The problem of non-proprietary legal entities in the light of the theory of separate property

Ibragimov Konstantin Yrievich ORCID: 0009-0003-7909-5734 Postgraduate student; Faculty of Law; St. Petersburg State University 199106, Russia, Saint Petersburg, Bolshoy Vasilyevsky Island ave., 71 ibragimovkj@gmail.com Other publications by this author

Introduction

Legal entities that are not owners of their property are a characteristic feature of the Russian legal order, which can be used as an example to demonstrate one of the possible and, as we further explain, undesirable correlation of limited property rights and property isolation. Property isolation is understood as giving property a specific legal status related, first of all, to the procedure of liability to creditors (protective isolation is the priority of claims of personal creditors in relation to the personal property of the founder, confirming isolation is the priority of claims of creditors of the entity in relation to separate property) ^{[1, pp. 393-396]}.

The theory of detached property, the provisions of which in the framework of this study are proposed to be used as an analysis tool, was developed by G. Hansman and R. Kraakman ^[1] and was developed in the works of foreign authors R. Squier ^[2], O. Eldar and A. Ferstein ^[3], as well as domestic researchers V. V. Podsosonnaya ^[4] and E. I. Chervets ^[5]. Previously, this theory was used in the analysis of ordinary legal entities and non-legal entities and was not used in the analysis of the problem of legal entities that are not owners of their property.

Most often, the legal separation of property occurs by using the construction of a legal entity, but property separation is also possible by using the construction of limited property rights and other security structures ^[2]. The property separation of legal entities also obviously does not occur without the use of property rights, but since a separate independent property right in this case is a direct consequence of legal personality, such a role of property rights is so obvious that it is not of interest for further consideration. At the same time, as a rule, either a fictitious person or another construction (for example, a limited property right) is used to achieve the necessary level of property isolation, but not two means at the same time.

However, the Russian legal order has a characteristic feature in which this logic is violated. This feature is the presence in the Russian system of property rights of such rights as the "right of economic management" and the "right of operational management", which are vested in state–owned enterprises and institutions. The peculiarity of this situation is that property separation occurs simultaneously in two different ways: (1) by creating a new legal entity, (2) by creating a limited proprietary right.

Recently, in the context of such legal entities, the topic of legal separation of property (asset partitioning) was raised by E. A. Sukhanov, who pointed out the close connection of legal personality with property rights, manifested in the fact that the whole point of the construction of a legal entity is to transfer ownership from the founders to the entity they established ^{[6, pp. 10-11]}.

Within the framework of this work, using the categories of protective and confirmatory property separation for analysis, it is proposed to substantiate two interrelated statements: (1) in Russian law there is no need to use the construction of limited property rights to achieve the goals for which the right of operational management and economic management is currently used; (2) creating an organizational and legal form for a legal entity, the rule of law is able to establish property separation in any format of degree and complexity, without additional use of the construction of limited property rights.

The research used general scientific methods of cognition: analysis, synthesis, comparison, modeling. In addition, private scientific methods were used: normative, comparative historical, as well as the method of economic analysis of law.

§ 1. Historical background and current status of legal entities of non-owners

The analysis of this problem cannot be carried out without understanding the reasons for the emergence of this institution and the reasons why such structures persist to the present. It is generally recognized in the doctrine that the formal absence of legal personality of state-owned enterprises in the Soviet period was ideological in nature and aimed to formally consolidate state ownership of the means of production: "Until the mid-30s, the concept of ownership divided by the state (authorities and management) and an enterprise (economic state body) remained the most popular. After the adoption of the 1936 Constitution, for well-known reasons, free-spirited discussions around the rights of the trust subsided. Fruitful scientific and practical disputes were replaced by the politically one-line slogan "The state is the sole and only owner of all state property" ^{[7, pp. 64-65]}."

Despite such an unambiguous political attitude, there was also a need to separate individual parts of state property for their relatively independent participation in turnover and effective management. In the 1930s and 1960s, such a need was satisfied at the expense of actual property isolation without any definite solution at the level of positive law ^{[8, pp. 258-263; 9, p. 55]}. Since 1964, the structure of operational management has been legally fixed, which was the fruit of the work of A.V. Venediktov, who proposed it in the context of denying the designs of capitalist countries, in which there was already a de facto solution to this problem through the recognition of split ownership ^{[10, p. 323]}.

V. A. Boldyrev also notes that the decision to retain formal state ownership of the property of enterprises could also be related to the purposes of criminal law – crimes against state property were more serious ^{[11, pp. 30-31]}.

It seems to us that in this case, the legal separation of state property was such a means that allowed enterprises to achieve sufficient independence in a way that did not contradict ideological and political attitudes. Recognition of legal entities, granting legal entities ownership rights, simple separation of property (actual recognition of legal personality, without formal recognition) are various techniques of legal technique that, being interchangeable, can be alternatively used depending on the political and cultural framework in which the legislator is located. At the same time, from the point of view of theoretical jurisprudence and legal technique, such decisions may be unreasonable and suboptimal.

The question remains, why does such double property separation persist in modern Russian law, despite the fact that the existing political regime does not deny the right to private property? V. A. Boldyrev offers the following justification: initially, in the transition period from a planned to a market economy, the preservation of non-proprietary legal entities served as a means of protection from uncontrolled and widespread privatization, and after This was due to the fact that in the social sphere these subjects cannot be replaced by something else ^{[11, pp. 53-54]}. The latter thesis is also used by other authors as an argument in favor of preserving non-proprietary legal entities ^{[12, p. 107]}.

Such a justification does not seem entirely convincing, since the abolition of non-compliant legal entities does not mean the withdrawal of the state from the relevant spheres and production chains and the transition from public to private financing. Moreover, even with the current regulation, some researchers argue that in reality the above-mentioned legal entities have full-fledged property rights ^[13], which, in our opinion, indicates a gap between positive law and the current level of development of theoretical jurisprudence.

The rejection of non-proprietary legal entities can be a simple transition from one civil law structure that formalizes legal separation to another, devoid of outdated add-ons and facilitating the understanding and description of law, without any change in the essence of the relationship. At the moment, there are positive changes associated with the gradual withdrawal of unitary enterprises from circulation, so in 2019 a law was adopted prescribing the liquidation or reorganization of enterprises operating in competitive markets (Federal Law No. 485-FZ of December 27, 2019 "On Amendments to the Federal Law "On State and Municipal Unitary Enterprises" and Federal Law "On Protection of Competition"").

At the same time, we can assume that the incomplete elimination of legal entities that are not owners of their property from circulation is due to the desire of the legislator to preserve the status quo in terms of the property isolation of such legal entities, since the nature of such isolation is very different from the isolation of ordinary legal entities, owners of their property, and therefore cannot be achieved without the construction of limited proprietary rights. Next, it will be explained why this is possible and quite easily feasible.

§ 2. Property isolation of legal entities of non-owners

Confirmatory property separation in unitary enterprises and institutions is arranged as simply as possible – institutions and unitary enterprises are not responsible for the obligations of the owner of their property (clause 3 of Article 123.22 of the Civil Code of the Russian Federation), which means a strong form of confirmatory property separation. In general, this is similar to the responsibility of business entities, but with an important feature – the creditors of the owner do not only have direct claims to the property of the entity, but also there is no mechanism for foreclosing on the rights of the owner in relation to such an entity (unlike business entities, where shares/shares can be foreclosed). This feature leads to the emergence of a super-strong confirmatory isolation in the terminology of G. Hansman and R. Kraakman ^{[1, p. 395]}.

This degree of confirmatory property separation is justified by the fact that, as a rule, such legal entities either do not represent interest to creditors as a subject of foreclosure, or operate in socially significant areas, which is why their falling under the control of the owner's creditors or the possibility of foreclosure on their property are extremely undesirable from the point of view of law and order.

However, the need for an increased degree of confirmatory separation does not in any way explain the need for additional separation of property through a limited proprietary right, but rather, on the contrary, contradicts it. Obviously, the unavailability of the property of a unitary enterprise or institution to the creditors of the owner would not require any additional explanation if the owner of the property was the institution or enterprise itself.

Protective property separation. In relation to enterprises, as a general rule, there is a strong protective isolation (the owner of the property is not responsible for the debts of the enterprise) with two exceptions: (1) cases where the insolvency is caused by the actions of the owner, (2) subsidiary liability of the owner for debts of state-owned enterprises (clause 6 of Article 113 of the Civil Code of the Russian Federation). This type of protective isolation is generally similar to the isolation of business entities.

In relation to institutions, protective isolation is more complicated and depends primarily on the type of institution. A state-owned institution is responsible only with the funds at its disposal, and the owner of the property bears subsidiary responsibility for its obligations (clause 5 of Article 123.22 of the Civil Code of the Russian Federation). Thus, there is no protective separation, although the main property of such an institution is actually protected by immunity from foreclosure and in this sense is isolated.

A budgetary institution is also responsible for other property, except for especially valuable movable property, if it was transferred by the owner or acquired at the expense of funds allocated by the owner, as well as real estate, regardless of what it was acquired at. The owner also bears subsidiary liability for obligations related to causing harm to citizens, as well as for obligations from a public contract during liquidation (clause 5 of Article 123.22 of the Civil Code of the Russian Federation). An autonomous institution is responsible in almost the same way, but, in addition, it is also responsible for real estate that was not acquired at the expense of funds provided by the owner (clause 6 of Article 123.22 of the Civil Code of the Russian Federation). Thus, in budgetary and autonomous institutions there is a strong protective isolation (with some exceptions), as well as full immunity in relation to certain property.

The existing degree of protective isolation can be achieved without using the construction of limited proprietary rights, since the presence/absence of subsidiary liability of the founder is also possible when securing property on the right of ownership. Otherwise, the nature of property isolation is more similar to executive immunity – a direct prescription of the law that certain property cannot be foreclosed on. This leads to the idea that if the availability of property to creditors is determined not by the fact that the property is assigned to the essence, and not by the content of the right itself, on which it is fixed, then the right of operational management and economic management as a legal institution does not really make any sense, since the same immunities from foreclosure can be established for property belonging to an institution by right of ownership, as, for example, happens in accordance with Article 446 of the Civil Procedure Code of the Russian Federation.

It could be assumed that the establishment of immunity through a certain limited proprietary right serves the convenience of describing such immunity, but this is not the case, since the amount of property falling under immunity is determined not by the type of law, but by the type of legal entity and the type of specific property in relation to each of the types of legal entities.

A specific regime for the disposal of property. Since property separation can also manifest itself in a specific order of ownership, use and disposal of certain property, this aspect must also be taken into account. Indeed, in terms of the disposal of property that is under the right of operational management or economic management, such a specific procedure has been established.

With regard to unitary enterprises possessing property on the right of economic management, the following procedure is established: in accordance with Article 18 of Federal Law No. 161-FZ dated 11/14/2002 "On State and Municipal Unitary Enterprises" (hereinafter – "FZ-161"), the disposal of movable property, as a general rule, takes place without the consent of the owner, and disposal of real estate only with the consent of the owner. At the same time, the company's charter may establish additional restrictions on transactions without the consent of the owner. A state-owned enterprise that possesses property on the right of operational management is even more limited in the disposal of property and has the right to independently dispose only of the products it produces (paragraph 1 of Article 19 of the Federal Law-161).

The situation is similar for institutions for which property is assigned the right of operational management. As a general rule, the procedure for disposing of property is as follows: (1) state-owned institutions are not entitled to dispose of any property without the consent of the owner (paragraph 4 of Article 298 of the Civil Code of the Russian Federation), (2) autonomous and budgetary institutions are not entitled to dispose of particularly valuable movable property assigned to them by the owner or acquired at the expense of funds allocated to them by the owner for the purchase of such property, as well as real estate (clauses 2 and 3 of Article 298 of the Civil Code of the Russian Federation).

Thus, the existence of the right of economic management and operational management also does not in itself give anything in terms of the regime of disposal of property, since freedom in the disposal of one or another type of property is determined not by the law on which it is assigned to an enterprise or institution, but by the type of legal entity and the type of specific property.

Therefore, in our opinion, the positions of those authors who write that the right of operational management and the right of economic management differ in a set of powers conferred on the rightholder can be considered incorrect ^{[14; 15]}. Even at the level of legal definitions, it is impossible to determine how these rights differ in content, since in this part there is simply a reference to the scope established by law. All the differences established in Article 296 of the Civil Code of the Russian Federation concerning operational management regarding the disposal of any property by a subject of this right only with the consent of the owner are in fact blurred by special provisions of the law, which nevertheless allow disposal without the consent of the owner. Strictly speaking, the definitions proposed in the Civil Code are not so much definitions of the relevant rights as they determine the scope of legal capacity of the enterprises and institutions themselves, acting by default.

The different scope of powers within the framework of one right, which depends on the type of property and the type of institution/enterprise, in our opinion, does not allow us to assert that certain independent content is inherent in these types of property rights. Moreover, if we follow the logic of the legislator, then the content of these rights is determined by law, namely articles concerning the procedure for disposing of this property (there are simply no other options), for example, with regard to the right of operational management of state-owned enterprises, this is Article 19 161-FZ, which states which transactions require the consent of the owner, but paragraph 1 of this article states that the charter may provide for consent to other transactions. Article 18 of the same Law contains a similar rule in relation to economic management. If we proceed from the fact that the content of these rights, named at the level of the law as real, is determined by the freedom to dispose of property without the consent of the owner, it turns out that the scope of such rights can be determined by the charter and make the right of economic management equal in content to operational management or even narrower.

§ 3. Separation of property by means of a legal entity and a limited proprietary right

The most common methods of legal separation of property are the use of the construction of a legal entity and the use of a limited proprietary right (for example, a pledge). These methods can be used separately from each other to achieve different goals. They can also be used together, but only if they are used sequentially and each of these methods has its own goals and separates its own amount of property. For example, having isolated the property of a legal entity, it is possible to isolate a part of it inside this isolated property with the help of a pledge. The pledge of the property of a legal entity allows you to set priorities among a group of creditors of a legal entity in relation to separate property.

Separation in two ways at the same time to form one separate mass does not make any sense, as it was shown by the example of legal entities that are not owners of their property. By creating any kind of organizational and legal form, the rule of law has the full opportunity to establish any kind and degree of property isolation of such property simply by virtue of the prescription of the law.

It is also necessary to pay attention to the fact that, having complete freedom in establishing the property isolation of certain types of legal entities, the rule of law should ensure that the regulation of relations is understandable for all participants in the turnover, so that creditors understand what property they have the right to claim when entering into a relationship with such a person. An indication of the right of operational management and economic management, as shown above, does not give such an understanding in any way. Such an understanding gives an indication of a specific organizational and legal form in general, but due to the complexity and high reference of regulation to special acts and exceptions, it complicates the process of such understanding.

Conclusion

The current degree of confirmatory separation in relation to State-owned enterprises and institutions, firstly, can be easily achieved without the use of limited proprietary rights, and secondly, theoretically it could be best justified if it were recognized that institutions and enterprises are the owners of such property. The availability of the founder's property (protective isolation) to creditors of the enterprise / institution is also in no way related to the existence of a limited proprietary right.

The separation of the property of legal entities that are not owners of their property, in terms of the inaccessibility of certain property of such persons to its creditors, occurs by virtue of a direct prescription of the law: property that formally has the same status – fixed on the right of operational management or economic management – can be both accessible to creditors and inaccessible to them depending on depending on the following circumstances: (1) the type of institution to which it is assigned, (2) whether it is movable/immovable, (3) whether it is particularly valuable, (4) at what expense it was acquired. Such separation, in fact, represents executive immunity, which, as a rule, is established without the use of any limited proprietary rights.

Thus, it can be confidently argued that the existence of the right of economic management and operational management in itself does not provide anything for the purposes of property separation, either in terms of determining the range of property available to creditors of the person who possesses it, or in a broader sense in terms of the legal regime as such. They can be replaced by the right of ownership without any essential change in the existing approach to regulation, including with the preservation of immunity from collection and the procedure for disposing of this property with the consent of the owner in cases established by law and the charter.

Therefore, it can be considered that the rights of operational management and economic management in their modern embodiment are a legislative disadvantage, which, in terms of the effect of real rights to property separation, does not differ from ordinary legal entities – owners of their property – in anything other than special legislative restrictions that are not actually related to real rights.

In addition, this state of affairs demonstrates that the separation of property through a legal entity and a limited proprietary right makes sense only when it occurs sequentially to isolate a part of the property within another separate property, and not when two methods are used to isolate the same amount of property, since the construction of a legal entity itself it is sufficient to establish any kind of separation of one volume of property.