Consequences of non-payment of a share in the authorized capital of a limited liability company at its establishment

Bosyk Ol'ga Igorevna ORCID: 0000-0002-1392-4785 Senior Lecturer; Department of Civil Law and Labor Law; Surgut State University Room 724, Lenin str., 1, Surgut, Khanty-Mansiysk Autonomous Okrug, 628415, Russia bosykolga@yandex.ru Other publications by this author

I. Introduction

The legislator defines the concept of a limited liability company through the presence of authorized capital, the size and procedure for the formation of which are necessarily indicated in the decision on the establishment of a legal entity (Article 87 of the Civil Code of the Russian Federation, Article 2 of the Law On LLC). The state imperatively sets the minimum size of the authorized capital of an LLC, depending on the significance of the potential entrepreneurial activity of the company for the country and the interests of a wide range of people. The founders of the company wishing to carry out activities in the banking sector must, within a month from the date of receipt of the notification of state registration, fully pay the authorized capital. The minimum amount of the authorized capital is determined by the license, but cannot be less than ninety million rubles (Article 11 of Federal Law No. 395-1 dated 02.12.1990 "On Banks and Banking activities"). Violation of mandatory requirements for payment of the authorized capital of an LLC in the banking sector of the economy entails compulsory liquidation at the initiative of the Bank of Russia ^{[1, p.34]}. The above consequences are due to the special importance of this type of business activity for the state and potential risks for creditors. Revocation of the bank's license leads to the return of funds to individuals through a special state deposit insurance system (Article 1 of Federal Law No. 177-FZ dated December 23, 2003 "On Deposit Insurance in Banks of the Russian Federation"). Credit organizations with a universal or basic license can participate in this system based on a decision of the Bank of Russia, which is accepted if there is a fully paid-up authorized capital of the LLC ^{[2, p.45]}. Consequently, the consequences of non-payment of a share in the authorized capital of an LLC wishing to engage in banking activities are public.

Less stringent requirements for the size of the authorized capital and the procedure for its formation are provided for LLC in the field of private security activities in a special federal law. The minimum amount of authorized capital for a private security organization is one hundred thousand rubles, and for an LLC wishing to provide armed security services – two hundred and fifty rubles (paragraph 1 of paragraph 151 of the Law of the Russian Federation dated 03/11/1992 No. 2487-1 "On private detective and security activities in the Russian Federation"). The absence of paid-up authorized capital in the minimum amount entails refusal to obtain a license to carry out activities ^{[3, p.42]}. Thus, the consequence of non-payment of a share in the authorized capital is the inability to carry out entrepreneurial activities, since such LLC have a special legal status.

For most LLC companies, there are two requirements for the authorized capital: the minimum amount is ten thousand rubles and the payment period is four months from the date of state registration (paragraph 1 of Article 16 of the Law on LLC). The consequence of non-payment of a share in the authorized capital of an LLC is the loss of a participant's legal status with the transfer of his share to the company (clause 3 of Article 15, clause 3 of Article 16 of the Law on LLC). The author previously addressed the problem of the grounds and consequences of the appearance of shares belonging to a limited liability company ^{[4, p. 39]}. The topic of paying shares in the authorized capital of an LLC is so extensive that it is impossible to analyze problematic aspects in one article. The provisions of the LLC Law on the consequences of non-payment of shares in the authorized capital of an LLC at its establishment require additional study, explanation and evaluation. The calling of the science of civil law to help in the analysis of various aspects of public life is mandatory ^{[5, p.12]}.

The theoretical understanding of the consequences of non-payment of shares in the authorized capital in science is considered as a derivative of the problem of the concept of authorized capital ^{[6, p.35]} or as a prerequisite for the emergence of the participant's right to participate ^{[7, p.15]}, or as a prerequisite for the alienation of a share in the authorized capital ^{[8, p.10]}.

The problem under study has an independent significance, which is confirmed by law enforcement practice when courts are forced to consider disputes about the loss of participant status (Resolution of the Arbitration Court of the Ural District dated 04.12.2023 No. F09-7588/23 in case No. A07-27893/2022), on its exclusion from the company due to non-payment of a share (Resolution of the Arbitration Court of the North Caucasus District dated 09/29/2022 No. F08-6884/2022 in case No. A25-2120/2020), on coercion to perform duties in kind (Resolution of the Federal Antimonopoly Service of the Far Eastern District dated 04/01/2013 No. F03-755/2013 in case No. A04-7148/2012).

The purpose of the study is to develop and construct new theoretical provisions on the consequences of non-payment of a share in the authorized capital of a limited liability company at its establishment. To achieve this goal, the following tasks are formulated: to identify the importance of the formation of the company's authorized capital at its establishment, to establish a causal relationship between the fulfillment of the obligation to pay a share in the authorized capital of an LLC and the loss of participant status, to determine the legal nature of liability for violation of the constituent obligation. Research hypothesis: non-payment of a share in the authorized capital of a limited liability company at its establishment entails the involvement of the founder in pre-corporate liability.

II. Methodological basis of the study

The methodological basis of the study was formed by classical methods of civil law: dogmatic, historical, comparative legal. The dogmatic method made it possible to understand and explain the meaning of the norms of law on the consequences of non-payment of a share in the authorized capital of an LLC at an institution. O. S. Ioffe argued that the importance of civilistic research lies not in artificially changing the current norm, but in understanding its actual meaning ^{[9, p.6]}. The importance of dogmatics for civil law is difficult to overestimate due to the fact that it allows for a detailed analysis of a complex rule of law.

The historical method was used in the study of the formation of norms on the consequences of non-payment of a share in the authorized capital of an LLC at its establishment, taking into account current events in the country. In 1990, in order to increase the interest of the labor collectives of state–owned enterprises in the transformation of business companies, the state revived a limited liability company as a form of entrepreneurial activity (paragraph 4 of the Resolution of the Council of Ministers of the USSR dated 06/19/1990 No. 590 "On Approval of the Regulations on Joint-Stock Companies and Limited Liability Companies and Regulations on Securities" (hereinafter - the Resolution of the Council of Ministers of the USSR No. 590). The minimum amount of the authorized capital was 50,000 rubles, of which 35,000 rubles were paid before the state registration of the company. The maximum period for full payment of the authorized capital was one year, after which, in accordance with the general rule, a legal penalty of ten percent per annum was applied from the remaining amount (paragraph 66 of the Resolution of the Council of Ministers of the USSR dated 06/19/1990 No. 590). The legislator was guided by the economic interest in the form of the emergence of a new taxpayer – a legal entity and a paternalistic approach to potential participants in society. The phrase "authorized capital" demonstrated that the state understood it as the initial property basis of the organization's activities.

This concept was originally developed in the continental European legal culture under the name "solid capital" as a protective buffer between the claims of creditors, business owners and management ^{[10, p.5]}. In 2009, Jerome Werner criticized the bill on reducing the authorized capital of Gesellschaft mit beschränkter Haftung (hereinafter referred to as GmbH) (an analogue of a domestic LLC) from twenty–five thousand euros to ten and the appearance of Haftungsbeschränkt (hereinafter referred to as mini-GmbH) for registration, which is enough for 1 euro. The main subject of criticism was the potential insecurity of creditors in the event of insufficient authorized capital to meet their claims ^{[11, p.149]}. The search for a direction of development during the formation of a market economy led the domestic legislator to use the concept of a foreign legal order.

The rule on a legal penalty in case of non-payment of a share in the authorized fund of an LLC at its establishment was a consequence of the contractual nature of the decision to establish a legal entity. Due to the fact that the predecessors of the LLC were partnerships, the activities of which were determined by the terms of the partnership agreement. The partnership agreement has long been known to domestic civil legislation, which is due to its purpose – to unite the capitals and forces of several persons to achieve a common economic goal since merchant times ^{[12, p.90]}. In 1912, V. V. Rosenberg formulated the prerequisites for the creation of limited liability partnerships based on current norms and legal tradition. The scientist believed that a share in the partnership is provided after making the main part of the contribution to the fixed capital of the organization ^{[13, p.6]}. The understanding of a share in a partnership at the beginning of the twentieth century and today differs, but the essence remains the same: failure to fulfill the obligation to pay for a share in the authorized capital entails deprivation of the right to manage a legal entity.

The Russian model of a partnership agreement has an analogue in German law - a joint activity agreement (partnership agreement). German corporate law provides for two types of such agreements: contract joint venture and equity joint venture ^{[14, p.6]}.

The first option is designed to create an enterprise for a certain period of time, and the second is to acquire shares in other LLC companies or create it from scratch. Both versions of partnership agreements should contain conditions on the procedure for financing and collective investment of the company's activities ^{[15, p.15]}. Despite the differences in the names of such agreements in Russia and Germany, they provide for a general rule: failure to fulfill obligations to finance an LLC at the stage of establishment entails property liability.

With the adoption of the first part of the Civil Code of the Russian Federation as amended on 11/30/1994 No. 51 – FZ, the rule on the application of a legal penalty to the founder who violated the obligation to pay a share in the authorized capital became invalid. An LLC participant who did not fully contribute to the authorized capital became a joint debtor within the value of the unpaid part. The maximum payment period remained the same – one year, but if after the specified period the authorized capital was not formed, then the company had to reduce it or liquidate it (Article 90 of the Civil Code of the Russian Federation (Part one) dated 11/30/1994 No. 51 – FZ).

In 2009, the rules on the consequences of non–payment of a share in the authorized capital of an LLC at its establishment were changed on the basis of the provisions of Federal Law No. 312 - FZ dated 12/30/2008 "On Amendments to Part One of the Civil Code of the Russian Federation and Certain Legislative Acts of the Russian Federation" and Federal Law No. 129 – FZ dated 05.05.2014 "On Amendments to Article 90 of Part One of the Civil Code of the Russian Federation and Article 16 of the Federal Law "On Limited Liability Companies" (hereinafter – Law No. 129 – FZ), as amended, are in force to this day. The founders are obliged to fully pay their share in the authorized capital of the LLC within four months from the date of state registration, otherwise the rights to this share will pass to the company. A penalty for non-fulfillment of the obligation to pay for a share in the authorized capital is applied if there are appropriate conditions in the agreement on the establishment of the company (Article 16 of the Law on LLC). The provision on the loss of the status of a participant in an LLC that has not paid its share in the authorized capital was the result of the consolidation of the regulatory rule that civil law applies to corporate relations (paragraph 1 of Article 2 of the Civil Code of the Russian Federation). The historical method made it possible to explain the change in the legislator's understanding of the payment of a share in the authorized capital of an LLC at its establishment from the property basis of the company's activities to an instrument for regulating intra-corporate relations.

The comparative legal method was used to analyze the norms of Russian and German legislation. The choice of the country of foreign law was determined by the history of the development of civil law and observance of the traditions of Roman law. This method has a positive impact on domestic science, provided that all aspects and features of foreign experience are taken into account ^{[16, p.184]}.

III. The main part

The everyday desire of the subject to create an LLC turns into a legal one at a meeting of the founders of the company, at which the legal fate of the organization is determined. The results of the constituent assembly are formalized by a decision on the establishment, which, among other things, must contain information on the procedure and timing of the formation of the authorized capital (Article 50.1 of the Civil Code of the Russian Federation, Article 11 of the Law on LLC).

The founders may provide for a penalty for non–payment of a share in the authorized capital of an LLC in the establishment agreement (hereinafter referred to as the agreement), which has an independent meaning. The legislator, based on the method of authorization, grants the founders the right to provide in the establishment agreement for property liability for non-payment of a share in the authorized capital of an LLC at its establishment (paragraph 3 of Article 16 of the Law on LLC). There is a direct causal relationship between the contribution to the authorized capital by the founder and the receipt of the right to participate in the management of the company. Therefore, payment of a share in the authorized capital of an LLC at its establishment is a transaction, since it leads to the emergence of the rights and obligations of a participant after the state registration of the company. The establishment agreement has an obligatory pre–corporate character, which is due to the presence of a creditor in the form of a future corporation and debtors - founders. The main purpose of the agreement is to obtain the right to participate in the authorized capital of the company at its establishment, provided that the obligation to pay shares is properly fulfilled.

The legal status of a participant arises as a result of the provision of a state service – registration of a legal entity, and not after the conclusion of an agreement on the establishment of an LLC (Article 12 of the Order of the Federal Tax Service of Russia dated 01/3/2020 No. MMV-7-14/12@ "On Approval of the Administrative Regulations for the Provision by the Federal Tax Service of State Services for the State Registration of Legal Entities, Individuals as Individual Entrepreneurs and peasant (farm) farms"). After the entry on the establishment of the company appears in the state register, corporate relations arise, and before that, pre–corporate relations, which are subject to civil legislation. The property to be contributed to the authorized capital belongs to the founders on the basis of property rights before the state registration of the company.

The establishment agreement is similar to a purchase and sale agreement, the main purpose of which is to streamline the relationship between the seller and the buyer since the time of Ancient Rome. Mancipatio is the oldest form of purchase and sale (in cash) and a method of acquiring property rights ^{[17, p.101]}. In the case under consideration, the subject is not a thing in its narrow sense, but the right of participation, through which the rights and obligations of an LLC participant are realized, like a buyer (figurative comparison).

L. M. Dmitrieva believes that failure by a participant to fulfill the obligation to form the authorized capital leads to the automatic transfer of his share to the company with the loss of a special legal status ^{[18, p.36]}. The author artificially combined two consequences into one, adding an automatic aspect that is not peculiar to the domestic system of state registration. The first consequence is private law and is expressed in the fact that participants do not perceive a person who has not fulfilled the obligation to form the authorized capital as equal. The second consequence is public law, which consists in the need for state registration of changes in the composition of participants. The company knows that the founder has not fulfilled the obligation to form the authorized capital, but not third parties who rely on information from the state register.

The separation of the consequences of non-payment of a share in the authorized capital of an LLC when it is established in private and public spheres is necessary to resolve corporate conflicts. The behavior of participants who for ten years perceived a person as a participant, but in case of disagreements on the management of the company require proof of payment of a share in the authorized capital, is recognized as unfair (Resolution of the Fourth Arbitration Court of Appeal dated 09/19/2018 No. 04AP-3064/2018 in case No. A78-17696/2017). When resolving the case, it was taken into account that the obligation to keep documents on payment of a share in the authorized capital of an LLC at its establishment is not imposed on either the participant or the company, and after a certain period of time they may be lost. In such disputes, courts should assess the trust relations between the parties preceding the conflict (Resolution of the Arbitration Court of the West Siberian District dated 30.06.2021 No. F04 -2318/2021 in case No. A46-15151/2020).

Since 1892, the Gesellschaft mit beschränkter Haftung (hereinafter referred to as the German LLC Law) has been in force in Germany, which provides for the formation of a new organizational and legal form for German legislation - a limited liability company (abbreviated as GmbH) ^{[19, p.3]}. On June 26, 2008, the Law on modernization of the legislation on LLC and anti-abuse (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, MoMiG), the purpose of which was to simplify and transparency the procedure for establishing LLC ^{[23, p.6]}. The authorized capital (Stammkapital) is paid in cash (Bareinzahlung), property (Sacheinlage) or in a mixed manner ^{[20, p.115]}. The founders conclude a partnership agreement among themselves, in which, among other things, they agree on the procedure and conditions for the formation of the authorized capital of a classic German LLC (§8 German LLC Law, Article 22 of The German commercial code ^{[21, p.60]}. The general rule states that half of the minimum amount of the authorized capital must be paid on the date of state registration, and the remaining part – within a year after the company receives legal capacity.

The founders can tighten the regulatory requirements in the partnership agreement. For violation of the procedure for the formation of the authorized capital, property liability is applied to the founders: a legal penalty is paid for each day of delay. The partnership agreement may provide for a penalty, which is applied to the violator on an equal basis with the legal one, in order to encourage him to fulfill his obligations in the interests of society ^{[22, p.165]}. Such a founder, the manager of an LLC, is provided with a grace period of one month, during which it is necessary to make a contribution to the authorized capital and pay legal and contractual penalties. If the obligation is not fulfilled after the specified period, the person is excluded from the LLC due to the loss of rights to a share in the company. The participants of the LLC are obliged to pay the remaining part of the authorized capital in a proportional ratio, and then have the right to demand money from the violator in a recourse manner (§ 21 of the German LLC Law) ^{[23, p.12]}. The peculiarity of the German LLC model is to attract a limited amount of capital from a narrow circle of potential partners who are interested in personal cooperation and are ready to bear joint responsibility for each other ^{[24, p.12]}.

The partnership agreement developed in pre-revolutionary Russia was developed in European continental law, which follows from the analysis of German legislation and doctrine. In Germany, greater importance is attached to the property needs of an LLC, which is due to the capitalist rules of entrepreneurial behavior. In Russia, priority is given to trusting relationships and partnerships, which is expressed in the greater importance of actions and behavior, rather than in the presence of written evidence of payment of shares in the authorized capital. This approach is a consequence of the historically established identity of the domestic LLC.

IV. The final part

In the course of the conducted research, the following theoretical provisions were developed and constructed:

• The formation of the authorized capital of a limited liability company at its establishment is of private and public importance.
• A direct causal relationship has been established between the payment of a share in the authorized capital by the founder and the receipt of the right to participate in the management of the LLC.
• The consequence of non-payment of a share in the authorized capital of the company at its establishment is the onset of pre-corporate liability, which is divided into property (application of penalties in the form of contractual penalties to the violator) and non-property (disapproval of the behavior of the founder by other participants).
• The responsibility of the founder for violating the obligation to pay for a share in the authorized capital is of a complex legal nature.
• In Russia, the term "partnership" means not only a contract, but also a certain level of trust, the value of actions and behavior, which is due to the historical identity of the country. In Germany, greater importance is attached to the property needs of an LLC, which is due to the capitalist rules of entrepreneurial behavior.