V. A. Laptev

Corporate Law:
Legal Organization of Corporate Systems

Monograph

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Author:
Laptev V. A., Doctor of Law, Prof., Dr. habil., Judge of the Moscow Arbitration Court, Chairman of the Scientific Advisory Council of the Moscow Arbitration Court, Associate Professor of the Department of Entrepreneurial and Corporate Law of the Kutafin Moscow State Law University, Senior Research Fellow of the Institute of State and Law of the Russian Academy of Sciences.

Reviewers:
Andreyev V. K., Doctor of Law, Prof., Dr. habil., Head of the Scientific Council for the Civil Law Research of the Russian State University of Justice, Professor of the Department of Entrepreneurial and Corporate Law of the Kutafin Moscow State Law University, member of the Scientific Advisory Council of the Supreme Court of the Russian Federation, Merited Scholar of the Russian Federation;
Ershova I. V., Doctor of Law, Prof., Dr. habil., Head of the Department of Entrepreneurial and Corporate Law of the Kutafin Moscow State Law University, member of the Scientific Advisory Council of the Supreme Court of the Russian Federation, Merited Lawyer of the Russian Federation.

This monograph investigates the legal status of Russian corporations at the present day. It describes the legal organization of corporate systems, defines the concepts of corporate relations and corporate property owned by members of corporations. The author analyzes the sources of regulation of corporate relations, identifies the place of corporate law in the Russian system of law branches, investigates the legal aspects of corporate governance mechanisms and discusses the matters pertaining to the protection of corporate rights.

The described legislation is current as of August 2019.

The relevance of the present work is emphasized by its consideration of the latest changes in corporate legislation and judicial practice. The book is aimed at a broad readership, including representatives of public and local authorities, legal practitioners, lecturers in entrepreneurial and corporate law, graduate and postgraduate students.

Translation of: Korporativnoe pravo: Pravovaya organizatsiya korporativnykh sistem.
Translated from the Russian by Ekaterina Delikishkina.

UDC 346+347.7

BBC 67.404

© Laptev V. A., 2020

© Prospekt LLC, 2020

LIST OF USED ACRONYMS AND ABBREVIATIONS

1. Normative legal acts

Russian Constitution — Constitution of the Russian Federation, adopted by popularvote on December 12, 1993 // Rossiyskaya Gazeta. December 25, 1993. No. 237.

Civil Code — Civil Code of the Russian Federation // CL RF. 1994. No. 32 (pt. I). Art.3301; 1996. No. 5
(pt. II). Art. 410; 2001. No. 49 (pt. III). Art. 4552; 2006. No. 52 (pt. IV). Art. 5496.

Code of Administrative Judicial Procedure — Code of Administrative Judicial Procedure of the Russian Federation // CL RF. 2015. No. 10. Art. 1391.

Code of Administrative Offences — Code of Administrative Offences of the Russian Federation // CL RF. 2002. No. 1 (pt. I). Art. 1.

Code of Arbitration Procedure — Code of Arbitration Procedure of the Russian Federation // CL RF. 2002. No. 30. Art. 3012.

Code of Civil Procedure — Code of Civil Procedure of the Russian Federation // CL RF. 2002. No. 46. Art. 4532.

Criminal Code — Criminal Code of the Russian Federation // CL RF. 1996. No. 25. Art. 2954.

Family Code — Family Code of the Russian Federation // CL RF. 1996. No. 1. Art. 16.

Labor Code — Labor Code of the Russian Federation // CL RF. 2002. No. 1 (pt. I). Art. 3.

Land Code — Land Code of the Russian Federation // CL RF. 2001. No. 44. Art. 4147.

Tax Code — Tax Code of the Russian Federation // CL RF. 1998. No. 31 (pt. I). Art. 3824; CL RF. 2000. No. 32 (pt. II). Art. 3340.

Town Planning Code — Town Planning Code of the Russian Federation // CL RF. 2005. No. 1 (pt. I). Art. 16.

Agricultural Cooperation Law — Federal Law No. 193-FZ of December 8, 1995 “On Agricultural Cooperation” // CL RF. 1995. No. 50. Art. 4870.

Arbitral Tribunals Law — Federal Law No. 102-FZ of July 24, 2002 “On Arbitral Tribunals in the Russian Federation” // CL RF. 2002. No. 30. Art. 3019.

Arbitration Courts Law — Federal Constitutional Law No. 1-FKZ of April 28, 1995 “On the Arbitration Courts of the Russian Federation” // CL RF. 1995. No. 18. Art. 1589.

Arbitration Law — Federal Law No. 382-FZ of December 29, 2015 “On Arbitration (Arbitral Proceedings) in the Russian Federation” // CL RF. 2016. No. 1 (pt. I). Art. 2.

Banking Law — Federal Law No. 395—1 of December 2, 1990 “On Banks and Banking Activity” // CL RF. 1996. No. 6. Art. 492. The original version of RSFSR Law No. 395—1 of December 2, 1990 “On Banks and Banking Activity in the RSFSR” // Bulletin of the Congress of People’s Deputies and the Supreme Soviet of the RF. 1990. No. 27. Art. 357.

Bankruptcy Law — Federal Law No. 127-FZ of October 26, 2002 “On Insolvency (Bankruptcy)” // CL RF. 2002. No. 43. Art. 4190.

Business Copartnerships Law — Federal Law No. 380-FZ of December 3, 2011 “On Business Copartnerships” // CL RF. 2011. No. 49 (pt. V). Art. 7058.

Credit Cooperation Law — Federal Law No. 190-FZ of July 18, 2009 “On Credit Cooperation” // CL RF. 2009. No. 29. Art. 3627.

Housing Cooperatives Law — Federal Law No. 215-FZ of December 30, 2004 “On Housing Savings Cooperatives” // CL RF. 2005. No. 1 (pt. I). Art. 41.

Investment Funds Law — Federal Law No. 156-FZ of November 29, 2001 “On Investment Funds”

Investment Partnerships Law — Federal Law No. 335-FZ of November 28, 2011 “On Investment Partnerships” // Cl RF. 2011. No. 49 (pt. I). Art. 7013.

JSC Law — Federal Law No. 208-FZ of December 26, 1995 “On Joint-­Stock Companies” // CL RF. 1996. No. 1. Art. 1.

Law on Developing Entrepreneurship — Federal Law No. 209-FZ of July 24, 2007 “On Developing Small and Medium Scale Entrepreneurship in the Russian Federation” // CL RF. 2007. No. 31. Art. 4006.

Law on Enterprises and Entrepreneurial Activities — RSFSR Law No. 445—1 of December 25, 1990 “On Enterprises and Entrepreneurial Activities” // Bulletin of the Congress of People’s Deputies and the Supreme Soviet of the RF. 1990. No. 30. Art. 418.

Law on Protection of Competition — Federal Law No. 135-FZ of July 26, 2006 “On Protection of Competition” // CL RF. 2006. No. 31 (pt. I). Art. 3434.

Law on Public-­Law Companies — Federal Law No. 236-FZ of July 3, 2016 “On Public-­Law Companies in the Russian Federation and on Amendments to Certain Legislative Acts of the Russian Federation” // CL RF. 2016. No. 27 (pt. I). Art. 4169.

Law on Registration of Legal Persons — Federal Law No. 129-FZ of August 8, 2001 “On State Registration of Legal Persons and Individual Entrepreneurs” // CL RF. 2001. No. 33 (pt. I). Art. 3431.

Law on State Unitary Enterprises — Federal Law No. 161-FZ of November 14, 2002 “On State and Municipal Unitary Enterprises” // CL RF. 2002. No. 48. Art. 4746.

Law on the Organization of Insurance Business — Law of the Russian Federation No. 4015-1 of November 27, 1992 “On the Organization of Insurance Business” // Bulletin of the Congress of People’s Deputies and the Supreme Soviet of the RF. 1993. No. 2. Art. 56.

LLC Law — Federal Law No. 14-FZ of February 8, 1998 “On Limited Liability Companies” // CL RF. 1998. No. 7. Art. 785.

Mortgage Securities Law — Federal Law No. 152-FZ of November 11, 2003 “On Mortgage Securities” // CL RF. 2003. No. 46 (pt. II). Art. 4448.

Mutual Insurance Law — Federal Law No. 286-FZ of November 29, 2007 “On Mutual Insurance” // CL RF. 2007. No. 49. Art. 6047.

Non-­Commercial Organizations Law — Federal Law No. 7-FZ of January 12, 1996 “On Non-­Commercial Organizations” // CL RF. 1996. No. 3. Art. 145.

Privatization Law — Federal Law No. 178-FZ of December 21, 2001 “On the Privatization of State and Municipal Property” // CL RF. 2002. No. 4. Art. 251.

Production Cooperatives Law — Federal Law No. 41-FZ of May 8, 1996 “On Production Cooperatives” // CL RF. 1996. No. 20. Art. 2321.

Public Associations Law — Federal Law No. 82-FZ of May 19, 1995 “On Public Associations” // CL RF. 1995. No. 21. Art. 1930.

Securities Market Law — Federal Law No. 39-FZ of April 22, 1996 “On the Securities Market” // CL RF. 1996. No. 17. Art. 1918.

SRO Law — Federal Law No. 315-FZ of December 1, 2007 “On Self-­Regulatory Organizations” // CL RF. 2007. No. 49. Art. 6076.

2. Government institutions, organizations

Bank of Russia — Central Bank of the Russian Federation

Constitutional Court — Constitutional Court of the Russian Federation

FAS — Federal Antimonopoly Service of Russia

Federal Tax Service — Federal Tax Service of the Russian Federation

Ministry of Construction — Ministry of Construction Industry, Housing and Utilities Sector of the Russian Federation

Ministry of Economic Development — Ministry of Economic Development of the Russian Federation

Ministry of Finance — Ministry of Finance of the Russian Federation

Ministry of Justice — Ministry of Justice of the Russian Federation

Rosimushchestvo — Federal Agency for State Property Management of the Russian Federation

Rosreestr — Federal Service for State Registration, Cadaster and Cartography of the Russian Federation

Rosstrachnadzor — Insurance Supervision Service of Russia

Rostechnadzor — Federal Environmental, Industrial and Nuclear Supervision Service of Russia

Supreme Court — Supreme Court of the Russian Federation

Supreme Court of Arbitration — Supreme Court of Arbitration of the Russian Federation

3. Others acronyms and abbreviations

Art(s). — Article

Ch(s). — Chapter(s)

CL RF — Compendium of Legislation of the Russian Federation

CLS — civil-­law society

JSC — joint-­stock company

LLC — limited liability company

PJSC — public joint-­stock company

pt(s). — part(s)

RF — Russian Federation

RSFSR — Russian Soviet Federative Socialist Republic

SRO — self-­regulatory organization

UIF — unit investment fund

USSR — Union of Soviet Socialist Republics

In memory
of Vladimir Vladimirovich Laptev

PREFACE

The reform of the Russian civil and business law, whose main ideas were outlined in the Guidelines for the Development of Civil Legislation (2009)1, became a milestone event for the Russian legal community at the beginning of the twenty-­first century. The legislative recognition of corporate relations in Art. 2 of the Civil Code as a special kind of public relations is a subject of an active discussion in Russian jurisprudence.

The Civil Code has undergone multiple significant changes from the moment of its inception, which has earned it the nickname “the economic constitution”. At different periods during the reform of civil and business law, which is still ongoing, the Civil Code either prevailed over the laws on specific forms of corporations, or vice versa.

The issues pertaining to corporate relations and legal status of corporations have recently come under active scrutiny from scientists specializing not only in economic and private law, but also in general theory of law. The questions of legal standing and activity of corporations are also under consideration of the related (neighboring) branches of law, including labor and administrative law.

An interest towards studying corporations can be explained by their unique essence. The dynamics of development of the legal regulation of corporate relations attests to the relevance of the present study2. The search for optimal balance in legal regulation of corporate relations aims to help Russia improve its score in the World Bank’s “Doing Business” report that ranks economies based on the business environment.

The decrease in the entrepreneurial risks and the increase in the standards of corporate governance make the investment climate – and the Russian economy as a whole –favorable. Putting in place a legislative framework for corporate activity has become a priority goal for Russian policy makers.

The present work has incorporated the ideas of the Third Scientific School of Economic Law, whose foundations were laid by the Soviet academicians V. V. Laptev and V. K. Mamutov, that made the objective and elaborate analysis of the subject matter possible. The fundamental ideas of the Third School constitute a logical continuation of the works of the First School – the Dual-­Sector Law theory (by P. I. Stuchka), and the Second School – the School of the Unified Economic Law (by L. Y. Ginzburg and E. B. Pashukanis).

The present work considers a corporation not only as a legal entity, but also as a structural unit of the corporate system. To this end, the author defines the concept of a corporate system and describes its legal organization.

The author presents an analysis of corporate relations, defines the sources of their regulation, describes the legal status of specific forms of corporations and the liability of their bodies, identifies the mechanisms and substance of corporate governance, and investigates the scope of corporate liability and the methods of legal protection of corporate rights.

The approaches to evaluation of the subject matter presented in this work are based on actual judicial practice, with due regard to the perspectives of development of corporate legislation.

In this monograph, the author continues the traditions of the Department of Entrepreneurial and Corporate Law of the Kutafin Moscow State Law University and the Entrepreneurial and Corporate Law Sector of the Institute of State and Law of the Russian Academy of Sciences.

V. A. Laptev

Section 1.
GENERAL PROVISIONS

Chapter 1.
Fundamentals of corporate law

1. Definition of corporation

The development of corporate relations in Russia was accompanied by multiple amendments into the existing legislation, many of which were inspired by the foreign legislations. In particular, the institution of corporate agreement (i.e., the agreement stipulating corporate rights) was borrowed into the Guidelines for the Development of Civil Legislation (2009) from the English law. Not all novelties of corporate legislation were welcomed by Russian legislators and legal practitioners. Nonetheless, some provisions of foreign corporate laws are eventually being adopted into the Russian legal framework, as we will see below.

The corporate form of economic activity has a long history. As V. V. Laptev had rightly pointed out, historically, starting from the seventeenth century, the English, Dutch and French corporations, such as the East and West India joint-­stock companies, were considered an instrument of economic domination of the Western European states over the Eastern countries. The state played a significant role in the governance of these corporations, whereas the property rights belonged to shareholders3.

Governance practices of contemporary domestic corporations were studied in depth by V. V. Laptev, V. K. Andreyev, A. V. Gabov, I. S. Shitkina and other scholars of law, who emphasized the distinctions between corporations and other legal persons, in particular, the ability of members of a corporation to control its activity4.

Across legal frameworks, a corporation (from Latin corporatio) is universally defined as an association of persons. Yet, the term is differently interpreted by the Russian and foreign legislations.

Most scholars view a corporation within the Russian legal framework as a legal person (e.g., see V. K. Andreyev, E. A. Sukhanov, I. S. Shitkina5). This follows from Arts. 2, 65.1–65.3 of the Civil Code and the laws concerning individual forms of corporations.

On the basis of the comparative analysis of foreign legislations, E. S. Silova had defined a corporate entity through its adherence to one of the three models of corporate governance: Anglo-­American (an outsider model with the participation of individual independent members), Asian (with the significant participation of banks and affiliated persons), or Continental (with the substantial bank participation)6. Using a similar economic approach, A. G. Dementieva identified two additional models of corporate governance-­family (family-­owned business groups that are common worldwide) and Russian (incorporating the elements of other models in its development)7.

By scrutinizing the foreign legislative experience, A. E. Molotnikov and E. G. Afanasieva singled out five main models of corporate governance: joint-­stock (prioritizing the interests of shareholders), managerial (placing control over a corporation in the hands of the management), labor (with mandatory election of employees into corporate governance bodies), governmental (prioritizing public interests) and stakeholder (taking into consideration the interests of shareholders, employees, creditors, counterparties and other persons)8.

In her analysis of public corporations that attract outside investors, I. S. Shitkina distinguishes between the outsider (where the shares are divided between many individuals, none of whom are majority shareholders) and the insider (where the control and the stock are concentrated in the hands of a few individuals) models of corporate governance9.

With regard to the Russian corporate practices, we suggest additionally identifying such models of corporate governance as directive (e.g., the corporations Rosneft and Gazprom) and beneficiary (through the nominal owners, e.g., the corporations Nornickel and Polyus), among others.

The abundance of corporate governance models serves as evidence of large variation in the corporate forms of economic activity.

The history of Russian corporate entrepreneurship in the post-­perestroika period of the early 1990s suggests that its idea was inspired by Soviet cooperative organizations10. At the time, collective entrepreneurship in the form of commercial corporations enabled the development of the free-­market economy (Art. 2 of the Law on Enterprises and Entrepreneurial Activities). The principle of consolidating individuals and/or their assets became central in shaping today’s commercial corporations, while cooperative associations gradually receded into the background.

V. K. Andreyev in several of his works promotes the view of a corporation as an independent subject of law, as it reveals more similarities to a legal person than to a unitary organization11. A similar view on a corporation is found in foreign legal systems.

The U. S. legislation, based on the case of the state of Delaware, recognizes three types of corporations:

1) corporations, that enjoy the rights of a legal person: Joint-­Stock Corporations, Public Limited Companies, Close Corporations, and Membership Corporations;

2) partnerships, i.e. entrepreneurial associations that are not entitled to legal personality: General Partnerships, Limited Liability Partnerships, Limited Partnerships, silent partnerships;

3) business trusts, that pool the assets of beneficiaries12.

In his analysis of American law, V. M. Shumilov defines corporations as “legal organizational forms of entrepreneurial activity”. Notably, the U.S. corporate law embraces such “hybrid” forms of entrepreneurial activity, as syndicates, equity mutual funds, business trusts, cooperatives, etc.13, thereby emphasizing the specific nature of corporations, not confined to legal persons. Furthermore, different U.S. states have their own legal acts governing the regulation of corporations and other business entities.

English corporate forms of entrepreneurship share many similarities with the American ones. The following organizations are considered corporate enterprises, according to the UK legislation:

1) companies that have the rights of a legal person: Public Limited Companies (with the liability limited to the value of the shares or guarantees), Private Limited Companies, as well as Unlimited Companies;

2) partnerships that are not entitled to legal personality, including Limited Liability Partnerships.

Another widespread form of corporations in the U.K. is a trust, whose activity is regulated by the Trustee Act 2000.

The UK has recently undergone the reform of corporate legislation, which has resulted in the Companies Act 2006 that came to substitute the 1986 Act. Other legal acts relevant to the subject matter include the Partnership Act 1890 (on common partnerships), the Limited Liability Partnerships Act 2000, as well as others.

Germany regards legal persons (JSC, LLC) and associations of persons (general and limited partnerships, as well as silent partnerships) as commercial corporations. In her analysis of the German corporate law, C. Maier14 distinguishes:

1) corporations that attract outside capital – Kapitalgesellschaften (limited liability company – Gesellschaft mit beschränkter Haftung, GmbH; entrepreneurial company with limited liability – Unternehmergesellschaft (haftungsbeschränkt), UG15; joint-­stock company – Aktiengesellschaft, AG);

2) corporations with personal liability – Personengesellschaft (civil law partnership – Gesellschaftbürgerlichen Rechts, GbR; general commercial partnership –Offene Handelsgesellschaft, OHG; limited partnership – Kommanditgesellschaft, KG; silent partnership – Stillegesellschaft).

Partnerships with personal liability (unlike the companies that attract capital) are not considered legal persons.

In France, the following legal entities are regarded as commercial corporations (with or without the rights of a legal person):

1) associations of persons (civil law partnerships, simple limited and general partnerships, de facto partnerships, and partnerships based on joint activities);

2) associations of assets (incorporated anonymous partnerships, incorporated limited partnerships, simplified incorporated partnerships);

3) mixed associations (limited liability companies).

To summarize what has been stated above, the term “corporation” embraces:

1) organizations that have the rights of a legal person;

2) entrepreneurial associations of persons (without the rights of a legal person);

3) associations of persons that place their assets under control of a trustee (not entitled to legal personality).

In Russia, recognition of certain legal entities as “corporations” (in their true sense) does not raise any particular objections (Arts. 48, 50 and 65.1 of the Civil Code). However, several provisions of the Russian legislation impose a distinction between “a corporation” and “a corporate organization”, the latter of which has the rights of a legal person (Art. 65.1 of the Civil Code). “A corporation” serves as an umbrella term and may refer both to legal persons (i.e., corporate organizations) and to corporate associations and trusts.

The legislative consolidation of a state corporation as one of the legal entity types with the right of a legal person, established by federal law (Art. 3, paragraph 5, of Federal Law No. 99-FZ of May 5, 201416), has introduced a certain confusion into the term “corporation”. A state corporation represents a unitary non-­commercial organization. As E. B. Lauts rightly observed, from this follows that the adoption of the Law on Public-­Law Companies17 mostly boils down to renaming state corporations into public-­law companies18. Yet, aligning the terminology with the true essence of state corporations is reasonable. Moreover, it is in line with the logic of Art. 50 of the Civil Law, that sets forth a closed list of legal entity types (corporate and unitary) entitled to legal personality.

It is noteworthy that the governance structure of public-­law companies and state corporations is similar to that of corporate organizations. For example, governance bodies of a public-­law company include the supervisory board (the supreme governance body), the Director-­General (the individual executive body), as well as the board (the collective executive body) – in case its creation is provided for by the decision on the establishment of a public-­law company (Art. 7 of the Law on Public-­Law Companies), which demonstrates certain degree of borrowing from the corporate model of governance structure.

The structure of production units of some Russian state corporations is often associated with holding groups. For example, the state corporation Rostec, that brings together approximately 700 organizations, essentially functions as a holding company, whose portfolio includes such famous brands as AvtoVAZ, KamAZ, Kalashnikov Concern, Russian Helicopters, etc.19

With respect to entrepreneurial associations, a pattern of truncated doctrinal borrowing from foreign legislations is observed. Some provisions of the Russian legislation, however, indicate the contrary. Namely, it concerns the provisions that define the legal status of entrepreneurial associations of a corporate type, such as investment partnerships (the Investment Partnership Law), insurance pools (Art. 14.1 of the Law on Organization of Insurance Business), banking holdings (Art. 4 of the Banking Law), etc.

Such entrepreneurial associations are treated by the Russian law similarly to foreign corporations of this kind, that are referred to as de facto partnerships (Société de fait) or simple partnerships based on joint activities of their members – in France, Partnerships or Limited Liability Partnerships – in the UK and the U.S., general partnerships (Offene Handelsgesellschaft) or limited partnerships (Kommanditgesellschaft) – in Germany, Austria and Switzerland, etc. Furthermore, several provisions of the Russian legislation are simply copying the foreign experience (e.g, cf. investment partnerships in Russia and Limited Partnerships in the UK and the U.S.20). Moreover, until recently even general partnerships in Russia were considered a contractual association of persons without the rights of a legal person (Art. 9 of the Law on Enterprises and Entrepreneurial Activities).

International economic integration (from Latin integratio ‘unification’) has led to fundamentally new approaches to understanding business (trade, commerce) entities. The forms of economic activity are not prescribed by legislation, but–quite the opposite – the economy and the market themselves create the models of entrepreneurial (business) activity, which gradually get consolidated in the legal system. Thus, the economic aspects are primary, and the legal ones are derived from them. One cannot tease apart the entrepreneurial legislation from the economy.

The principle of uniting individuals invariably serves as a basis of a corporation. For the record, for this exact reason Art. 2 of the Civil Code defines relations pertaining to participation in and governance of corporate organizations as “corporate”. Thus, the “contractualness” of establishment and of asset (investment) consolidation cannot be considered defining attributes of a corporation21.

The criterion of contractualness is not met by many non-­commercial corporations (which are numerous), that are established with an institutional or administrative purpose (Ch. 4, § 6, of the Civil Code). For example, the goal of a self-­regulatory organization is coordinating entrepreneurial and professional activity of its members, including developing and setting the standards and regulations governing this activity, as well as monitoring their compliance (Arts. 2–3 of the Self-­Regulatory Organizations Law). Moreover, the membership in a self-­regulatory organization cannot be viewed as a treaty process, and the establishment of corporate rights depends on the decision of the collective body on the admission to membership (Art. 17 of the Self-­Regulatory Organizations Law).

A similar situation, in particular, is observed in the U.S., where nonprofit charitable corporations, mutual-­benefit organizations and religious corporations operate (see the Model Nonprofit Corporation Act). For the record, nonprofit organizations do not have the right of a legal person, but are viewed as subjects of law, whose activity is aimed at developing relationships between their members and addressing the members’ needs. These corporate associations are not contractual in nature.

Adoption of the foreign experience is evidenced by the active use of asset pooling in various legal entities formed by associations of individuals22. Over the course of the last twenty years unit investment funds (UIF) – diversified asset portfolios consolidating the assets transferred by trustors under control of a managing company and the assets acquired in the course of such management (Art. 10 of the Investment Funds Law) – have become widespread business ventures in Russia. It is evident that the fund as a pool of assets, while being an object of law, is not entitled to legal personality. Yet, founders of a UIF form a civil-­law society, established with the aim of property (asset) management. Membership in a corporate entity (UIF) is confirmed by an investment unit – a registered security certifying its holders’ interest in the ownership of the property constituting the UIF (Art. 14).

The Supreme Court followed the same path by pointing in its Plenary Decree No. 25 of June 23, 2015 “On the Application by the Courts of Certain Provisions of Section I, Part One, of the Civil Code of the Russian Federation”23 to the existence of three interpretations of the term “civil-­law society”:

1) a collective body of a corporation (which constitutes a legal person) – e.g., a general meeting of corporate members, a board of directors, etc. (paragraph 103, point 2);

2) a legal person (paragraph 118, point 1);

3) an association of individuals (a de facto corporation), not entitled to legal personality, such as a bankruptcy meeting of creditors or a meeting of joint property owners (paragraph 103, point 2).

The stated above confirms that the understanding of the term “corporation” cannot and should not be confined to a legal person. The Russian legal doctrine should move past the 2009 Guidelines for the Development of Civil Legislation (Section III, paragraph 1.5) and consider the substance and content of contemporary corporate relations.

The shift of approach in the Russian legal system may also be illustrated by the example of joint-­stock companies. Initially, joint-­stock companies were viewed as associations of individuals established for the purpose of joint economic activities (Art. 12 of the Law on Enterprises and Entrepreneurial Activities, 1990). Subsequently, a joint-­stock company was re-­interpreted as a commercial organization whose charter capital was divided into shares that certified the rights of company members with respect to the company (Art. 2 of the JSC Law). A founders’ agreement was regarded as an agreement about joint activity toward the establishment of the company (paragraph 6 of the Decree of the Plenum of the Supreme Court of Arbitration No. 19 of November 18, 2003 “On Certain Issues Pertaining to the Application of Federal Law ‘On Joint-­Stock Companies’”24). Finally, at present a joint-­stock company is considered a corporate organization whose shareholders have the right of participation in it and form its supreme body (Art. 65.1 of the Civil Code), whereas a joint activity agreement may only establish corporate associations (such as investment partnerships and insurance pools) and is different in its legal nature from a joint-­stock company founders’ agreement.

When analyzing the structure of an entrepreneurial trust, one can relate it to “the triad of ownership” (possession, use, disposition). From the moment of the establishment of a trust25, its owners/investors (trustors) lose their rights to possession, use and disposition of their assets, while a managing trustee is granted the authority to manage pooled assets of the trustors. Such transformation of assets into a legal form of entrepreneurial activity is also inherent in Russian commercial corporate organizations (joint-­stock companies, limited liability companies, etc.), that assume the rights to ownership of the assets transferred into the charter capital as contributions (payment) and placed under control (management) of the executive body of a corporation (Art. 53 of the Civil Code).

The current state of economic affairs suggests that the concept “beneficiary owner”, common in the English law, is being introduced into the Russian legislation. In Russia, the term “beneficiary” traditionally refers to a gain acquirer or a de facto owner (including a potential transferee) of an asset (e.g., Arts. 368 and 860.1 of the Civil Code). For example, Art. 860.1 of the Civil Code defines a beneficiary of a nominal account through his/her entitlement to the monetary funds that are managed by a trustee (account holder). In banking, a beneficiary owner is defined as a natural person that ultimately, directly or indirectly (through third parties), owns (has participatory interest in the charter capital larger than 25%) a bank client (legal person) or is able to control its activities (Art. 3 of Federal Law No. 115-FZ of August 7, 2001 “On Countering the Legalization of Illicit Earnings (Money Laundering) and Terrorism Financing”26). Thus, the defining characteristic of the beneficial ownership is not the nominal holding, but the ability of a third party (beneficiary) to monitor and manage assets (see the Informational Letter of the Bank of Russia regarding the identification of beneficiary owners by organizations that conduct transactions with monetary or other assets, approved by Letter of the Bank of Russia No. 14-T of January 28, 201427).

The fundamental prerequisite for the establishment of a beneficiary relation between the members of a corporate trust is the common capital (asset) management. In Russia, UIFs have gained a wide dissemination thanks to the accessibility of participation, qualified asset management (carried out by a trustee), capital structuring and its distribution among unit holders by means of defining their participatory interest using an investment unit and fiscal advantages (including benefits). Similarly, in the U.S., the participation of a beneficiary in a trust is established using trust receipts (securities). It is noteworthy that, unlike shares, investment units (trust receipts) are not considered issue-­grade securities.

The comparative analysis of Russian and American funds reveals many commonalities. First, they are established for qualified (e.g., private equity funds, hedge funds) or other investors (e.g., real estate funds – apartment UIFs). Second, they represent a legal form of consolidation of the investors’ various assets (shares, participatory interest in a charter capital, corporate and state bonds, real estate, artistic values, etc.28). Third, they ensure the securitization (protection) of assets transferred to a trust (fund) by third parties, including creditors. Such conditions ensure that trust (fund) corporations are in demand as a model of consolidation of investors’ assets.

The question of corporate personhood is of importance. One should not conflate in with legal capacity of corporations. We share the view of V. V. Laptev that corporate personhood embraces economic (business) competence that implies having exercisable legal rights and bearing obligations, as well as the capacity to have rights and obligations (i.e., legal capacity)29. Therefore, “corporate personhood” is a broader term than “legal capacity”.

Across the foreign juridical systems, the question of acquisition of corporate personhood is resolved differently, with registration (legitimization) not always being a defining factor.

In his study of the history of American corporate law, L. Friedman notes that, while previously corporate registration and discussion of the articles of incorporation in the state legislature followed the same procedure as passing of a law, currently registration is of a concessive (informational) nature and serves to ensure the fiscal and oversight functions of the state30. This change took place in the nineteenth century, after the U. S. Supreme Court had enunciated the right of corporations legally registered in one state to conduct business in other states, leading to a race between different states for the adoption of the most business-­friendly laws. As a result, several states had introduced such concepts as no-­par value shares, whose price is determined by their value on the stock market, and non-­voting shares. Therefore, corporate registration in the U.S. has long ceased being constitutive (law-­making), and instead became just one of the confirmatory acts certifying the existence of a subject of law.

In the U.S., based on the example of the state of Delaware, the establishment of an entrepreneurial association in the form of a Limited Partnership is concluded by signing of a partnership agreement or, in some cases, by making of a verbal agreement. Concurrently, the partnership files a certificate of limited partnership with the Delaware Secretary of State, containing the partnership’s address and the information about the partners (in accordance with the Delaware Revised Uniform Limited Partnership Act, as amended). Thus, the corporate personhood of an American incorporated partnership is not determined by its registration date, but depends on the partnership agreement. The filing of the Statement of Partnership Existence has impact only on the tax duties.

In the countries, where a corporation is viewed as a contractual structure of an association of persons, the emphasis is placed on signing the articles of incorporation. For example, in Panama a corporation gains corporate personhood (for third parties) the moment it registers its articles of incorporation (Arts. 2 and 6 of General Law of the Republic of Panama No. 32 of February 26, 1927 “On Corporations”31). Notably, the Panama Corporation Law contains provisions defining the legal capacity of a corporation through its legal authority, while omitting its legal obligations (Art. 19).

In the UK, registration of corporate associations (partnerships) is not constitutive. Only members of a partnership – regarded as self-­employed individuals by Her Majesty’s Revenue and Customs – get registered. Corporate personhood of UK partnerships as business entities is established only when a partnership agreement is concluded (usually, in writing). A partnership files a registration statement with the registrar of companies (the Companies House); its members must register with the tax authorities only if the partnership engages in economic activities in the UK. UK companies, on the other hand, while being considered corporate organizations (with the rights of a legal person), gain corporate personhood only after they have registered at the Companies House (starting from the date they received a Certificate of Incorporation).

In Germany, information about businessmen (Kaufmann) is contained in the commercial register maintained by courts (Registergerichte). Additional information is held in specialized registers of cooperatives (the Law on Production and Business Cooperatives) and partnerships32 (the Law on Partnerships). Germany applies the principle of public credibility of registers, so a legal subject is considered to be established from the moment information about it is entered into the register. In case a person evades from registration in the commercial register, such registration may be enforced.

In a number of countries registration is viewed as an acknowledgement of a corporation’s delictual dispositive capacity, which gives it the right to be engaged in litigations (Art. 15 of the Nevis Business Corporation Ordinance, dated November 13, 198433).

The presence of corporate personhood indicates a corporation’s ability to participate in economic relations. Importantly, its entrepreneurial or any other economic activity relies on certain legal structures. In their review of enterprises engaged in international trade, Y. Funk and V. Khvalei without hesitation classify societies, partnerships, European Economic Interest Groupings (EEIG; French Groupement d´intérêt économique, G.i.e.)34, transnational associations and business trusts as corporations35. These entities represent various forms of corporations. The main difference of a business trust from a legal person or an entrepreneurial association is in the limited liability of its beneficiaries (owners). The liability is channeled through a managing trustee.

Within the Russian civil and economic doctrine, the discussion revolves around the constitutive vs. confirmatory nature of corporate registration (or other means of legitimization) for the purpose of defining the corporate personhood of participants of economic activity. As E. V. Trofimova rightly pointed out, the Russian registration system of corporate organizations (legal persons) is constitutive in nature and is used for public purposes (state control of entrepreneurship, fiscal functions, statistical recording, gathering of information about business entities). She also noted that for commercial corporate organizations the registration procedure is declarative, for non-­commercial organizations it is informational (with legal appraisal of the documents), and for credit organizations it is authorization-­based36. Yet, the constitutive character of registration does not apply to corporate associations and trusts (funds).

Concerning Russian corporate organizations (legal persons), their legal capacity is in effect from the moment the information about the establishment of a legal person is entered into theUnified State Register of Legal Entities (Art. 49 of the Civil Code).

Determination of the corporate personhood of entrepreneurial associations can be illustrated by the work of the Federal Antimonopoly Service (FAS). In order to determine market dominance, the FAS estimates the economic concentration (consolidation) of property and productive assets. Further, the FAS works to identify cartels (e.g., salt and pollock cartels) that form corporate associations whose activity hinders competition37.

As a rule, corporate associations in Russia gain corporate personhood from the moment the relations between corporate members are legally defined (e.g., by signing an investment partnership or insurance pooling agreement, acquiring significant influence or control in the head organization of a banking holding or a banking group).

Participation of corporate trusts (funds) in economic activity is provided by endowing a trustee with the competence of asset management.

The discussion of the subject matter should not be confined to the concept of legal person, whose fictions are debated by legal experts to this day38. As V. K. Andreyev had rightly pointed out, identification of corporate personhood of a legal person has no legal effect, and it would be more accurate to talk about the competence of the bodies of a legal person (corporation)39. This approach resolves the problem of incorrect interpretation of the body as a legal person’s representative. The main inconsistency of this interpretation lies with the absence of legal relation between the legal person and its representative. After its brief inclusion (with Federal Law No. 99-FZ of May 5, 2014), the erroneous provision in paragraph 1 of Art. 53 of the Civil Code that defined a body of a legal person as its representative, was rightly eliminated.

Similar issues arise with the interpretation of assets transferred to state (non-­commercial) corporations. According to Y. K. Tolstoy, a state corporation is authorized only to exercise the right of the federal property owner on behalf of the Russian Federation40. In other words, bodies of a state corporation are granted the competence to manage assets transferred to a state corporation at its founding. Thus, the emphasis is placed not on the corporate personhood on the organization, but on the competence of its bodies.

It is also worth mentioning how the domestic legislator treats members of a corporation. For example, Art. 53.1 of the Civil Code, that defines liability of individuals authorized to act on behalf of a legal entity, members of the collective bodies and persons taking executive decisions, implies liability for corporate governance that was not taken in good faith, was not reasonable or was not compliant with the normal conditions of civil transactions or standard entrepreneurial risks.

It appears that the defining factor is the de facto corporate governance, i.e., who actually controls the corporation, albeit outside of the formally established corporate bodies (i.e., the director, the board of directors). The act of “piercing the corporate veil” in English law is based on this principle (cf. the German notion of “destructive interference”). In Russia, individuals that control a corporation de facto may also be held legally accountable for breaking down “corporate shields”.

The Russian economic doctrine regards entrepreneurial (corporate) associations as participants in economic relations (see, e.g., V. S. Belykh, V. A. Laptev, N. I. Mikhailov, I. S. Shitkina41). The emphasis is placed on the economic aspects that define these corporations as a certain form of economic activity (e.g., common economic policy of steel cartels, governance structure of vertically-­integrated oil and gas holding groups). In this connection, we believe that it is essential to move away from the neo-­civil approach that denies entrepreneurial associations the corporate personhood and participation in civil turnover (E. A. Sukhanov42), and suggest resuming the discussion of the law on entrepreneurial associations43.

In the foreign jurisprudence, a corporation established by an agreement of a simple partnership has long been entitled to corporate personhood, even in the absence of legal personality. It would be reasonable to adopt a similar approach in the Russian legal framework.

Obviously, a UIF is not a legal person (it’s an object of law), but a corporate association of persons in a corporate form, which has transferred its assets under control of a trustee, has to be viewed as a subject of economic relationships and a subject of law. It is not incidental that the Supreme Court recognizes civil-­law societies established in the form of real estate co-­owners’ associations as corporations, even in the absence of the registration for obtaining legal personality status (paragraph 103 of the Decree of the Plenum of the Supreme Court No. 25 of June 23, 2015). The FAS frequently deals with complex transaction structures when analyzing corporate partnerships with the participation of non-­residents and trusts (e.g., EuroChem44), etc.

The moment of establishment of corporate personhood of a corporate trust is determined by the date corporate relations between trustors and a trustee are formed. In other words, a trust corporation is established the moment trust management is established. Several countries pose additional requirements on trust registration procedure. For example, in Cyprus trusts are entered into registers that are maintained by the Cyprus Securities and Exchange Commission, the Cyprus Bar Association and the Institute of Certified Public Accountants.

In the Russian legal framework, the legal status of trusts was determined before the adoption of the Civil Code (see Presidential Decree No. 2296 of December 24, 1993 “On Trust Property (Trust)”45). It is evident that trusts and UIFs represent corporate forms of economic activity, and the corporate personhood of a corporate trust is implemented in accordance with the articles of incorporation and the law. Registration requirements for individual forms of trusts are also legally defined, in particular, by Art. 19 of the Investment Funds Law (for UIFs) and Art.27 of the Mortgage Securities Law (for mortgage pools).

General conclusion:

The present analysis suggests that the term “corporation” embraces:

• corporate organizations (legal persons);

• corporate associations (entrepreneurial associations);

• corporate trusts and funds.

2. Corporate relations

The issue of corporate relations is closely related to the branch affiliation of corporate law. One can find different definitions of corporate relations in legal literature. At the core of these definitions are unique properties of the subject of law (corporation), substance of the relations in question (corporate relations), legal aspects of their regulation, economic and social characteristics, as well as other defining criteria. Yet, domestic legal scientists, despite being guided by the same legislative provisions, arrive at different conclusions.

The Russian law defines corporate relations as relations associated with participation in corporate organizations or their governance (Art. 2 of the Civil Code).

At first glance, for relations to be recognized as corporate, one of the two requirements has to be fulfilled – participation in or governance of a corporation. However, the very fact of participation in a corporation automatically grants its members governance rights, as affirmed by the provision of Art. 65.1 of the Civil Code that states that members of a corporation form its supreme body–a general meeting, congress, conference, etc.

This leads to the conclusion that Art. 2 of the Civil Code has legally consolidated a long-­standing form of public relations – corporate relations, on a level with property and contractual relations.

The provisions of the Civil Code and other legislative documents attest to the fact that domestic legislative norms regarding corporations are still under development. The development of corporate economic activities is ensured through constitutional freedoms and the traditions of domestic economy.

One necessary measure was the adoption of Art. 307.1 of the Civil Code institutionalizing the applicability of general provisions on obligations to requirements emerging from corporate relations, which, by the way, led to the controversial interpretation of corporate relations as a form of contractual relations. But, as V. K. Andreyev has rightly noted, this provision of the civil law strongly underlines the special legal nature of corporate relations46.

The special legal nature of corporate relations is also manifested in the possibility of reinstating corporate rights through replevin (paragraph 3 of Art. 65.2 of the Civil Code, paragraph 7 of the Review of the Practices for Resolving the Disputes over Share Placement and Trading47, et al.). Namely, it concerns the cases of regaining corporate control that was lost by a corporate member due to the loss of shares that certified the scope of corporate rights. One should not conflate vindication of property rights with revindication of corporate rights through replevin (it’s a legal analogy).

One should pay attention to the literal text of Art. 307.1 of the Civil Code that stipulates the legal analogy, as it applies:

1) only to requirements (i.e., when it is objectively necessary for safeguarding the legally protected rights and interests of the participants of corporate relations);

2) only to general provisions on responsibilities (application of the provisions on individual types of requirements is not permitted).

The analogy in question is a coercive legal device, necessary for the regulation of corporate relations.

According to I. S. Shitkina, corporate relations represent legally regulated public relations that emerge in connection with the establishment, operation and discontinuation of activities of a corporation48.

V. A. Belov suggests that corporate relations are a type of public relations that are directed at the organization and implementation of activities aimed at achieving common goals–unionized or corporate activities49.

When examining the substance of corporate relations, V. K. Andreyev comes to the conclusion that corporate relations include two subtypes of public relations – relations associated with participation in corporate organizations and relations associated with their governance50.

Based on the doctrine of Roman law, corporate relations should be viewed as a subtype of either contractual or property relations. However, this assumption would be incorrect, as it ignores the content of legal provisions regulating corporate relations.

The substance of corporate relations may be better identified through examining their characteristic traits, as well as defining subjective rights and legal responsibilities of their participants. Moreover, it is beneficial to apply the normative approach, commonly used in Russian jurisprudence, to the assessment of rules of law regulating corporate relations.

As clearly stressed by E. A. Sukhanov, corporate relations cannot be viewed as a subtype of contractual relations, just as the rights of corporate members cannot be viewed as contractual rights, because this may lead to substituting the rules of corporate law by the contractual ones, which cannot be permitted as not corresponding to the legal nature of corporate relations51.

A special nature of corporate relations is evidenced by a corporate agreement (Art. 67.2 of the Civil Code), grounds for recovery of losses (paragraph 5 of Art. 406.1 of the Civil Code), liability for misrepresentation of circumstances (paragraph 4 of Art. 431.2 of the Civil Code) and other legislative provisions. In many cases, legal regulation of the behavior of participants of corporate relations (e.g., regarding the conclusion of a corporate agreement) is equated in its legal consequences to the mode of entrepreneurship (paragraph 4 of Art. 431.2 of the Civil Code).

The Constitutional Court had repeatedly expressed its opinion on the economic nature of corporate relations, by pointing out that founders (members) of business companies independently perform economic activities with the purpose of profiting from the use of their capabilities and assets by means of production organization and management, sale of goods, performance of the work or service provision (Decree of the Constitutional Court No. 10-P of April 23, 201252). In many cases, activity of shareholders was categorized as other not prohibited by law economic activity, associated with certain legal risks, as joint-­stock companies conduct entrepreneurial activities independently (Decrees of the Constitutional Court No. 3-P of February 24, 200453, No. 11-P of May 25, 201054, et al.).

Legal literature has started employing the term “corporate responsibility”55, which, in all likelihood, represents an artificial legal construct (legal device) used to characterize the scope of corporate rights and responsibilities of corporate members.

Corporate responsibilities are closely related to intraeconomic ones. The concept “intraeconomic responsibilities” can be applied both to corporate responsibilities (conventional name) and to responsibilities in their classic sense (Art. 307 of the Civil Code).

The fundamental difference between corporate and other responsibilities is the moment they emerge. Whereas corporate responsibilities exist from the moment a person becomes a member (participant) in a corporation (Art. 65.1of the Civil Code), all other responsibilities emerge when an agreement (deal) is concluded, as a consequence of causing damage, as a consequence of illicit enrichment, etc. (paragraph 2 of Art. 307 of the Civil Code). Therefore, a participant of a public or corporate relation assumes the status to a party (creditor, debtor – Art. 308 of the Civil Code), as well as subjective rights and responsibilities following a judicial fact – an action or an event (e.g., making a deal or causing harm through inaction). In corporate relations, acquisition of membership (participation) serves as such a judicial fact.

One should take into account the multifaceted nature of corporate relations. In particular, a corporate agreement and an agreement on the pledge of rights of corporate members allow transferring corporate rights to creditors or other persons. The proponents of the civil approach regard such constructs as “quasicorporate relations” to which the contractual law should be applied (see, e.g., S. Y. Filippova56). Therefore, if corporate governance can be regarded as the realization of contractual rights, which is doubtful, then the realization of corporate governance rights by creditors does not exist! But does it? In this connection one might remember the doctrinal dispute over the non-­recognition of holding groups’ subjective rights and their possessing only quasi-­corporate personhood, which is no longer relevant, among other things, thanks to the appropriate legal provisions (the Investment Partnership Law, Art. 4 of the Banking Law, Art. 14.1 of the Law on the Organization of Insurance Business, etc.).

The establishment of corporate rights and responsibilities is, as a rule, preceded by two circumstances:

1) the establishment of a corporation as a subject of law;

2) the will of a corporate participant (member) themselves to acquire corporate rights.

Therefore, corporate rights are realized with respect to an existing corporation (e.g., a joint-­stock company registered in the Unified State Register of Legal Entities, a banking holding registered with the Bank of Russia57, an insurance pool established as a general partnership, etc.).

In legal literature, one can find a reasonable opinion on the corporate nature (i.e., existing from the moment a decision to establish a corporation is taken) of founders’ rights prior to the establishment of a corporation, since an association of persons (general meeting of founders) gains and exercises the rights and responsibilities, has a governance body and commits acts that have legal consequences (V. K. Andreyev58).

A corporate relation should be viewed in the context of cohesion between membership and governance. It is hard to envision corporate membership in isolation from corporate governance. Few exclusions to this rule include cases of judicial restraint, conclusion of a corporate agreement and foreclosure of corporate assets. paragraph 3 of the Decree of the Plenum of the Supreme Court of Arbitration No. 11 of July 9, 2003 “On Arbitration Court Practices for Considering Claims for Imposing Injunctive Relief Associated with the Prohibition of General Shareholders’ Meetings”59 provides for handing down judgements preventing an annual or an extraordinary general meeting of shareholders from taking decisions regarding individual issues on the agenda, if these issues represent the subject of a dispute or are directly related to it. Another example is a corporate agreement that may oblige members of a corporate organization to refrain from exercising their corporate rights, including the right to vote in a certain way at a general meeting and commit other acts of corporate governance in a concerted manner (Art. 67.2 of the Civil Code). Finally, the third scenario is when the corporate rights are exercised not by corporate members themselves, but by the pledgees of shares or participatory interest in a charter capital (Art. 358.15 of the Civil Code).

When looking at corporate relations through the prism of characteristics inherent in a corporation itself, one can make an interesting observation. Art. 65.1 of the Civil Code defines corporations as legal persons whose founders (members) have the right of participation (membership) and form the supreme body. Further, Art. 65.2 of the Civil Code institutionalizes the right of a corporate member to participate in corporate management.

It should be emphasized that Art. 65.2 refers to management of corporate affairs, not corporate governance. Such wording was used by the legislator in order to tease apart corporate management from corporate governance and corporate control, the latter of which is realized through the executive bodies (Art. 53 of the Civil Code).

Assessment of the regulatory nature of corporate legal provisions may help unfold the content of corporate relations. It is important to understand what portion of public relations is covered by corporate legislation.

The corporate legislative provisions in question regulate corporate legal relations, determine the legal status of corporations, define the framework and structure of their executive bodies, and dictate the legal regime of corporate management. On the other hand, the law overlooks the will-­formation of participants (members) of a corporation with respect to governance as a thought process. It goes without saying that the end product of this process – the development of an appropriate will – should meet the criteria of legitimacy and good faith and cannot infringe upon the rights and lawful interests of others. The thought process itself is not part of the judicial assessment of the actions undertaken by corporate members, in particular, when dealing with claims for expelling persons from a corporation; only the articulated final will and its legal consequences are subject to legal evaluation (see paragraph 5 of the Review of the Arbitration Court Practices for Resolving the Disputes over the Expulsion of Limited Liability Company Members60).

Understanding of the essence of a corporate relation is facilitated by the analysis of its object. In the traditional legal doctrine, the object of a legal relation is what a public relation is directed at, as well as what it is built around – i.e., material and other benefits.

In her review of approaches to the interpretation of objects of corporate relations, I. S. Shitkina suggests defining such an object as the activity of subjects directed at obtaining material benefits, rather than the benefits themselves61. This approach focuses on the subject matter of a corporate relation (behavior of its participants), rather than its object.

It is suggested that an object of a corporate relation is corporate participation (membership). This proposition follows from the provisions of Arts. 2 and 65.1 of the Civil Code.

This brings up the question: if participation (membership) in a corporation and its governance are two indissociable elements of a corporate relation, why is the participation (membership) their only object?

To answer this question, we must separate the primary elements from the secondary. The primary element of corporate relations is the participation (membership) in a corporation, which emerges when a member (participant) joins a corporation and is terminated when he or she leaves it. As for the governance of corporate activities, the emergence and termination of this element of a corporate relation are directly dependent on participation, thus, governance is secondary62.

Participation in a corporation may or may not be related to governance (e.g., as in the case of concluding a corporate agreement or pledging the interest in a charter capital of an LLC). Importantly, “corporate management” should not be conflated with delegating the functions of the executive body to a trustee or a managing company (see, e.g., paragraph 1 of Art. 69 of the JSC Law or Art. 42 of the LLC Law) that do not enjoy the rights of membership. The manager fulfilling the role of an executive body serves a dual function: on the one hand, he delivers a contractual compensated provision of services, on the other hand, he exercises corporate governance.

Returning to the thesis of the identity of participation and governance in corporate relations, one should note that, despite the possibility of separating governance and membership, as a rule, these two elements are inseparable. The exclusion of governance aspects from a member’s corporate rights depends on his own volition. For example, if a member does not consent to signing a corporate agreement or pledging his participatory interest in corporate governance, the established system of corporate governance remains in effect.

Speaking of objects of rights, one should not conflate an object of corporate rights with an object of civil rights63. Objects of civil rights include belongings, such as cash money, certificated securities and other property, e.g., non-­cash funds, book-­entry securities, property rights; deliverables and service provision; protected intellectual property and related identifications; intangible benefits (Art. 128 of the Civil Code).

Non-­identity of these concepts is also evidenced by the fact that an object of corporate legal relations – participation (membership) – is first to emerge, which in its turn leads to the establishment of corporate rights with respect to a corporation, whereas objects of civil rights – company shares – emerge later (e.g., on establishment of a business company and introduction of the information about it into the Unified State Register of Legal Entities, or on additional issue of shares).

The content of corporate legal relations reveals the scope of rights and responsibilities of their participants. O. S. Ioffe suggested that legal relations do not embrace the behavior of their participants in general, but rather involve specific rights and responsibilities that define the legal framework outlining acceptable behavior (subjective legal rights and authority)64.

The Civil Code defines the fundamental rights and responsibilities of participants in a corporation (Art. 65.2, 67, 73, 85, 123.3, 123.11, et al.). In a sense, they could be labeled minimum rights and responsibilities of corporate members. The detailed description of corporate rights and responsibilities (corporate authority) can be found in special laws (the JSC Law, the LLC Law, the Business Copartnerships Law, et al.).

Corporate relations are defined as internal relations within a corporation. Yet, other relations closely associated with them can also be considered as such. First, the realization of corporate rights requires the involvement of third parties – public authorities and the Bank of Russia. In particular, the Federal Tax Service (FTS) maintains the Unified State Register of Legal Entities and the record of participation interests in charter capitals of LLCs; the Bank of Russia registers equity issuance and monitors compliance with corporate legislation; the FAS regulates economic concentration transactions, in particular through acquiring large stocks of shares and participation interests in a charter capital of business companies. Second, membership and governance relations themselves have public-­law aspects. For example, self-­regulatory organizations take up the position that internal documents come into force only after they are entered into the state register of self-­regulatory organizations by Rostechnadzor (pt. 12 of Art. 55.5 of the Town Planning Code); when concluding corporate deals, their counterparties should take into account local normative acts, including the charter, that regulate corporate procedures for concluding specific types of deals (paragraph 1 of Art. 174 of the Civil Code, paragraph 2 of Art. 69 of the JSC Law).

Speaking of the convergence of public and private aspects of economic (entrepreneurial) relations that is manifested in the interplay between the procedural and regulatory elements of economic activity, the economic law doctrine has labeled intereconomic relations as “the Martemianov triangle”– a model that underlines the presence of horizontal, vertical and internal elements in these relations65.

It is no coincidence that T. V. Kashanina referred to corporate law as “the core of entrepreneurial law”66, as intracompany and intraeconomic relations have historically constituted the major part of the entrepreneurial law subject matter. Of particular relevance is the study of internal relations in the unified state-­owned economic sector of the Soviet era, whose business units (enterprises, production associations, bodies of economic management) represented economic systems – subsystems of the national economy67.

To summarize, corporate relations are relations associated with participation (membership) in corporations, their management and control. Relations pertaining to corporate management may be conventionally labeled as intraorganizational relations, whereas relations pertaining to corporate control can be described as intraproductive68.

The specific content of a corporate relation depends on the legal entity type of a corporation and on corporate acts that regulate its activity, which we will discuss in more detail in the following sections.

3. Corporate law in the Russian legal system

When analyzing corporate relations, it is necessary to determine the place that corporate law takes in the Russian legal system. The domestic pre-­revolutionary, Soviet and modern legal doctrines have not succeeded in developing a single approach towards identifying the criterion for dividing the Russian legal system into separate branches.

Among the proposed criteria were the subject matter of regulation – i.e., the content of public relations (A. V. Dozortsev69, V. K. Mamutov70, V. K. Raicher71), the character of regulated relations (V. V. Laptev72), the subject matter and the method (S. S. Alekseyev73, I. V. Pavlov74), Y. K. Tolstoy75, V. F. Yakovlev76), the addressee of regulation (V. S. Tadevosyan77), etc. Each viewpoint was supplemented by numerous arguments and, it should be acknowledged, had some merit. Still, division of the legal system into separate branches is not a purely scientific question, as it is necessary for law enforcement and, thus, calls for an appropriate scientific assessment.

Following a lengthy academic debate and the establishment of fundamentally different perspectives, the doctrine now has several definitions of corporate law to offer.

Modern legal literature suggests that many scientists involved in this matter have opted to acknowledge corporate law as an independent branch of Russian law – among them are V. K. Andreyev, V. V. Dolinskaya, T. V. Kashanina, I. S. Shitkina, to name a few. Such a decision is, as a rule, founded on the thesis of uniqueness of the subject matter of the branch – corporate relations.

In particular, being a proponent of the economic (entrepreneurial) law approach, V. K. Andreyev considers the subject matter of legal regulation to be the only possible criterion for separating the branches of law, and corporate law meets this criterion78. According to I. S. Shitkina, corporate law is also recognized as a branch of law and is defined as a set of norms regulating public relations emerging in connection with the establishment, operation and discontinuation of corporate activities79. The emphasis here is placed on the fact that the subject matter of corporate law is directly linked to corporations as subjects of law. Further, I. S. Shitkina mentions that the norms of corporate law are based on combining private and public methods of legal regulation, thus duplicating the provisions of the general part of entrepreneurial law.

It should be noted that until recently many scholars of economic law had adhered to the view that corporate law constitutes only a major institute of entrepreneurial law that regulates relations pertaining to the establishment and operation of corporations (see, e.g., E. P. Gubin and I. S. Shitkina80). However, this institute was subsequently acknowledged to have the attributes of a law branch.

The essence of corporate relations should be the starting point in the assessment of the branch affiliation of corporate law. A corporation itself is a key subject of the legal relations in question, but not a defining one when it comes to separating law branches. Otherwise, we would have to (following the “subjective principle”) recognize not only “corporate law”, but also “unitary law” as a branch of law that regulates the issues pertaining to the legal arrangement and operation of unitary organizations, which is doubtful.

Besides, if one concurs with I. S. Shitkina’s opinion on the subject matter of corporate law (“relations emerging in connection with the establishment, operation and discontinuation of corporations”), then it would be more accurate to substitute the word “operation” with the expression “governance of activity”, which would underline the essence of the relations in question (corporate relations). Otherwise, it sounds like corporate law also regulates production activities and business operations of corporations (banking, insurance, oil-­and-­gas, construction, etc.). It is evident that the authors did not attach this meaning to their work, as the discussion is confined to relations emerging from participation in and governance of corporations.

When studying organization of the legal system, D. A. Kerimov suggested to define a law branch as an established set of norms that regulates public relations that are homogeneous in quality on the basis of specific principles and methods and, thus, acquiring certain independence, sustainability and autonomy of function. Furthermore, the nature of these relations determines the method of their legal regulation81.

Worthy of note is the position of T. V. Kashanina who – in her monograph “Structure of law” – classifies corporate law as a subtype of “private law”. According to her, corporate law represents a set of legal norms established by the bodies of a corporation that express the will of its members. The author argues for the uniqueness of the set of norms in question, which are established by the members of a corporation. Among the sources of corporate law, she mentions corporate customs and practices, corporate precedents and corporate normative acts82. The emphasis is placed on the idea of corporation as an association of individuals, in any field (political, economic, social or spiritual) in which its participants independently develop (establish) the norms and rules of behavior (sources of corporate law).

An interest towards this approach is explained by the uniqueness of the state-­run sanctioning system of corporate policy-­making which shapes the system of sources of corporate law. Yet, the legal organization and activity of a corporation is inextricably linked with the issues of registration (legitimization) of a corporation, protection of corporate rights, regulation of corporate procedures by the state and other matters that are traditionally regulated by entrepreneurial law.

N. N. Pakhomova speculates about the corporate nature of social relations and the connectedness of their subjects with each other, but later points out the necessity of singling out corporate relations which possess special attributes (an economic component)83. Further, she without hesitation classifies corporate law as the third sub-­branch of civil law, on a level with property and contractual law84.

Therefore, one can postulate the existence of a “mega-­branch” of Russian law that covers the major portion of public relations and includes all sorts of corporate relations, including family relations (“spousal corporation”), administrative relations (government body as a “public corporate association” of public servants employed there), relations between different ethnic (“ethnic corporation”) and national groups, etc85. One can also define an association of the world Internet users as a corporate association that is united by the Internet telecommunications network and is managed by its users. In the latter case, corporate law becomes a supra-­national global issue.

When defining a law branch, one should first identify the legal categories and the legal substance of the phenomena in question. Social, economic, historic and other aspects may also be accounted for, but they are not defining.

Many proponents of the school of private law, including E. A. Sukhanov, view corporate law as special private law in relation to general private law – i.e., civil law86. Yet, no justification is provided to denying the overlap between the private-­law and the civil-­law sources of regulation or the complexity of the branch law in question.

In his assessment of E. A. Sukhanov’s scientific views, Y. K. Tolstoy contests the classification of corporate law as a sub-­branch of civil law87. According to Y. K. Tolstoy, the suggested approach leaves open the question of the place that corporate relations take within civil law. It isn’t clear whether they should be placed into the discussion of the subject matter of civil law (as a subtype of public relations) or into the discussion of legal persons (on corporate entities).

In all cases, defining corporate law as a part of civil law leads to the truncation of tis concept. It appears that special (corporate) private law is based on public relations of private-­law character (e.g., equal relationships between participants based on a corporate agreement).

Further, E. A. Sukhanov’s approach does not consider the public-­law component of corporate relations, which constitutes their substantial part (including the relations pertaining to corporate governance and regulation of the activity of SRO members, issues related to competence of executive bodies and corporate control, etc.).

V. F. Popondopulo defines corporate law as a set of general and special norms of civil law that regulates contractual obligations associated with participation in corporate organizations and their governance (corporate relations), based on equality, autonomous will and material independence of their participants88. This definition is based on the normative approach rooted in Art. 2 of the Civil Code. Yet, this approach undermines the long-­awaited amendments to the Civil Code that had introduced the third type of public relations–corporate relations, on a level with property ad contractual ones. Furthermore, it is hard to find “equality” and “autonomous will”, for example, in relationships between the general meeting of a corporation (the will-­forming body) and its director (the executive body).

We should note that the proponents of the private law school have been recently paying a lot of attention to the core issues of entrepreneurial law and have attempted to describe them in the vein of civil law science, and in particular this pertains to the term “legal person of public law”89. While recognizing that these subjects of law possess specific public competence, they by all means include them into the discipline, ignoring the fact that there is no “equality” and “autonomy of will” to speak of here90. However, according to Art. 2 of the Law on Public-­Law Companies, these organizations are explicitly granted public-­law functions and authority, and their activity is carried out on behalf of the government and society.

Modern scientists specializing in civil law often without hesitation classify corporate law as a sub-­branch of civil law91. In particular, E. V. Bogdanov justifies this point of view through the substance of relations in question, which, according to him, has no fundamental distinctions from civil legal relations. Corporate law is viewed as a sub-­branch of civil law that regulates property, personal non-­property and civil-­law organizational relations associated with the participation in corporations and their governance. However, it isn’t clear on which grounds organizational-­governance relations can be classified as private-­law ones. Moreover, corporate bodies that participate in corporate relations do not possess the traditional civil-­law capacity and do not fit the suggested approach, which demonstrates that it is impossible-­based on Art. 2 of the Civil Code – to define corporate relations as belonging to the subject matter of civil law, and that it is reasonable to identify them as the subject matter of corporate law instead.

V. A. Belov sees the academic debate over this issue as an indication that scientists of private and entrepreneurial law try to slap a branch label based on the linguistic (rather than legal) aspect of the word “corporation”. At the same time, V. A. Belov proposes the term “corporate law”– a set of legal norms that regulate public relations directed at the organization and implementation of activities aimed at achieving common goals (unionized or corporate activities), with the reservation that corporate law is not covered by the institute of private law92.

While having the above-­described views in mind, we suggest a different approach to defining the place of corporate law within the legal system. We also consider it possible and reasonable to rely on the works of pre-­revolutionary and Soviet legal scientists that studied this issue.

The history of the economic law doctrine dates back to distant past. Justifying the existence of economic (now referred to as entrepreneurial) law as a branch, representatives of the economic law school relied primarily on the emerging system of trade law (later known as commercial, economic and, finally, entrepreneurial law) that regulated the appropriate public relations within the national economy.

During the Soviet period, O. A. Krasavchikov pointed out the tendency towards unification of the economic legislation already in the 1960s-1970s, which, according to him, indicated the necessity to adopt the USSR Economic Code93. Later he would scientifically justify the establishment of economic law as a unique and independent branch of law.

Entrepreneurial law had developed as a branch of law, a science and a study discipline. As V. V. Laptev rightly noted, all definitions of economic law converge on that it regulates the issues pertaining to the establishment and operation of economic entities, including corporate ones, regardless of whether they belong to the real economy or not94.

The most successful criterion for dividing the branches of law is according to the subject matter and the nature of regulated relations. This approach rules out the existence of quasi-­branches of law – declared to be independent, but lacking a common component. Furthermore, this shortfall (the absence of a common component in a branch of law) is not addressed by the dogmas of Roman law any more, and the traditional division of law into private and public has become methodological in nature with respect to the separation of private legal norms from public. For example, G. F. Shershenevich, while viewing trade law as part of civil law (a common practice for jurisprudence of that time – see also the works of A. I. Kaminka95, P. P. Tsitovich96, et al.), could not neglect the difference between the norms of private trade law, public trade law and international trade law97. Notably, G. F. Shershenevich more frequently used the term “private law” than “civil law”. Public and international trade legislations could not have been classified as civil, as it would violate all reasonable distinctions that could be made between law branches.

The multifaceted nature of Russian law branches allowed V. K. Raicher98 to divide them into basic and complex. Yet, most basic branches of law would become complex over time, as – in Y. K. Tolstoy’s words99–it was not possible to isolate “chemically pure” branches.

A similar interpretation was proposed by S. S. Alekseyev, who presumed that a branch of law is the main unit of the legal system, identifiable by a special regime of legal regulation and covering entire sectors, clusters of homogeneous public relations100. According to him, all branches of law could be divided into profile, special and complex. Economic law was considered by S. S. Alekseyev to be a complex law branch, because it combined heterogeneous institutes of profile and special law branches101.

L. L. Laptev remarked that branches of law are not separated by a “brick wall”102, yet blurring of the boundaries between them should be avoided. Otherwise, it might create ambiguities regarding what legal norms should be used in each particular case.

Within the science of entrepreneurial law, three subtypes of relations (entrepreneurial-­law relations) constituting the subject matter of this law branch can be distinguished:

1) relations that emerge from conducting economic activity (including the entrepreneurial kind);

2) relations emerging from the regulation of entrepreneurship;

3) intraeconomic (intraproductive and intracorporate) relations (V. V. Laptev103, V. K. Mamutov104, S. S. Zankovskiy105, et al.).

Already in the pre-­revolutionary jurisprudence, intracompany and internal relations – that subsequently became the subject matter of Soviet economic and modern entrepreneurial law – were studied in the courses on trade law (in particular, when discussing artisan, general, joint-­stock and other partnerships106). Here we should note that, although the subject matter of entrepreneurial law is multifaceted and discussable, the scope of this work will necessarily be limited to the study of legal nature and content of corporate relations.

Soviet cooperatives founded on the principle of “united labor”107 are the prototypes of Russian corporations. Modern – primarily commercial – corporations, founded as associations of individuals or their assets, evolved to meet the respective needs of the market economy.

When discussing corporate organizations, whose legal forms are enforced by a closed list in Art. 4 of the Civil Code, one could call into doubt the validity of classifying the activities of non-­commercial corporations as the subject matter of entrepreneurial (economic) law.

Non-­commercial corporations do not carry out entrepreneurial activities, yet the legislation enables them to engage in “income-­generating activities” (paragraph 4 of Art. 50 of the Civil Code). Moreover, in order to conduct such activities, non-­commercial corporations are obliged to have assets of sufficient market value, exceeding the minimum charter capital of an LLC (paragraph 5 of Art. 50 of the Civil Code).

Self-­regulatory organizations (SRO), membership in which endows subjects with the right to carry out entrepreneurial and professional (including economic) activities, can hardly be considered a subject of private law. A SRO is granted public authority, namely the competence to regulate economic activities of its members (Art. 3 of the SRO Law). Further, one of the sources of funding for SROs is the income gained from the placement of monetary funds in bank deposits (paragraph 1, subparagraph 6 of Art. 12 of the SRO Law), which demonstrates the ability of SROs to engage in income-­generating economic activities.

Another good example of economic activities conducted by participants in non-­commercial relations is the operation of consumer credit cooperatives that bring together natural and/or legal persons for the purpose of meeting their financing needs (paragraph 3 of Art. 1 of the Credit Cooperation Law). Members of this non-­commercial corporation – including participating organizations (legal persons) – gain an opportunity of concessional financing of their business, production or other activities. Activities of real estate owners’ partnerships aimed at management of common property belonging to co-­owners of units in an apartment building has an economic rationale (Art. 123.12 of the Civil Code), as it allows them to efficiently organize the structure of asset management, etc.

It hardly seems reasonable to single out Cossack communities and small indigenous communities of Russia as special forms of corporations. Obviously, these social groups represent corporate organizations in the broad sense of this term. However, if we followed this path, we would have to recognize all social groups identified according to other criteria as corporations and subjects of civil or entrepreneurial relations (e.g., on ethnic, religious, spiritual, linguistic or other grounds).

Mentions of Cossack communities and small indigenous communities of Russia in different laws underline the economic component of their activities; in particular, with respect to agricultural activities, the law provides for leasing them land plots for the purpose of agricultural production, preservation and development of their traditional ways of life, economy and trades (paragraph 5 of Art. 10 of the Law on Agricultural Land Turnover).

The corporate essence of both non-­commercial and commercial corporations (membership and governance) is the same and is tightly linked to the economic interests of their participants.

Under this approach, it may seem reasonable to rename entrepreneurial law into “economic law”, and in fact this proposal has long been circulating in the domestic academic literature108. Considering the current economic situation in the country, the label “entrepreneurial law” was suggested to be substituted with “economic law”, because the scope of entrepreneurial activity has long exceeded the framework of the provision of paragraph 1, point 3 of Art. 2 of the Civil Code109. Still, we prefer using the term “entrepreneurial law” as the working name of the law branch under consideration.

The debate on this issue does not change the scope of public relations regulated by the branch. In particular, according to the civil doctrine, civil law is no different from private law, and the works on civil law traditionally cite the concepts of Roman law. As V. V. Vitryanskiy had rightly pointed out in his evaluation of the outcome of the Russian civil law reform, we may arrive at the most counterintuitive and unpredictable conclusions110. We would like to extend his thesis by noting that modern civil law is not what it used to be, and its subject matter also needs rethinking. However, its scope should be confined to the original understanding of civil relations, i.e., property and personal non-­property relations that are based on equality and autonomous will. Otherwise, the boundaries between law branches get blurred out.

A similar situation is observed with respect to entrepreneurial law, which was previously referred to as trade, commercial and economic law. This dispute is never-­ending, but we suggest settling on the working name “entrepreneurial law”.

The provisions of the Russian Constitution serve as the final argument in the debate about the branch affiliation of corporate law. First, the provisions of Arts. 34 and 36 of the Russian Constitution enshrine the unrestricted use of one’s abilities and assets in economic activity, as well as the right of association. The Constitutional Court has always viewed a corporate organization that unites its participants primarily as a form of collective entrepreneurship and/or an economic model of asset management, and secondarily as a subject of law111. The convergence of private and public aspects of corporate legal relations is emphasized here. Second, it should be taken into account that civil law is an exclusive competence of the Russian Federation (Art. 71), whereas entrepreneurial law is the responsibility of federal law with respect to the legal basis of the single market (Art. 71), as well as the joint responsibility of the Federation and its constituent entities on issues pertaining to the regulation of entrepreneurship (Art. 72)112. Furthermore, corporate activities and many aspects of corporate (governance) procedures are regulated not only by federal law, but also by subsidiary legislation, acts of the Bank of Russia113, regional normative acts, as well as local corporate acts114 (paragraph 5 of Art. 50, paragraph 4 of Art. 52 of the Civil Code, etc.).

It is incorrect to view corporate relations in terms of corporate governance (if one takes into account their substance) as equal relations based on autonomous will and discretion (paragraph 1 of Art. 2 of the Civil Code). With respect to the methods of legal regulation of corporate relations, scientific analysis suggests the presence of three traditional methods of entrepreneurial law–discretionary, peremptory and recommendatory115.

When analyzing the distinctions of an institute/subbranch from a branch of law, D. A. Kerimov states that an institute of law represents a subset of homogeneous relations (with their specific attributes) and also shares some similarities with a branch of law (objective insularity and organic unity of components, specificity of the method, relative independence, etc.)116. In other words, an institute of law determines the norms regulating a specific type of homogeneous public relations. In contrast to a law branch, a subbranch represents a large subset of public relations that fall within the scope of relations regulated by a branch (V. V. Lazarev, S. V. Lipen)117. Obviously, only an independent branch of law has its unique Common and Specific parts that do not duplicate and don’t borrow from the existing branches of law and have their subject matter, principles, methods of legal regulation, etc.

In his study of the subject matter of entrepreneurial law and the place it takes in the system of law branches, E. P. Gubin had pointed out the unity of the subject matter, the legislation and the corresponding study discipline in entrepreneurial law118.

Corporate relations belong to one of the three types of public relations that constitute the subject matter of entrepreneurial law – intraeconomic relations, on a level with relations directed at the implementation and regulation of entrepreneurial or other economic activity. Intraeconomic relations, in their turn, are divided into intracorporate and intraproductive relations.

In summary, we came to the conclusion that corporate law should be viewed as a subbranch of entrepreneurial law that covers a substantial portion of entrepreneurial legal norms and regulates a homogeneous set of public relations–namely, corporate relations.

4. Sources of regulation of corporate relations in Russia

The sources of regulation of corporate relations may be approached from different angles. Some legal scientists view the sources of corporate law exclusively as the product of local policy-­making (T. V. Kashanina119). This opinion has its roots in the idea of corporation as an association of persons. Under this approach, only corporate legal acts adopted by a civil-­law society within a given corporation fall under scrutiny. Obviously, corporate acts serve as a source of regulation of corporate relations and represent the most crucial part in the taxonomy of such sources. Still, the entire system of sources of entrepreneurial law needs to be analyzed, and it includes all normative acts pertaining to the regulation of corporate relations120.

Let’s review the existing sources of corporate law.

1. Generally recognized principles, generally recognized norms of international law, international treaties and international customs.

The Russian legal system recognizes international acts (paragraph 4 of Art. 15 of the Russian Constitution). The regulation of their use is also enshrined in the Decree of the Plenum of the Supreme Court No. 5 of October 10, 2003 “On the Application by General Jurisdiction Courts of Generally Recognized Principles and Norms of International Law and International Treaties of the Russian Federation”121.

Generally recognized principles and norms of international law are primary with respect to international treaties, as international treaties are founded on the established principles and norms of international law122.

Among such generally recognized principles of international law are the principle of good faith that also pervades the norms of other branches of domestic law; the estoppel principle (from estop, ‘deprive of the right to object’), or the prohibition of abuse of a right. The principle of freedom of contract was introduced into corporate practice, including the case of conclusion of a corporate agreement (a shareholders’ agreement or an agreement stipulating the rights of a company’s participants), that is regulatory in nature.

Another example of a universally accepted norm is the recognition of a subsidiary business (branch, division) as defunct, in case a corporation shuts down its operation in the country of registration (incorporation). This principle was well illustrated by V. M. Koretskiy who pointed out that recognizing the existence of a subsidiary (branch, division) that is independent from its headquarter (corporation) is unacceptable, and the opposite should be viewed as the “resurgence” of a non-­existent subject of law or its “double (triple, etc.) existence”123.

We should note that some Russian laws differently approach the regulatory impact of international legal norms. For example, according to the Civil Code, generally recognized principles and norms of international law and international treaties are part of the Russian legislation (paragraph 1 of Art. 7). However, international treaties are prioritized over the civil legislation (paragraph 2, point 2 of Art. 7).

According to paragraph 1 of Art. 5 of the LLC Law, branches and divisions of Russian corporations established in a foreign country are obliged to comply with the foreign legislation, as well as Russia’s international treaties. Analogous provisions exist with respect to the establishment of branches and divisions of joint-­stock companies (paragraph 1 of Art. 6 of The JSC Law). Yet, these laws lack any mention of generally recognized principles and norms of international law.

Speaking of international treaties, it is worth reminding that a corporate association is based on the principles of free association and guaranteed protection of property rights, enshrined in Art. 11 of the Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 1950)124 as the essential guarantees of human rights.

2. The Russian Constitution.

In domestic legal science, the Russian Constitution is often referred to as “the Main law”, because it represents the supreme act of legal force, which all legal entities should comply with and which applies throughout the entire territory of Russia. The Russian Constitution is indeed the “main” and the “supreme” legal document in our state. The USSR Constitution (1977) and the RSFSR Constitution (1978) that preceded it even contained in their titles the words “main law”.

It should be taken into account that the Russian Constitution is a directly applicable act, which allows to apply its provisions to corporate relations (paragraph 2 of the Decree of the Plenum of the Supreme Court of the Russian Federation No. 8 of October 31, 1995 “On Certain Issues Pertaining to the Application of the Constitution of the Russian Federation by Courts for the Implementation of Justice”125).

The Russian Constitution also enshrines the principles of legality, freedom of economic (including corporate) activity (Arts. 8 and 34), plurality and equal protection of all forms of property (Arts. 8, 9, 34 and 35), and other fundamental principles126.

3. Legislation that defines the legal standing of corporations and regulates corporate relations.

When speaking of legislation, we need to mention that the existing body of laws containing the norms of corporate law could be conventionally divided into federal and regional legislations.

Although most norms of corporate law are prescribed by the federal legislation (Art. 71 of the Russian Constitution), in several regions of the country certain issues pertaining to the regulation of corporate activities are addressed by regional acts (Art. 72 of the Russian Constitution), in the context of the joint competence of the Federation and its constituent entities.

The federal legislation can be divided into codified and non-­codified acts127. The codified acts include the Civil Code, the Housing Code, the Town Planning Code, the Code of Administrative Offences, the Family Code, the Criminal Code, the Land Code, etc. The main codified act that regulates corporate relations is the Civil Code.

The detailed regulation of the legal standing of particular forms of corporate entities is implemented with the following laws: with regard to commercial corporations – the JSC Law, the LLC Law, the Business Copartnerships Law, the Production Cooperatives Law, etc.; with regard to non-­commercial organizations – the Non-­Commercial Organizations Law, the Housing Cooperatives Law, the SRO Law, etc.; with regard to entrepreneurial associations (of the corporate kind) – the Investment Association Law, etc.

Several Russian laws prescribe simultaneously the legal status of specific subject of entrepreneurial law and the details of regulation of their economic activities (e.g., the Banking Law or the previous Law of the Russian Federation No. 2383-I of February 20, 1992 “On Commodity Exchanges and Exchange Trade”128).

Regional laws on the regulation of particular types of economic activities may determine the parties involved in projects of a public-­private partnership. For example, according to the Law of Saint Petersburg No. 627–100 of December 25, 2006 “On the Participation of Saint Petersburg in Public-­Private Partnerships”129 and the Law of the Tatarstan Republic No. 50-ZRT of August 1, 2011 “On a Public-­Private Partnership in the Republic of Tatarstan”130 any Russian or foreign legal or natural person and any association of legal persons without the right of legal personality established by a general partnership agreement may act as a partner on a project.

4. Subsidiary normative acts at the federal and regional levels.

The Russian legal system allows to divide the subsidiary normative acts into two categories131:

1) acts passed in application of provisions of the law (e.g., by virtue of Art. 2 of the Law on Registration of Legal Persons was issued the Decree of the Government of the Russian Federation No. 319 of May 17, 2002 “On the Authorized Federal Executive Body Responsible for the State Registration of Legal Persons, Agricultural (Peasant) Farms, Natural Persons Acting as Individual Entrepreneurs”132);

2) acts passed by public authorities within their competence – i.e., discretionary power133 (in particular, the Order of the President of the Russian Federation No. 1392 of November 16, 1992 “On the Measures Directed at the Implementation of Industrial Policies in the Privatization of State Enterprises”134).

In jurisprudence, Orders of the President of the Russian Federation (presidents of the republics, heads of the constituent entities of the Russian Federation) and Decrees of the Government of the Russian Federation have been traditionally considered normative, whereas Instructions and Messages have been viewed as individual acts. However, in recent years the approach began to shift. For example, the Presidential Message to the Russian Federal Assembly (2012) mentions that, in order to upgrade the economy that would enable fair competition, the Russian Government must adopt (as part of the national entrepreneurial initiative) the “road map” towards the promotion of competition, industrial modernization, development of science and technology, as well as new branches of economy135. Another example is the Instruction of the Government of the Russian Federation No. 1315-r of June 25, 2016 which approved the Plan of Action (“Road Map”) “The Improvement of Corporate Governance”136.

5. Municipal normative acts.

To a certain degree, corporatization of municipal enterprises required regulation by their owners (municipalities). Clearly, one way for municipal bodies to implement such regulation is by issuing appropriate normative acts. One good example of it is the prescribed use of the “golden share” – a special corporate right (see the Decree of the head of the town of Elektrogorsk of Pavlovo-­Posadsky District of Moscow Oblast No. 236 of July 11, 2003 “On Approving the Provision for the Management of Joint-­Stock Company Shares Found in the Municipal Property of the Town of Elektrogorsk that were Created during the Process of Privatization and on Exercising the Special Right of the “Golden Share”)137.

6. Corporate normative acts.

Local corporate

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