation of the Russian Federation. 2004. N 40. Art. 3961.23http://www.nalog.ru/mnsrus.


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confirming that state duty has been paid. According to Art. 23 of the Act on

State Registration of Legal Persons and Individual Entrepreneurs, state

registration may be refused in case document necessaries for registration are

have not been presented, provision of documents with an improperregistration body, changes made in constituent documents of a legal person

subject to liquidation or if the founder is a legal person subject to liquidation

or registration of legal persons that appear as a result of its reorganization.

Pursuant to Art. 24.1 of the Act On State Registration of Legal Persons

and Individual Businessmen, officials of registration authorities are held

liable for groundless refusal of state registration, failure to grant state

registration within specified periods or other violation of the order of state

registration established by the Federal Act and also for unlawful refusal of

provision or untimely provision of data and documents contained in the stateregister or other documents as laid down by Federal Act. This regulation is a

reference rule: the responsibility for the relevant offences has been

established by other Acts, such as the Code of Administrative Offences

(untimely or incorrect entries about a legal person into the Unified State

Registry) which may lead to fines and disqualification from public office.

There are not so many of such disputes pending in commercial courts, as

there are only three grounds for refusal of state registration and as a result of

the fact that a registration authority does not make any legal interpretation of

documents produced for state registration.Pursuant to Art. 169 of the Criminal Code

24, illegitimate refusal to

register a legal person by an official is punishable by a fine or by

deprivation of the right to hold specified offices or by compulsory work or

by deprivation of liberty (three years). According to the Act on state

registration of legal persons and individual businessmen, a registration

authority has to reimburse the damage inflicted by the refusal of state

registration when a fault has been committed (Art. 24). The legislation does

not provide for special rules of reimbursement of such damage; in this

regard, general provisions of the Civil Code apply. The same Act (Art. 25)provides that applicants, legal persons and/or individual businessmen are to

be held liable for non-provision or untimely provision of data necessary for

the state register and also for provision of unauthentic data.

The state register comprises information on the formation,

reorganization and liquidation of legal persons, the acquisition by natural

persons of the status of an individual businessman, the termination by

natural persons of activity as individual entrepreneurs, other information



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about legal persons and individual entrepreneurs as well as supporting

documents. Information and documents contained in the registry are open

and accessible to the public, with the exception of information with limited

access.The freely accessible website of the Federal Taxation Service contains

less comprehensive information on the Unified State Registry (which is

composed of two registries: legal persons and individual

entrepreneurs25

). Information about the number, date of issue and about the

body which has issued the document, certifying the ID of natural persons,

information about bank accounts of legal persons and individual

businessmen may be submitted solely to the organs of state power and the

organs of state extra-budgetary funds in cases and in the procedure

established by the Government which is not public.The Criminal Code (Art. 47) establishes the disqualification from

holding specified offices (in public administration) or engaging in specified

activities as a criminal sanction. The disqualification could be imposed as

main sanction for a period from one up to five years or as an additional

sanction for a period from six months up to three years. In the case where

the disqualification is imposed as an additional sanction, it starts to be

enforced following the expiry of the period of the main sanction, e.g.

deprivation of liberty. In the Special Part of the Criminal Code

disqualification is explicitly provided for as a main or additional sanctionfor a number of corruption related offences, including active and passive

bribery in the private sector (Art. 204 Criminal Code), misuse of official

duty (Art. 285 Criminal Code) and passive bribery (Art. 290 Criminal Code)

and serious forgery (Art. 292, part 2 Criminal Code). The provisions dealing

with the punishment of money laundering (Art. 174 Criminal Code) and

active bribery (Art. 291 Criminal Code) do not provide for disqualification

sanctions.

However, under the general rule of Art. 47 part 3 Criminal Code, the

disqualification may be imposed as an additional sanction also for crimesfor which it is not explicitly provided for in the Special Part of the Criminal

Code if the court considers such measure appropriate. Furthermore, the

Code of Administrative Offences establishes the disqualification from

acting in a leading position in a legal person as an administrative sanction

which could be imposed by court for a term from six months to three years

[Art. 3.2 and 3.11 the Code of Administrative Offences26

(CAO)]. Moreover,

25

http://reg.nalog.ru.26Collection of legislation of the Russian Federation. 2002. N 1 (part 1). Art. 1.


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administrative fines are provided for in situations where disqualified persons

are engaged in the management of a legal person (Art. 14.23 CAO).

Pursuant to the general rules contained in Art. 19 CC only physical

persons can be subject to criminal liability. The authorities indicated thatthere are no immediate moves in Russia to make legal persons criminally

liable for criminal offences.

However, according to Art. 1068 of the Civil Code, a legal person may

bear civil or (pecuniary) responsibility for the harm caused by its employees

while performing official duties, including for actions related to bribe taking

or bribery in a profit-making organization, regardless of whether a bribe

taker bears criminal responsibility or not. According to Art. 28-29 of the

Civil Code, legal persons are independently liable for their obligations. Thus

a legal person can be sued for damages. Moreover, provisions onunreasonable enrichment (Art. 1102, 1103, 1107 of the Civil Code) can be

applied in respect of legal persons, and both parties may be deprived of all

their benefits relating to corrupt activities in case a business deal is against

or inconsistent with the Act and order or morality and therefore is null and

void (Art. 169 of the Civil Code).

III.ADMINISTRATIVE LIABILITY OF LEGAL PERSONS

Legal persons can also be subject to administrative liability in respectof administrative offences.

Administrative liability of legal persons is established in the Code of

Administrative Offences. According to Art. 2.10 and 3.2 CAO, legal

persons are subject to responsibility for administrative offences. At present,

there are plans to make certain amendments to the Code which will establish

administrative liability of a legal person for corruption offences committed

on behalf or to the benefit of legal persons, as reflected in the National Anti-

corruption Plan.

The current principles for legal persons administrative responsibilityare established by the CAO or by the Acts on administrative offences

adopted in the various regions of the Federation.

According to Art. 3.2 CAO, the available administrative sanctions

which can be imposed on legal persons include: warning, administrative fine,

confiscation of the crime instrument or the subject of the administrative

offence, administrative suspension of the activity.

According to Art. 13 of the Federal Act on Combating Legalisation

(Laundering) of Proceeds of Crime and Financing of Terrorism 200127

, the

27Collection of legislation of the Russian Federation. 2001. N 33 (part 1). Art. 3418.


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licence of the organizations which conduct transactions with funds or other

assets and operate on the basis of a licence, may be withdrawn. If a legal

person violated the legislation on money-laundering, the legal person can be

brought to administrative responsibility according to Art. 15.27 the CAO.The legislation of the Russian Federation on taxes and duties does not

provide for any deductions or other reduction of tax base in connection with

bribes and facilitation payments. All grounds for the reduction of tax base

have been established by the Tax Code; the application of such grounds

must be documented. None of the grounds specified by the Code relate

directly or indirectly to bribes and facilitation payments.

The tax and internal affairs bodies are to inform one another in the

order defined by the agreements between them of the available materials on

breaches of the legislation on taxes and fees and tax offences, aboutmeasures taken, about the tax inspections carried out by them and also

exchange other necessary information (Art. 82 of the Tax Code). Art. 30.4

of the Tax Code establishes that the tax authorities, federal executive bodies,

regional executive bodies, local authority bodies and the agencies of the

governmental extra-budgetary funds must discharge their functions and

cooperate with each other by exercising their authority and fulfilling

obligations established by this Code or other legislation.

The process by which internal affairs bodies gain access to the tax

documentation is laid down in a number of Acts, on the militia, on publicprosecutors, on accounting and on money laundering.

According to the Federal Act On Operational-Search Activity 199528

and Chapter 11 of the Code Criminal Procedure29

, Act enforcement bodies

(prosecutors, investigators, inquiry officers) are entitled to request necessary

information, applications, documents and their copies, including secret tax

information.

According to Art. 102 of the Tax Code, any information regarding a

taxpayer received by the tax authorities, internal affairs bodies, an agency of

a governmental extra-budgetary fund or the customs authorities are to beconsidered confidential. The access to such information and its storage is

controlled in a special way. Access to the data covered by tax secret is

granted to the officials included on the lists determined by the federal

executive bodies which are, authorized to fulfil functions of supervision and

control in the sphere of taxes and fees, in the sphere of internal affairs, or to

fulfil functions of supervision and control in the sphere of custom

procedures.

28

Collection of legislation of the Russian Federation. 1995. N 33. Art. 3349.29Collection of legislation of the Russian Federation. 2001. N 52 (part I). Art. 4921.


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The Federal Act On Accounting 201130

provides for the basic rules

in this area. All legal persons have to compile bookkeeping reports on the

basis of their accounting data. The Accounting and storage of accounting

documents are organized head of the economic subject (Art. 7).Primary accounting documents, ledgers, accounting (financial)

statements should be stored in the economic entity during the periods

established in accordance with the rules of the organization of the state

archives, but not less than five years after the reference year (Art. 29).

Account offences in the Russian Federation are mainly dealt with

under the CAO. According to Art. 15.11 CAO, a gross violation of the rules

of bookkeeping and of submitting accounting documents, as well as of a

procedure and terms of keeping accounting documents entails the

imposition of an administrative fine on officials to the amount of between2,000 and 3,000 ruble.

According to Art. 120 of the Tax Code, a gross violation (i.e. absence

of primary documents, invoices, book-keeping registers, repeated twice and

more times during a calendar year, untimely or incorrect coverage of

business transactions, monetary funds, tangible assets, intangible assets and

financial investments of a taxpayer in the balance sheet accounts and in

reporting) of rules of accounting for income and (or) expenditure and (or)

objects of taxation, if these actions were committed within one tax period, in

the absence of signs of a tax offence, carries a fine of 10,000 Ruble (approx.220 EUR).

The Criminal Code of the Russian Federation does not establish

account offences. However, accountants may be held liable in the light of

corruption crimes under Art. 292 of the Criminal Code (Official forgery

against public officials) and also under Art. 174 and 174-1 of the same Code

for laundering of proceeds of any corruption crimes.

The Federal legislation sets forth the duty of accountants, auditors

and/or representatives of other professions in the sphere of consulting, to

inform Act enforcement bodies about suspicions of offences related to thelaundering of criminally gained proceeds and financing terrorism:

According to the Federal Act On Combating Legalisation (laundering) of

Proceeds of Crime and Financing of Terrorism 2001 if a lawyer, notary or

any person occupied in the sphere of legal and bookkeeping services has any

grounds to consider the deals and transactions indicated in Art. 7.1.1 of this

Act to be aimed at laundering criminally gained proceeds or financing

terrorism, s/he should be obliged to inform an authorized body.



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Art. 144 of the Criminal Procedure Code provides that an inquiry body,

inquiry officer, investigator and prosecutor are entitled to demand

explanations from the persons who rendered consulting services to the legal

person when checking a report of a crime.

IV.PROBLEM OF CRIMINAL LIABILITY OF LEGAL PERSONS

The issue of the criminal liability of the legal entities in Russia has

become increasingly relevant in recent years. Today, the Russian legal entity

may only be charged with civil or administrative liability. There are a lot of

Russian scientific publications that throw light upon different aspects of this

problem. However, the majority of Russian scientists oppose the

introduction of the criminal liability of legal entities.

31

On April 26th, 2004 Russia ratified the UN Convention against

Transnational Organized Crime.32

But the legislation has not yet been

brought into conformity with its obligations under the convention. The

provisions on criminal liability of organizations in Act 26 of the Federal a

On Ratification of the United Nations Convention against Transnational

Organized Crime and its Report against the smuggling of migrants by land,

sea and air and the Report on the prevention human traffic suppression,

especially women and children, and the punishment for it were not reflected.

The same fate befell the United Nations Convention of the UnitedNations against Corruption, 2003, ratified by Russia on July 25th, 2006.33

On July 25th, 2006, Russia ratified the Council of Europe Convention

on criminal liability for corruption of 1999.34

In the explanatory note to the draft act on ratification of the Convention

of July 1st, 2006 it is stressed that the Convention contains rules other than

those provided for the legislation of the Russian Federation, and in

connection with the ratification will require changes in the existing or the

adoption of new federal acts. On July 6th, 2006 Legal Department of the

State Duma gave a positive opinion on the bill (2.2-1/2374) and pointed

31. . // -. -1992.-

6.-. 82; . : /. . . , . .. 3-.-.: , 2009. . 2; . .

().-.: ,2002.-. 109; . . . .: , 2005;

/ . . ...: , 2007;

().-2-./. . . .-.: , -, 2010.32Collection of Laws of the Russian Federation. 2004. 18. Art. 1684.33

Collection of Laws of the Russian Federation. 2006. 12. Art. 1231.34Collection of Laws of the Russian Federation. 2006. 31 (part 1). Art. 3424.


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out the need to regulate the liability of legal persons. However, hopes for the

mplementation of these provisions are not fulfilled; the corresponding rules

in the Russian criminal law have not appeared yet.35

The federal Act No.

273-FS On Corruption Counteraction on December 25th, 2008 also doesnot provide criminal liability for organizations.

36

The head of the Investigatory Committee of the Russian Federation

Alexander Bastrykin believes that the solution to the corruption and other

problems related to the participation of organizations is not possible without

the introduction of criminal liability of the legal bodies. He refers to the fact

that the criminal liability of legal entities exists in most developed

countries.37

There are provisions of the necessity of establishing effective

accountability of organizations for involvement in certain types of crimes in

conventions to which the Russian Federation joined. Under his leadership,the Investigation Committee of the Russian Federation made out a draft of

federal law On Modification of Some Acts of the Russian Federation in the

Connection with Introduction of Institute of Criminally-legal Influence

Concerning Legal Bodies.38

Thus, the relation to the institution of corporate criminal liability of

legal entities is ambiguous. In that case, of course, the experience of

developed foreign countries is of special interest.

CONCLUSION

Currently, liability of legal persons for criminal offences is not

provided for in Russian legislation. Thus, the legislation of Russia in this

sphere does not correspond to the international obligations of state.

35For more details on this topic, see: . . :

., 2008.36Collection of Laws of the Russian Federation.2008.-52 (part 1).-Art. 6228.37

. 2011. 23 , RUSSIAN NEWSPAPER, March 23, 2011.38http://www.rg.ru.

the problem of criminal liability of legal persons in russia

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