DRAFT

CIVIL CODE

OF THE REPUBLIC OF TAJIKISTAN

First Part

Dushanbe Ö 1998

DIVISION I

GENERAL PROVISIONS

SUBDIVISION 1

BASIC PROVISIONS

      CHAPTER 1. CIVIL LEGISLATION

Article 1.   Relations Regulated by Civil Legislation

      1. Civil legislation determines the legal position of the participants in civil commerce, the grounds for the origin and the procedure for realization of the right of ownership and other rights in things, of rights to the results of intellectual activity, regulates contractual and other obligations and also other property relations and related personal non-property relations based upon equality, autonomy of will and the property independence of the participants.

      Family relations, labor relation and relations concerning the use of natural resources and environmental protection that comply with the characteristics indicated in the paragraph above shall be regulated by civil legislation unless otherwise provided by the legislation on marriage and family, labor, land and other special legislation.

      2. Citizens, legal persons, state and administrative and territorial units are the participants in relations regulated by civil legislation. 

      The rules established by civil legislation shall be applied to relations with the participation of foreign citizens, persons without citizenship, and foreign legal persons, unless otherwise provided by a statute.

      3. Civil legislation regulates the relations between persons engaging in entrepreneurial activity or with their participation, proceeding from the position that entrepreneurial activity is independent activity done at one's own risk directed at the systematic receipt of profit from the use of property, sale of goods, performance of work, or rendering of service by persons registered in this capacity by the procedure established by a statute.

      4. Civil legislation shall not be applied to property relations based on administrative or other authoritative subordination of one party to another, unless otherwise provided by legislation.

      5. Relations connected with exercising and protection of inalienable rights and freedoms of man and other nonmaterial values (personal non-property relations which are not connected with property relations) shall be protected by civil legislation unless it follows otherwise from the nature of these relations.

      Article 2.   Civil Law Acts

      1. Civil legislation consists of the present Code, other statutes and legal acts), regulating the relations indicated in Paragraphs 1 and 5 of Article 1 of the present Code.

      Norms of civil law contained in other statutes and legal acts must conform to the present Code.

      2. Ministries, departments and other state agencies may issue acts regulating civil relations in the instances and within the limits provided by the present Code, other statutes, and other legal acts.

      Article 3.   Basic Principles of Civil Legislation

      1. Civil legislation is based on the principles of the inviolability of ownership, freedom of contract, the impermissibility of arbitrary interference by anyone in private affairs, the necessity of the unhindered realization of civil law rights, ensuring the restoration of violated rights and judicial protection of them.

      2. Citizens (natural persons) and legal persons shall obtain and exercise their civil law rights by their own will and in their own interest. They shall be free in the establishment of their rights and duties on the basis of contract and in determining any terms of contract not contradictory to legislation.

      3. Civil law rights may be limited on the basis of a statute for the purposes of defending the morals, health, rights, and legal interests of other persons, of ensuring the defense of the country, the security of the state and environmental protection.

      Article 4.   The Effect of Civil Legislation in Time

      1. Acts of civil legislation do not have retroactive force and shall be applied to relations that have arisen after they came into effect.

      The effect of a statute shall extend to relations that arose before it went into effect only in the cases when this is directly provided by a statute.

      2. With respect to relations that arose before an act of civil legislation was put in effect, the act shall be applied to rights and duties that arose after it was put into effect with the exception of relations of parties under a contract concluded before the act of civil legislation was put in effect.

      If after the conclusion of a contract a statute was adopted that establishes rules which are obligatory for the parties other than those that were in effect at the time of the conclusion of a contract, the terms of a concluded contract shall remain in force except for cases when a statute establishes that its effect extends to the relations that arose out of earlier concluded contracts.

      Article 5.   Customs of Trade

      1. A custom of trade is a rule of conduct that has taken form and is widely applied in any area of entrepreneurial activity and is not provided for by legislation, regardless of whether it has been fixed in any document.

      2. Customs of trade contradicting provisions of legislation or a contract either of which are obligatory for participants in the respective relation shall not be applied.

      Article 6.   Application of Civil Legislation by Analogy

      1. In cases when the relations indicated in Paragraphs 1 and 5 of Article 1 of the present Code are not directly regulated by legislation or agreement of the parties and there is no custom of trade applicable to them, then civil legislation regulating similar relations (analogy of statute) shall be applied to such relations, if it does not contradict their nature.

      2. In case of impossibility of use of analogy of statute, the rights and duties of the parties shall be determined proceeding from the general principles and sense of civil legislation (analogy of law) and the requirements of good faith, reasonableness, and justice.

      3. The application by analogy of norms restricting civil law rights and establishing liability shall not be allowed.

      Article 7.   Civil Legislation and the Rules of International Law

      1. Generally recognized principles and rules of international law and the international agreements of the Republic of Tajikistan are, in accordance with the Constitution of the Republic of Tajikistan, a constituent part of the legal system of the Republic of Tajikistan.

      2. International treaties of the Repblic of Tajikistan shall be applied to the relations indicated in Paragraphs 1 and 5 of Article 1 of the present Code directly, except in cases when, from the international agreement, it follows that the issuance of a domestic state act is required for its application.

      If an international treaty of the Republic of Tajikistan has established rules other than those that are provided by civil legislation, the rules of the international treaty shall be applied.

CHAPTER 2.

THE ORIGIN OF CIVIL LAW RIGHTS AND DUTIES, THE EXERCISE OF CIVIL LAW RIGHTS AND PERFORMANCE OF CIVIL LAW DUTIES, PROTECTION OF CIVIL LAW RIGHTS

      Article 8.   Grounds for the Origin of Civil Law Rights and Duties

      1. Civil law rights and duties arise from grounds provided by a statute or other legal acts, and also from the activities of citizens and legal persons, which, although not covered by a statute or such acts, nevertheless, by the effect of the general principles and sense of civil legislation, engender civil law rights and duties.

      In accordance with this, civil law rights and duties arise:

      a) from contracts and other transactions provided for by a statute and also from contracts and other transactions that, although not provided for by a statute, do not contradict it;

      b) from acts of state agencies and agencies of local self-government that are provided for by a statute as a ground for the arising of civil law rights and duties;

      c) from a judicial decision establishing civil-law rights and duties;

      d) as a result of obtaining property on bases permitted by a statute;

      e) as a result of the creation of works of science, literature, or art, of inventions or other results of intellectual activity;

      f) as a result of causing harm to another person;

      j) as the result of unjust enrichment;

      i) as the result of other actions of citizens and legal persons;

      h) as the result of events with which a statute or other legal act connects the occurrence of civil-law consequences.

      2. Rights to property subject to state registration arise from the time of registration of the respective rights to it, unless otherwise established by a statute.

      Article 9.   Exercise of Civil Law Rights

      1. Citizens and legal persons may exercise at their discretion the civil law rights belonging to them.

      2. Failure by citizens or legal persons to exercise rights belonging to them shall not entail termination of these rights, with the exception of cases provided by a statute.

      Article 10. Limits of Exercise of Civil Law Rights

      1. Actions of citizens and legal persons taken exclusively with the intention to cause harm to another person are not allowed, nor is abuse of a legal right allowed in other forms.

      2. Use of civil law rights for the purpose of restricting competition is not allowed, nor is abuse of a dominant position on the market.

      3. In case of failure to observe the requirements provided by Paragraph 1 and 2 of the present Article, the court may refuse the person protection of the right belonging to him.

      4. A person who abuses the right is obliged to reinstate the position of a person suffered from the abuse and compensate him for caused damages.

      5. In cases when a statute places protection of civil law rights in dependence upon whether these rights were exercised reasonably and in good faith, the reasonableness and the good faith of the participants in civil legal relations shall be presumed.

      6. The exercise of civil law right must not violate the rights and interests of other subjects of law and must not cause any damage to the environment.

      7. Citizens and legal persons must exercise their rights in good faith, reasonably and fairly and comply with the requirements of legislation, moral principles of the society and entrepreneurs shall comply with business ethics rules. Such duty may not be excluded or restricted by any contract. Good faith, reasonableness and justness of actions of the parties of civil law relations shall be presumed.

      8. No acts committed by citizens and legal persons aimed at causing harm to any other person, abuse of rights in any other form and exercise of a right in contradiction to its purpose shall be accepted. In the event of a failure to comply with the requirements stipulated in Paragraphs 6-8 of the present Article the court may refuse the person the protection of the right belonging to him.

      Article 11. Protection of Civil Law Rights

      1. Protection of violated or disputed civil law rights shall be provided, in accordance with the jurisdiction over cases established by procedural legislation, by a court, commercial court, or court of private arbitration (hereinafter×court).

      2. Protection of civil law rights by an administrative procedure shall be effectuated only in cases provided for by a statute. A decision taken by an administrative procedure may be appealed in court.

      Article 12. Means of Protection of Civil Law Rights

      The protection of civil law rights is effectuated by way of:

      - recognition of a right;

      - reinstating the situation that existed before the violation of the right and stopping the activities that violated the right or created a threat of its violation;

      - declaration of an avoidable transaction as invalid and applying the consequences of its invalidity or applying the consequences of the invalidity of a void transaction;

      - declaration of the invalidity of an act of a state agency or of an agency of local self-government;

      - self-protection of a right;

      - a judgment for performance of an obligation in kind;

      - compensation for damages;

      - recovery of a penalty;

      - compensation for moral harm;

      - termination or alteration of a legal relation;

      - non-application by a court of an act of a state agency or of an agency of local self-government that contradicts a statute;

      - by other manners provided by a statute.

      Article 13. Declaration of an Act of a State Agency or of an Agency of Local Self-Government as Invalid

      A non-normative act of a state agency or of an agency of local self-government and, in cases provided by a statute, also a normative act, not complying with a statute or other legal acts and violating civil law rights or interests protected by a statute of a citizen or legal person may be declared invalid by a court.

      In case of declaration by a court of an act as invalid, the violated right shall be subject to reinstatement or to protection in the other manners provided by Article 12 of the present Code.

      Article 14. Self-Protection of Civil Law Rights

      Self-protection of civil law rights is allowed.

      The means of self-protection must be proportional to the violation and not go outside the bounds of the actions necessary for stopping the violation.

      Article 15. Compensation for Damages

      1. A person whose right has been violated may demand full compensation for the damages caused to it unless a statute or contract provides for compensation for damages in a lesser amount.

      2. Damages means the expenses that the person whose right was violated has made or must make to reinstate the right that was violated, or the loss or harm to its property (actual damage), and also income not received that this person would have received under the usual conditions of civil commerce if its right had not been violated (lost profit).

      If the person who has violated a right has received income as a result, the person whose right has been violated shall be entitled to demand×along with other damages×compensation for lost profit in an amount not less than such income.

      Article 16. Compensation for the Damages Caused by State Agencies and Agencies of Local Self-Government

      Damages caused to a citizen or legal person as the result of illegal actions of (or failure to act by) state agencies, agencies of local self-government, or officials of these agencies, including the issuance of an act of a state agency or agency of local self-government that does not correspond to a statute or other legal act, shall be subject to compensation by the Republic of Tajikistan or the respective subject of the Republic of Tajikistan.

Subdivision 2

SUBJECTS OF CIVIL LAW RIGHTS

CHAPTER 3.

CITIZENS OF THE REPUBLIC OF TAJIKISTAN

 AND OTHER NATURAL PERSONS

      Article 17. The Concept of a Natural Person

      Citizens (natural persons) shall be deemed citizens of the Republic of Tajikistan, citizens of other states and stateless persons. The provisions of the present Code shall be applied to all citizens unless otherwise established by a statute.

      Article 18. The Legal Capacity of a Citizen

      1. The ability to have civil law rights and bear duties (civil legal capacity) is recognized in equal measure for all citizens.

      2. The legal capacity of a citizen arises at the time of his birth and is terminated by death.

      Article 19. Content of the Legal Capacity of Citizens

      Citizens may have property by right of ownership including foreign currency within and outside the Republic of Tajikistan; inherit and bequeath property; move freely within the Republic and choose the place of residence; freely leave the Republic and return to its territory; engage in any activity not forbidden by a statute; found legal persons independently or jointly with other citizens and legal persons; conclude any other transactions not contrary to a statute and participate in obligations; choose a place of residence; have the rights of authors of works of science, literature, and art, of inventions and other results of intellectual activity; claim the compensation for financial and moral damages; have other property and personal rights.

      Article 20. The Name of a Citizen

      1. A citizen shall obtain and exercise rights and duties under his own name, including his family name and given name, and also his patronymic unless otherwise follows from a statute or ethnic custom.

      In cases and by the procedure provided by a statute, a citizen may use a pseudonym (made-up name).

      2. A citizen has the right to change his name by the procedure established by a statute. A change of name by a citizen shall not be a basis for terminating or changing his rights and duties obtained under the previous name.

      A citizen is obligated to take the necessary measures to notify his debtors and creditors of the change of his name and bears the risk of consequences caused if these persons lack information on his change of name.

      A citizen who has changed his name has the right to demand the entry, at his expense, of the relevant changes in documents formalized in his former name.

      3. The name obtained by a citizen at birth and also a change of name are subject to registration by the procedure established for registration of acts of civil status.

      4. Obtaining rights and duties under the name of another person is not allowed.

      5. Harm caused to a citizen as the result of improper use of his name is subject to compensation in accordance with the present Code.

      In case of distortion or use of the name of a citizen in manners or in a form that impinges upon his honor, dignity, or business reputation, the rules provided by Article 174 of the present Code shall be applied.

      Article 21. Place of Residence of a Citizen

      1. The place of residence is the place where a citizen permanently or primarily lives.

      2. The place of residence of minors who have not attained the age of fourteen years or of citizens who are under guardianship is the place of residence of their legal representatives or guardians.

      Article 22. The Dispositive Capacity of a Citizen

      1. The capacity of a citizen to obtain and exercise civil law rights by his actions and to create for himself civil law duties and to fulfill them (civil law dispositive capacity) arises in full with the attainment of majority, i.e., on the attainment of the age of eighteen.

      2. In the case when a statute allows entry into marriage before attaining the age of eighteen, a citizen who has not attained the age of eighteen obtains civil law dispositive capacity in full from the time of entry into marriage.

      Civil law dispositive capacity obtained as the result of conclusion of marriage is retained in full also in case of dissolution of the marriage.

      In case of declaration of a marriage as invalid, the court may adopt a decision on the loss by the minor spouse of full legal capacity from a time determined by the court.

      Article 23. Impermissibility of Deprivation or Limitation of the Legal Capacity and the Dispositive Capacity of a Citizen

      1. No one may be limited in legal capacity and dispositive capacity other than in the cases and by the procedure established by a statute.

      2. Nonobservance of the conditions and procedure established by a statute for the limitation of the dispositive capacity of citizens or of their right to engage in entrepreneurial or other activity shall entail the invalidity of the act of the state or other agency that has established the respective limitation.

      3. A full or partial renunciation by a citizen of legal capacity or of dispositive capacity, or other transactions directed at the limitation of legal capacity or dispositive capacity, shall be void, with the exception of cases when such transactions are permitted by a statute.

      Article 24.       Entrepreneurial Activity of Citizens

      1. Citizens have the right to engage in entrepreneurial activity without the formation of a legal person from the time of state registration unless it is otherwise provided by the present Code.

      2. The state registration of individual entrepreneurs shall be carried out upon the application of individual entrepreneurs. The state registration of individual entrepreneurs is the placement on records of an individual entrepreneur.

      3. The respective rules of the present Code that regulate the activity of legal persons being commercial organizations shall be applied to entrepreneurial activity of citizens conducted without the formation of a legal person, unless otherwise follows from legislation or the nature of the legal relation.

      4. The following citizen conducting entrepreneurial activity without the formation of a legal person shall be exempted from state registration:

a)      those who are in the composition of a peasant farming operation;

b)      those who perform one-time work under a work contract and other civil law contracts;

c)      those who engage, alongside with wholesale and retail trade network, in the sale of property belonging to them as well as produced processed and purchased products including imported industrial and food products in special places allotted for it or through commission shops.

d)      those whose profit from the performance of work and services within one year do not exceed twenty minimal wages.

      The registration of the said citizens as taxpayers and procedure for their taxation shall be in accordance with the tax legislation.

      5. A citizen conducting entrepreneurial activity without the formation of a legal person shall act on the basis of a purchased patent. At the same time the patent is a certificate of state registration of a citizen as an individual entrepreneur and a license which gives the right to conduct entrepreneurial activity specified in the patent. A procedure for the issuance of patents and a patent fee amount shall be determined by the Government of the Republic of Tajikistan.

      Article 25. Property Liability of a Citizen

      1. A citizen shall be liable for his obligations with all property belonging to him, with the exception of property upon which, in accordance with a statute, execution may not be levied.

      The list of property of citizens on which execution may not be levied shall be established by the Civil Procedure Code of the Republic of Tajikistan.

      Article 26. Insolvency (or Bankruptcy) of an Individual Entrepreneur

      1. An individual entrepreneur who is not in a position to satisfy the demands of creditors connected with his conduct of entrepreneurial activity may be declared insolvent (or bankrupt) by decision of a court. From the time of making of such a decision, his registration as an individual entrepreneur shall lose force.

      2. In the conduct of proceedings for the declaration of an individual entrepreneur bankrupt, his creditors on obligations not connected with his conduct of entrepreneurial activity also have the right to present their claims. The claims of these creditors not presented by them in these proceedings shall remain in force after the bankruptcy proceedings for an individual entrepreneur.

      3. The claims of creditors of an individual entrepreneur in case he is declared bankrupt shall be satisfied at the expense of the property belonging to him upon which execution may be levied, in the following order:

      in the first priority, claims of citizens to whom the entrepreneur is liable for causing of harm to life or health and also claims for the recovery of support payments shall be satisfied by capitalization of the respective periodic payments;

      in the second priority, settlements shall be made for the payment of severance allowances and payment for labor for maximum three months with persons working under a labor agreement;

      in the third priority, claims of creditors secured by pledge of property belonging to the individual entrepreneur shall be satisfied;

      in the fourth priority, indebtedness for obligatory payments to the fisc and to off-budget funds shall be covered;

      in the fifth priority accounting with other creditors shall be made in accordance with a statute.

      The claims of each priority shall be satisfied after the full compensation of the claims of the previous priority.

      4. After completion of accounting with creditors, the individual entrepreneur who was declared bankrupt shall be freed from performance of the remaining obligations connected with his entrepreneurial activity and other claims presented for performance and considered in declaring the entrepreneur bankrupt.

      5. The grounds and procedure for declaration by a court of an individual entrepreneur bankrupt or for his declaring his own insolvency (or bankruptcy) shall be established by the statute on insolvency (or bankruptcy).

      6. By decision of a court, a citizen declared a bankrupt may be prohibited to engage in entrepreneurial activity within a defined period that may not exceed the maximum period fixed by a statute on insolvency (or bankruptcy).

      Article 27. Legal Capacity of Minors of the Age of Fourteen to Eighteen Years

      1. Minors of the age of fourteen to eighteen years may conduct transactions, with the exception of those listed in Paragraph 2 of the present Article, with the written consent of their legal representatives×parents, adoptive parents, or curator.

      A transaction conducted by such a minor also is valid in case of its later written approval by his parents, adoptive parents, or curator.

      2. Minors of the age of fourteen to eighteen years have the right, independently, without the consent of their parents, adoptive parents, or curator:

      1) to dispose of their earnings, scholarship, and other income;

      2) to exercise the right of an author of a work of science, literature, or art, of an invention or of other result of their intellectual activity protected by a statute;

      3) in accordance with a statute, to make deposits in credit institutions and to dispose of them;

      4) to conduct small everyday transactions provided by Paragraph 2 of Article 29 of the present Code.

      Upon attaining eighteen years, minors also have the right to be members of cooperatives in accordance with the statutes on cooperatives.

      3. Minors of the age of fourteen to eighteen years independently bear property liability for transactions conducted by them in accordance with Paragraphs 1 and 2 of the present Article. For harm caused by them, such minors bear liability in accordance with the present Code.

      4. If sufficient grounds are present, a court on petition of parents, adoptive parents, or a curator, or of an agency of tutelage and guardianship, may, with the exception of cases when the minor has obtained legal capacity in full in accordance with Paragraph 2 of Article 22 or Article 28 of the present Code, limit the right of a minor of the age of fourteen to eighteen years to independently dispose of his earnings, scholarship, or other income, or deprive the minor of this right.

      Article 28. Emancipation

      1. A minor who has attained the age of sixteen years may be declared of full dispositive capacity, if he is working under a labor agreement, including under a contract-in-writing, or with the consent of his parents, adoptive parents, or curator is engaged in entrepreneurial activity.

      The declaration of a minor as of full dispositive capacity (emancipation) is made by decision of an agency of curatorship and guardianship with the consent of both parents, adoptive parents, or curator or, in the absence of such consent, by decision of a court.

      2. Parents, adoptive parents, and the curator do not bear liability for the obligations of an emancipated minor, in particular for obligations that have arisen as a result of his having caused harm.

      Article 29. Dispositive Capacity of Children

      1. For minors who have not attained the age of fourteen years (children), transactions with the exception of those indicated in Paragraph 2 of the present Article may be made in their name only by their parents, adoptive parents, or guardians.

      The rules provided by Paragraphs 2 and 3 of Article 37 of the present Code shall be applied to transactions of legal representatives of a minor with the minor's property.

      2. Minors of the age of six to fourteen years have the right to conduct independently :

      1) very small consumer transactions: buying bread, books, pencils etc. performed at their conduct;

      2) transactions directed at obtaining a cost-free benefit and not requiring notarial authentication nor state registration;

      3) transactions for disposition of assets provided by the legal representative or by a third person with the consent of the legal representative, for a particular purpose or for free disposition.

      3. Property liability under transactions of a child, including for transactions conducted by him independently, shall be borne by his parents, adoptive parents, or guardians, unless they show that the obligation was violated without their fault. These persons, in accordance with a statute, shall also answer for harm caused by children.

      Article 30.       Declaration of a Citizen as Lacking Dispositive Capacity

      1. A citizen who as the result of mental disorder cannot understand the significance of his actions or control them may be declared by a court as lacking dispositive capacity by the procedure established by civil procedure legislation. Guardianship shall be established over him.

      2. Transactions in the name of a citizen who has been declared lacking dispositive capacity may be made by his guardian.

      3. If the grounds on which a citizen was declared lacking dispositive capacity have ceased to exist, the court shall recognize him as having dispositive capacity. On the basis of the decision of the court the guardianship established over him shall be terminated.

      4. If the court refuses to satisfy a petition on declaring a person as lacking dispositive capacity and it is ascertained that the petition was lodged in bad faith, the person who suffered moral harm as a result of such actions shall have the right to demand compensation from the petitioner.

      Article 31. Limitation of the Dispositive Capacity of a Citizen

      1. A citizen who, as the result of abuse of alcoholic beverages or narcotic substances, puts his family in a difficult material position, may be limited by a court in dispositive capacity by the procedure established by civil procedure legislation. Curatorship shall be established over him.

      He shall have the right to conduct very small consumer transactions independently.

      He may conduct other transactions and also receive wages, pensions, and other income and dispose of them only with the consent of the curator. However, such a citizen independently shall bear property liability for transactions conducted by him and for harm caused by him.

      2. If the grounds upon which the citizen was limited in dispositive capacity no longer exist, the court shall terminate the limitation of his dispositive capacity. On the basis of a decision of the court, the curatorship established over the citizen shall be terminated.

Article 32. Guardianship and Curatorship

      1. Guardianship and curatorship shall be established for the protection of the rights and interests of citizens lacking dispositive capacity or not of full dispositive capacity. Guardianship and curatorship over minors also may be established for the purpose of their upbringing. The corresponding rights and duties of guardians and curators shall be defined by legislation on marriage and the family.

      2. Guardians and curators may act in defense of the rights and interests of their wards in relations with any person, including in courts, without special authorization.

      3. Guardianship and curatorship over minors shall be established if they lack parents or adoptive parents, if a court has deprived the parents of parental rights, and also in cases when such citizens for other reasons have been left without parental care, in particular when parents avoid their upbringing or the defense of their rights and interests.

      Article 33. Guardianship

      1. Guardianship may be established over children and also over citizens declared by a court as lacking dispositive capacity as the result of mental disorder.

      2. Guardians shall be representatives of the wards by force of a statute and conduct all necessary transactions in their names and in their interests.

      Article 34. Curatorship

      1. Curatorship may be established over minors of the age of fourteen to eighteen years and also over citizens limited by a court in dispositive capacity as the result of abuse of alcoholic beverages or narcotic substances.

      2. Curators may give consent to the conduct of those transactions that citizens who are under curatorship do not have the right to conduct independently.

      Curators shall render assistance to wards in their exercise of their own rights and the performance of obligations and also protect them from abuses on the part of third persons.

      Article 35. Agency of Guardianship and Curatorship

      1. The agencies of local self-government are the agencies of guardianship and curatorship.

      2. A court shall be obligated within three days from the time of entry into legal force of a decision declaring a citizen lacking dispositive capacity or a decision limiting his dispositive capacity to report this decision to the agency of guardianship and curatorship at the place of residence of such a citizen for the establishment of guardianship or curatorship over him.

      3. The agency of guardianship and curatorship at the place of residence of the wards shall exercise supervision of the activity of their guardians and curators.

      Article 36. Guardians and Curators

      1. A guardian or curator shall be appointed by the agency of guardianship and curatorship at the place of residence of the person needing guardianship or curatorship within a month from the time when the aforesaid agency became aware of the necessity of establishing guardianship or curatorship over the citizen. In the case of circumstances worthy of attention, the guardian or curator may be appointed by the agency of guardianship and curatorship at the place of residence of the guardian (or curator). If a guardian or curator is not appointed within one month for the person needing guardianship or curatorship, the performance of the obligations of the guardian or curator shall be imposed temporarily on the agency of guardianship or curatorship.

      The appointment of a guardian or curator may be appealed to a court by the interested parties.

      2. Only adult citizens with dispositive capacity may be designated as guardians and curators. Citizens deprived of parental rights may not be appointed as guardians or curators.

      3. A guardian or curator may be appointed only with his consent. His moral and other personal qualities, his ability for performing the obligations of guardian or curator, the relations existing between him and the person needing guardianship or curatorship, and, if possible, also the wish of the ward, must be considered.

      4. The guardians and curators of citizens needing guardianship or curatorship and being located or placed in respective upbringing or therapeutic institutions, institutions of social protection of the public, or other analogous institutions, shall be these institutions.

      Article 37. Performance by Guardians and Curators of Their Obligations

      1. Obligations of guardianship and curatorship shall be performed without compensation, except in cases provided by a statute.

      2. Guardians and curators of minor citizens are obligated to live with their wards. Separate residence of a curator from a ward who has attained the age of 16 shall be allowed with the consent of the agency of guardianship and curatorship on the condition that this does not affect unfavorably the upbringing and protection of the rights and interests of the ward.

      Guardians and curators are obligated to notify the agencies of guardianship and curatorship of change of place of residence.

      3. Guardians and curators are obligated to take care for the support of their wards, to ensure their care and treatment, and to protect their rights and interests.

      Guardians and curators of minors must take care for their education and upbringing.

      4. The obligations indicated in Paragraph 3 of the present Article are not imposed upon curators of adult citizens limited by a court in dispositive capacity.

      5. If the grounds upon which a citizen has been declared lacking dispositive capacity or of limited dispositive capacity as the result of abuse of alcoholic beverages or narcotic substances have ceased to exist, the guardian or curator is obligated to petition a court for the declaration of the ward as having dispositive capacity and of the removal of guardianship or curatorship from him.

      Article 38. Disposition of the Property of a Ward

      1. Income of the citizen under wardship including income due to the ward from the management of his property, with the exception of the income that the ward has the right to dispose of independently, shall be expended by the guardian or curator exclusively in the interests of the ward and with the prior consent of the agency of guardianship and curatorship.

      The guardian or curator has the right to make the expenditures necessary for the support of the ward at the expense of amounts due to the ward as his income, without the prior consent of the agency of guardianship and curatorship.

      2. A guardian does not have the right, without the prior consent of the agency of guardianship and curatorship to conclude, nor a curator×to give consent to the conclusion of, transactions for the alienation, including exchange or gift, of property of the ward, its rental (or lease), uncompensated use or pledge, nor to transactions involving a renunciation of rights belonging to the ward, the division of his property or the separation of shares from it, nor to any other transactions involving the reduction of the property of the ward.

      The procedure for administration of the property of the ward shall be determined by a statute.

      3. The guardian, the curator, their spouses, and their close relatives do not have the right to conduct transactions with wards, with the exception of the transfer of property to the ward as a gift or for cost-free use, nor to represent the ward in the conclusion of transactions or in the conduct of judicial proceedings between the ward and the spouse of the guardian or curator or between the ward and their close relatives.

      Article 39. Entrusted Management of the Property of the Ward

      1. If permanent management of immovable or valuable movable property of the ward is necessary, the agency of guardianship and curatorship shall conclude with a manager, designated by this agency, a contract on entrusted management of this property. In this case the guardian or ward shall retain his powers with respect to the property of the ward that was not transferred to entrusted management.

      In the exercise by the manager of powers for the management of the property of the ward, the effect of the rules provided by Paragraphs 2 and 3 of Article 37 of the present Code shall extend to the manager.

      2. Entrusted management of the property of the ward shall be terminated on the bases provided by a statute for termination of a contract for entrusted management of property and also in case of termination of the guardianship or wardship.

      Article 40. Releasing and Removing Guardians and Curators from the Performance of Their Obligations

      1. An agency of guardianship and curatorship shall free a guardian or curator from his performing his obligations in cases of return of the minor to his parents or his guardians.

      In case of placement of the ward in an upbringing or therapeutic institution, institution of social protection of the public, or other analogous institution, the agency of guardianship and curatorship shall free an earlier appointed guardian or curator from performing his obligations, unless this contradicts the interests of the ward.

      2. If there are compelling reasons (illness, change in property position, absence of mutual understanding with the ward, etc.), the guardian or curator may be freed from performing his duties upon his request.

      3. In cases of improper performance by the guardian or curator of the duties imposed upon him, including in case of his use of guardianship or curatorship for self-serving reasons or in case of leaving the ward without supervision or the necessary help, the agency of guardianship and curatorship may remove the guardian or curator from performing these obligations and may take the necessary measure for bringing the guilty citizen to the liability established by a statute.

      Article 41. Termination of Guardianship and Curatorship

      1. Guardianship and curatorship over adult citizens shall be terminated if a court has rendered a decision to recognize the ward as having dispositive capacity or to terminate limitations upon his dispositive capacity upon petition of the guardian, curator, or agency of guardianship and curatorship.

      2. Upon attainment by a minor of the age of fourteen years, guardianship over him shall be terminated, and the citizen exercising the obligations of guardian becomes curator of the minor without a further decision to this effect.

      3. Curatorship over a minor shall be terminated without a special decision upon the minor ward's attaining the age of eighteen years, and also upon his entry into marriage and in other cases of his obtaining full dispositive capacity before attaining majority (Paragraph 2 of Article 22 and Article 28).

      Article 42. Patronage Over a Citizen With Dispositive Capacity

      1. On the request of an adult citizen with dispositive capacity, who due to the condition of health cannot independently exercise and protect his rights and perform his duties, curatorship in the form of patronage may be established over him.

      2. The curator (or helper) of the adult citizen with dispositive capacity may be appointed by the agency of guardianship and curatorship only with the consent of such a citizen.

      3. Disposition of the property belonging to an adult ward with dispositive capacity is conducted by the curator (or helper) on the basis of a contract of delegation or entrusted management concluded with the ward. The conclusion of everyday and other transactions directed at the support and the satisfaction of everyday needs of the ward shall be conducted by his curator (or helper) with the consent of the ward.

      4. Patronage established in accordance with Paragraph 1 of the present Article over an adult citizen with dispositive capacity shall be terminated upon demand of the citizen who is under patronage.

      The curator (or helper) of a citizen who is under patronage shall be freed from fulfillment of the obligations resting upon him in the cases provided by Article 39 of the present Code.

      Article 43. Declaration of a Citizen as Missing

      A citizen may, upon petition of interested persons, be declared missing by a court, if in the course of a year, at the place of his residence, there is no information on the place where he is staying.

      If it is impossible to establish the day of receipt of the last information on the missing person, the start of the calculation of the period for declaration as missing is considered the first day of the month after that in which the last information of the missing person was received, and in case of impossibility of establishing this month×the first of January of the following year.

      Article 44. Consequences of Declaration of a Citizen as Missing

      1. The property of a citizen declared missing, in case of the necessity of its protection, shall be transferred on the basis of a decision of the court to a person who shall be selected by an agency of guardianship and curatorship and who shall act on the basis of contract of entrusted management concluded with this agency.

      The administrator of property of a person declared missing shall undertake the performance of civil law obligations, pay off the debts of a missing person at the expense of his property and manage these property in the interests of such a person.  Support for the citizens whom the missing person was obligated to support shall be paid upon the request of interested persons.

      2. The agency of guardianship and curatorship may, even before the expiration of a year from the day of receipt of information on the place of location of the missing citizen, appoint a manager for his property.

      3. The consequences of declaration of a person as missing not provided by the present Article shall be determined by a statute.

      Article 45. Vacating a Decision to Declare a Citizen Missing

      1. In case of the appearance a citizen who has been declared missing or of the discovery of the place where he is staying, the court shall vacate the decision that declared him missing. On the basis of the decision of the court, the management of the property of this citizen shall be terminated.

      2. If upon the expiration of three years from the time of appointment of an administrator, the decision on the declaration of a citizen as missing has not been vacated and there was no application to the court for declaring the citizen dead, the agency of guardianship and curatorship shall be obliged to go to court with a request to declare the citizen dead. 

      Article 46. Declaration of a Citizen Dead

      1. A citizen may be declared dead by a court, if at the place of his residence there is no information for three years about the place where he is staying or, if he disappeared under circumstances threatening death or giving a basis to assume he perished from a specific accident, there is no information for six months.

      2. A military serviceman or other citizen who has disappeared in connection with military actions may be declared dead by a court not earlier than after the expiration of two years from the day of the end of the military actions.

      3. The date of the death of the citizen who is declared dead shall be considered to be the date of entry into legal force of the decision of the court declaring him

dead. In case of declaring a citizen dead who disappeared under circumstances threatening death or giving a basis to suppose that he perished in a specific accident, the court may recognize as the date of death of this citizen the day on which he is thought to have perished.

      4. Declaration of a citizen dead shall entail the same consequences with respect to the rights and duties of such a citizen as his death would have entailed.

      Article 47. Consequences of the Appearance of a Citizen who has been Declared Dead

      1. In case of the appearance of a citizen who has been declared dead or of the discovery of the place where he is staying, the court shall vacate the decision on declaring him dead.

      2. Regardless of the time of his appearance, the citizen may demand from any person the return of property still preserved that was transferred without compensation to this person after the citizen was declared dead with the exception of the cases provided by Paragraph 3 of Article 323 of the present Code.

      Persons to whom the property of a citizen who was declared dead went under compensated transactions shall be obligated to return this property if it is shown that, in obtaining this property, they knew that the citizen who was declared dead was among the living. In case of impossibility of return of such property in kind, its value shall be compensated for. If the property of a citizen who was declared dead went to the state by the right of inheritance and was sold by it in compliance with conditions provided by the present Article then after the vacation of a decision to declare the citizen dead he shall be returned the amount received from the sale of his property.  

      3. A good faith possessor shall have the right to retain the improvements made by him if such improvements may be separated without any harm to the property. If the separation of improvements is impossible, the good faith possessor shall have the right to demand the compensation for the costs of improvements, however, not exceeding the amount of the increase in the value of the property.

CHAPTER 4.

LEGAL PERSONS

# 1.      BASIC PROVISIONS

      Article 48. Definition of a Legal Person

      1. A legal person is an organization that has separate property under ownership, economic management, or operative administration and that is liable for its obligations with this property and that may, in its own name, obtain and exercise property and personal nonproperty rights, bear duties, and be a plaintiff and defendant in court.

      Legal persons must have an independent balance sheet or budget.

      2. In connection with participation in the formation of the property of a legal person, its founders (or participants) may have rights under the law of obligations with respect to this legal person or rights in things with respect to its property.

      Legal persons with respect to which their participants have rights under the law of obligations include: business partnerships and companies, production and consumer cooperatives.

      Legal persons to whose property their founders have the right of ownership include: unitary enterprises including daughter enterprises and also institutions financed by the owner.

      3. Legal persons with respect to which their founders (or participants) do not have property rights include: societal and religious organizations (or amalgamaítions), charitable and other public foundations, and amalgamations of legal persons (associations and unions).

      Article 49. Legal Capacity of a Legal Person

      1. A legal person may have civil law rights corresponding to the purposes of activity provided in its founding documents and bear the duties connected with this activity.

      Commercial organizations, with the exception of unitary enterprises and other types of organizations provided by a statute, may have civil law rights and bear civil law duties necessary for conducting any types of activity not forbidden by a statute.

      A legal person may engage in certain types of activity, a list of which is determined by a statute, only on the basis of special permission (or a license).

      2. A legal person may be limited in rights only in cases and by the procedure provided by a statute. A decision on limitation of rights may be appealed by the legal person to a court.

      3. The legal capacity of a legal person shall arise at the time of its creation (Part 2 of Article 51) and shall terminate at the time of completion of its liquidation (Paragraph 8 of Article 64).

      The right of a legal person to conduct activity, to engage in which it is necessary to obtain a license (Paragraph 1 of the present Article), shall arise from the time of receipt of such a license or at the time indicated in it and shall terminate on the expiration of the term of its effectiveness, unless otherwise established by legislation.

      Article 50. Commercial and Noncommercial Organizations

      1. Organizations seeking to make profit as the basic purpose of their activity (commercial organizations) or not having making profit as such a purpose and not distributing profit received among their participants (non-commercial organizations) may be legal persons.

      2. Legal persons that are commercial organizations may be created in the form of economic partnerships and companies, production cooperatives, and state and municipal unitary enterprises.

      3. Legal persons that are non-commercial organizations may be created in the form of consumer cooperatives, societal or religious organizations (or amalgaímations) financed by the owner of the institutions, charitable and other foundations, and also in other forms provided by a statute.

      Non-commercial organizations may conduct entrepreneurial activity only to the extent that this serves the attainment of the purposes for which they are founded and corresponds to these purposes.

      4. The creation of amalgamations of commercial and/or non-commercial organizations in the form of associations and unions is permitted.

      Article 51. State Registration of Legal Persons

      1. A legal person is subject to state registration at the agencies of justice by the procedure determined by the statute on registration of legal persons. The data of state registration, including the firm name of commercial organizations, shall be included in a unified state register of legal persons open for public access.

      Violation of the procedure established by a statute for the formation of a legal person or failure of its founding documents to correspond to a statute shall entail refusal of state registration of the legal person. Refusal of registration on grounds of the inexpediency of creating the legal person is not allowed.

      A refusal of state registration and also avoidance of such registration may be appealed to a court.

      2. A legal person shall be considered created from the time of its state registration.

      3. A legal person shall be subject to re-registration only in instances provided by a statute.

      Article 52. Founders of a Legal Person

1.      A legal person may be founded by one or more founders.

      2. Founders of a legal person may be the owners of the property or agencies and persons authorized by them and, in cases expressly stipulated by legislative acts, other legal persons. In that respect, legal persons which own the property by the right of economic management or operative administration may be the founders of other legal persons with the consent of the owner or an agency authorized by him.

      Article 53. Founding Documents of a Legal Person

      1. A legal person shall act on the basis of a charter, a founding contract and a charter, or only a founding contract. In cases provided by a statute, a legal person that is not a commercial organization may act on the basis of a general provision for organizations of the given type.

      The founding contract for a legal person shall be concluded, and the charter shall be approved, by its founders (or participants).

      A legal person created in accordance with the present Code by a single founder shall act on the basis of a charter approved by this founder.

      2. The charter and founding documents of a legal person must indicate the name of the legal person, its seat, and the procedure for managing its activity; they also must contain the other information required by a statute for legal persons of the respective type.

      The founding documents of noncommercial organizations and unitary enterprises and, in cases provided by a statute, also of other commercial organizations, must define the object and purposes of the activity of the legal person. The object and defined purposes of the activity of a commercial organization may be provided by the founding documents.

      In a founding contract the parties (founders) obligate themselves to create a legal person and define the procedure for joint activity for its founding and the conditions of transfer of their property to it and of participation in its activity. The contract also defines the terms and procedure for distribution among the participants in profits and losses, for the management of the activity of the legal person, and for the exit of founders (or participants) from its composition.

      3. Changes in founding documents take effect for third persons from the time of the state registration of the changes, and in cases established by a statute, from the time of notifying the agency conducting state registration of such changes. However, legal persons and their founders (or participants) do not have the right to cite the absence of the registration of such changes in relations with third parties who have acted taking these changes into account.

      Article 54. Bodies of a Legal Person

      1. A legal person obtains civil law rights and undertakes civil law duties through its bodies acting in accordance with legislation  and the founding documents.

      The procedure for appointing or electing bodies of a legal person shall be determined by a statute and the founding documents.

      2. In cases provided by a statute a legal person may obtain civil law rights and undertake civil law duties through its participants.

      3. A person who, by virtue of a statute or the founding documents of a legal person, acts in its name must act in the interests of the legal person represented by him in good faith and reasonably. This person shall be obligated on demand of the founders (or participants) in the legal person, unless otherwise provided by a statute or contract, to compensate for the damages caused by him to the legal person.

      Article 55. The Name and Seat of a Legal Person

      1. A legal person shall have its own name, containing an indication of its organizational-legal form. The names of non-commercial organizations and also of unitary enterprises and, in cases provided by a statute, of other commercial organizations must contain an indication of the nature of the activity of the legal person.

      The inclusion of the indications to the official full or abbreviated name (name of the sate) into the name of a legal person, the inclusion of such a name or elements of the national symbolics into the requisites of documents or advertisement materials of a legal person shall be allowed by procedure determined by the Government.

      2. The seat of a legal person is determined by the place of its state registration, unless, in accordance with a statute, it has been established otherwise in the founding documents of the legal person.

      3. The name and seat of a legal person shall be indicated in its founding documents.

      4. A legal person that is a commercial organization must have a firm name.

      A legal person whose firm name has been registered by the established procedure has the exclusive right to its use.

      A person who has unlawfully used another's registered firm name, on demand of the holder of the right to the firm name, shall be obligated to stop its use and compensate for the damages caused.

      The procedure for registration and use of firm names shall be determined by a statute and other legal acts in accordance with the present Code.

      Article 56. Representative Offices and Branches

      1. A representative office is a separate subdivision of a legal person located outside the place where the legal person is located which represents the interests of the legal person and engages in their protection and make transactions and other legal actions in its name.

      2. A branch is a separate subdivision of a legal person located outside the place where the legal person is located and conducting all its functions or part of them, including the function of representation.

      3. Representative offices and branches are not legal persons. They are allotted property by the legal person that has created them and act on the basis of regulations approved by it.

      The heads of representative offices and branches are appointed by the legal person and act on the basis of a power of attorney from it.

      Representative offices and branches must be indicated in the charter of the legal person that has created them.

      Article 57. Liability of a Legal Person

      1. Legal persons other than owner-financed institutions shall be liable for their obligations with all property belonging to them.

      2. A Treasury enterprise or an institution financed by its owner shall be liable for its obligations by the procedure and on the conditions provided by Paragraph 7 of Article 124, by Article 127, and by Article 132 of the present Code.

      3. The founder of (or a participant in) a legal person or the owner of its property shall not be liable for the obligations of the legal person, and the legal person shall not be liable for the obligations of the founder (or participant) or owner, with the exception of cases provided by the present Code or by the founding documents of the legal person.

      If the insolvency (or bankruptcy) of a legal person is caused by the founders (or participants), by the owner of the property of the legal person, or by other persons that have the right to give instructions obligatory for this person or otherwise have the possibility to determine its actions, then subsidiary liability for its obligations may be placed upon such persons in case of insufficiency of the property of the legal person.

      Article 58. Reorganization of a Legal Person

      1. Reorganization of a legal person (merger, accession, division, spin-off, transformation) may be realized by decision of its founders (or participants) or by the body of the legal person so authorized by the founding documents.

      2. Instances and procedure for the forced reorganization of commercial organizations by court decision may be stipulated by a statute for the purposes of the restriction of monopolistic activities.

      If the founders of (or the participants in) a legal person, a body authorized by them, or a body of the legal person authorized to reorganize it by the founding documents fails to conduct the reorganization of the legal person within the period determined by a decision of a court, a court shall designate an outside manager for the legal person and delegate to him the conduct of the reorganization of this legal person. From the time of designation of an outside manager, the powers for managing the affairs of the legal person shall pass to him. The outside manager shall act in the name of the legal person in court, compile the division balance sheet and submit it for consideration by the court together with the founding documents of the legal persons arising as the result of the reorganization. Approval by the court of these documents shall be the basis for state registration of the newly arising legal persons.

      3. In cases established by a statute, the reorganization of legal persons in the form of merger, accession, or transformation may be conducted only with the consent of authorized state agencies.

      4. A legal person shall be considered reorganized, with the exception of cases of reorganization in the form of accession, from the time of state registration of the newly arising legal persons.

      In case of reorganization of a legal person in the form of accession of another legal person to it, the first of them shall be considered reorganized from the time of making in the single state register of legal persons of an entry on the termination of activity of the joining legal person.

      Article 59. Legal Succession Upon the Reorganization of Legal Persons

      1. In case of the merger of legal persons, the rights and duties of each of them shall pass to the newly arising legal person in accordance with the transfer document.

      2. In case of accession of a legal person to another legal person, the rights and duties of the acceding legal person shall move to the latter in accordance with the transfer document.

      3. In case of division of a legal person, its rights and duties shall pass to the newly formed legal persons in accordance with the division balance sheet.

      4. In case of the spin-off from a legal person of one or several legal persons, the rights and duties of the reorganized legal person shall pass to each of them in accordance with the division balance sheet.

      5. In case of transformation of a legal person of one type into a legal person of another type (a change of organizational-legal form), the rights and duties of the reorganized legal person shall pass to the newly arising legal person in accordance with the transfer document.

      Article 60. The Transfer Document and the Division Balance Sheet

      1. The property rights and obligations of a legal person under reorganization shall be transferred to a newly arising  legal person: in case of merger and accession Ö in accordance with a transfer document; in case of division and spin-off Ö in accordance with a division balance sheet.

      The transfer document and the division balance sheet must contain provisions on legal succession for all obligations of the reorganized legal person with respect to all its creditors and debtors, including also obligations contested by the parties.

      2. The transfer document and the division balance sheet must be approved by the founders of (or participants in) the legal person or by the agency that has taken the decision to reorganize the legal person and must be presented together with the founding documents for state registration of the newly arising legal persons or for entering changes in the founding documents of existing legal persons.

      Failure to present the corresponding transfer document or division balance together with the founding documents, and also the absence in them of provisions on legal succession to the obligations of the reorganized legal person shall entail a refusal of state registration for the newly arising legal person.

      Article 61. Guaranties of Rights of Creditors of a Legal Person Upon Its Reorganization

      1. The founders of (or participants in) the legal person or the agency that has adopted a decision to reorganize the legal person are obligated to notify the creditors of the reorganized legal person of this in writing.

      2. A creditor of the reorganized legal person shall have the right to demand termination or early performance of legal obligations for which this legal person is a debtor and compensation for damages.

      3. If the division balance sheet does not provide the possibility of determining the legal successor of the reorganized legal person, the newly arisen legal persons bear joint and several liability for the obligations of the reorganized legal person to its creditors.

      Article 62. Liquidation of a Legal Person

      1. Liquidation of a legal person shall entail its termination without transfer of rights and duties by way of legal succession to other persons.

      2. A legal person may be liquidated:

      by a decision of its founders (or participants) or of the agency of the legal person empowered thereto by the founding documents, including in connection with the expiration of the term for which the legal person was created, with the achievement of the purpose for which it was created, or with declaration by a court that the registration of a legal person is invalid in connection with violations of legislation committed at its creation, if these violations have an irremediable nature;

      by a decision of a court in case of conduct of activity without appropriate permission (or license) or of activity prohibited by a statute, or with other multiple or gross violations of legislation, or in case of systematic conduct of activity contradicting the charter of a legal person purposes, and also in other cases provided by the present Code.

      3. A demand for the liquidation of a legal person on the bases indicated in Paragraph 2 of the present Article may be presented in court by a state agency or an agency of local self-government to whom the right for presenting such a demand has been granted by a statute.

      A decision of a court for the liquidation of a legal person may impose obligations for the conduct of the liquidation of the legal person on its founders (or participants) or the agency authorized for the liquidation of the legal person by its founding documents.

      4. A legal person that is a commercial organization or is operating in the form of a consumer cooperative, or a charitable or other foundation, also may be liquidated in accordance with Article 67 of the present Code as the result of declaration of it as insolvent (or bankrupt).

      If the value of the property of such a legal person is insufficient for satisfaction of the claims of creditors, it may be liquidated only by the procedure provided by Article 65 of the present Code.

      The provisions on the liquidation of legal persons as the result of insolvency (or bankruptcy) do not extend to institutions.

      Article 63. Duties of a Person Who has Taken a Decision to Liquidate a Legal Person

      1. The founders of (or participants in) a legal person or the agency that has taken a decision to liquidate a legal person are obligated to immediately report about this in writing to the agency that conducts state registration of legal persons, which shall enter in the single state register of legal persons information to the effect that the legal person is in the process of liquidation.

      2. The founders of (or participants in) the legal person or the agency that has taken the decision to liquidate the legal person shall appoint, with the consent of the agency exercising state registration of legal persons, a liquidation commission (or liquidator) and shall establish, in accordance with the present Code, the procedure and periods for liquidation.

      3. From the time of appointment of a liquidation commission, the powers for the management of the affairs of the legal person shall pass to it. In particular, all acts of bodies of a legal person aimed at the alienation of its property or at the cancellation of debts shall be committed only with the consent of the liquidation commission.

      Article 64. The Procedure for Liquidation of a Legal Person

      1. The liquidation commission shall place, in the press media in which data on state registration of a legal person are published, a publication about its liquidation and about the procedure and period for the submission of claims by its creditors. This period may not be less than two months after the time of publication about the liquidation.

      The liquidation commission shall take measures for the discovery of creditors and for the receipt of debtor indebtedness and also shall inform creditors in writing about the liquidation of the legal person.

      2. After the period for the presentation of claims by creditors, the liquidation commission shall compile an intermediate liquidation balance sheet, which shall contain information on the composition of the property of the legal person undergoing liquidation, on a list of the claims presented by creditors, and also about the results of their consideration.

      The intermediate liquidation balance sheet shall be confirmed by the founders of (or participants in) the legal person or by the agency that made the decision to liquidate the legal person, by agreement with the agency conducting state registration of legal persons.

      3. If the monetary assets available to the legal person (with the exception of institutions) being liquidated are insufficient for the satisfaction of the claims of creditors, the liquidation commission shall conduct the sale of the property of the legal person at a public auction by the procedure established for the execution of judicial decisions.

      4. Payment of monetary sums to creditors of the legal person being liquidated shall be made by the liquidation commission in the order of priority established by Article 64 of the present Code, in accordance with the intermediate liquidation balance sheet, beginning from the day of its approval, with the exception of creditors of the fifth priority, payment to whom shall be made at the expiration of one month from the day of approval of the intermediate liquidation balance.

      5. After settlement of accounts with creditors, the liquidation commission shall compile a liquidation balance sheet, which shall be approved by the founders of (or participants in) the legal person or by the agency that took the decision for the liquidation of the legal person, by agreement with the agency conducting state registration of legal persons.

      6. In case an institution being liquidated has insufficient property, or an institution being liquidated has insufficient monetary assets for satisfying the demands of creditors, the creditors shall have the right to go to court with a suit for satisfaction of the remaining demands at the expense of the owner of the property of this institution.

      7. Property of the legal person remaining after the satisfaction of the claims of creditors shall be transferred to its founders (or participants) who have the rights in things to this property or obligation rights with respect to this legal person unless otherwise provided by a statute, other legal acts, or the founding documents of the legal person.

      8. The liquidation of the legal person shall be considered complete and the legal person shall be considered to have ceased its existence after the entry of a notation to this effect in the single state register of legal persons.

      Article 65. Satisfaction of the Claims of Creditors

      1. In the liquidation of a legal person, the claims of its creditors shall be satisfied in the following order:

      in the first priority, claims of citizens to whom the entrepreneur is liable for causing of harm to life or health shall be satisfied by capitalization of the respective periodic payments;

      in the second priority, settlements shall be made for the payment of severance allowances and payment for labor with persons working under a labor agreement, including contract-in-writing employment, and also for payment of compensation under publishing contracts;

      in the third priority, claims of creditors secured by pledge of property of the legal person being liquidated shall be satisfied;

      in the fourth priority, indebtedness for obligatory payments to the fisc and to off-budget funds shall be covered;

      in the fifth priority, accounting with other creditors shall be made in accordance with a statute.

      2. The claims of each priority shall be satisfied after the full satisfaction of the claims of the previous priority.

      3. In case of insufficiency of the property of the legal person being liquidated, it shall be distributed among creditors of the respective priority proportionally to the amount of claims subject to satisfaction, unless otherwise established by a statute.

      4. In case of refusal by the liquidation commission to satisfy the claims of a creditor or of declining to consider them, the creditor shall have the right, before the approval of the liquidation balance sheet, to bring a suit in court against the liquidation commission. By decision of the court the claim of the creditor may be satisfied at the expense of the remaining property of the legal person undergoing liquidation.

      5. Claims of creditors presented after the period established by the liquidation commission for their presentation shall be satisfied from the property of the legal person undergoing liquidation that remains after the satisfaction of the claims of creditors presented on time.

      6. The claims of creditors not satisfied because of the insufficiency of the property of the liquidated legal person shall be considered canceled with the exception of the case provided by Article 68 of the present Code. Creditors' claims not recognized by the liquidation commission shall be considered canceled if the creditor has not brought a suit in court, and also claims for which the creditor has been refused satisfaction by a decision of a court shall be considered canceled.

      Article 66. Insolvency (or Bankruptcy) of a Legal Person

      1. A legal person that conducts commercial activity may be declared insolvent (or bankrupt) by decision of a court, if it is not in a position to satisfy the claims of creditors due to the insufficiency of its liquid assets.

      2. A legal person shall be declared bankrupt by court. A legal person may jointly with creditors take a decision to declare its insolvency (or bankruptcy) and voluntary liquidation.

      3. The grounds for a declaration by a court of a legal person insolvent (or bankrupt) or for declaration by a legal person of its own insolvency (or bankruptcy) and also the procedure for liquidation of such a legal person shall be established by the statute on insolvency (or bankruptcy). The claims of creditors shall be satisfied in the order provided by Paragraph 1 of Article 65 of the present Code.

      Article 67. Consequences of the Declaration of a Legal Person Insolvent (or Bankrupt)

      1. The declaration of a legal person insolvent (or bankrupt) by court as well as the declaration of a legal person of its insolvency by a joint decision with its creditors shall entail the liquidation of this legal person.

2.      From the time of declaration of a legal person insolvent:

a)      all unpaid obligations of this legal persons shall be deemed due unless they have become due earlier;

b)      the accruement of penalty and interests on all unpaid obligations of this legal person shall be stopped;

c)      all restrictions concerning the levy of execution on the property of this legal person stipulated by legislation shall be lifted;

d)      disputes of property nature with the participation of this legal person in the capacity of a defendant shall be terminated except for those disputes in relation to which decisions have entered their legal force;

e)      all claims of property nature may be presented to this legal person only within the boundaries of liquidation proceedings.

            3. If a legal person declares its insolvency by a joint decision with its creditors, the rules of Paragraph 2 of the present Article shall be applied unless agreement with creditor established otherwise.

            Article 68. Levying of Execution on the Property Belonging to a Legal Person After Its Liquidation

            If after the liquidation of a legal person, it is proved that the legal person transferred to another person or otherwise intentionally concealed at least a part of its property for the purpose of avoiding the liability to its creditors, the creditors whose claims have not been completely satisfied with liquidation proceedings shall be entitled to levy execution on this property to the extent of the unpaid part of indebtedness. In such a case, rules of Article 324 of the present Code shall be applied correspondingly. A person to whom the property has been transferred shall be deemed a bad faith person unless it knew or should have known of the intention of the legal person to conceal this property from creditors.

# 2.      BUSINESS PARTNERSHIPS AND COMPANIES

1.   General Provisions

      Article 69. Basic Provisions on Business Partnerships and Companies

      1. Business partnerships and companies are commercial organizations with charter (or investment) capital broken down into the shares (or contributions) of the founders (or participants). Property created at the expense of the contributions of the founders (or participants) and also that produced or obtained by the business partnership or company in the process of its activity shall belong to it by right of ownership.

      In cases provided by the present Code, a business company may be created by one person, who shall become the only participant.

      2. Business partnerships may be created in the form of a general partnership or a limited partnership (a special partnership).

      3. Business companies may be created in the form of a joint-stock company, a company with limited liability, or a company with supplementary liability.

      4. Individual entrepreneurs and/or commercial organizations may be participants in general partnerships and the general partners in limited partnerships.

      Citizens and legal persons may be participants in business companies and investors in limited partnerships.

      State agencies and agencies of local self-government do not have the right to be participants in business companies nor investors in limited partnerships, unless otherwise established by a statute.

      Institutions financed by their owners may be participants in business companies and investors in partnerships with the permission of the owner, unless otherwise established by a statute.

      A statute may forbid or limit the participation of individual categories of citizens in business partnerships and companies, except in open joint-stock companies.

      5. Business partnerships and companies may be founders of (or participants in) other business partnerships and companies with the exception of cases provided by the present Code and other statutes.

      6. An investment in the property of a business partnership or company may be money, securities, other things, or property rights or other rights having a monetary evaluation.

      The monetary evaluation of the investment of a participant in a business company shall be made by agreement among the founders of (or participants in) the company and, in cases provided by a statute, shall be subject to independent expert review.

      7. Business partnerships and also companies with limited and supplementary liability do not have the right to issue stock.

      Article 70. Rights and Duties of Participants in a Business Partnership or Company

      1. Participants in a business partnership or company shall have the right:

      to participate in the administration of the affairs of the partnership or company with the exception of the cases provided by Part 2 of Article 89 of the present Code and the statute on joint-stock companies;

      to receive information on the activity of the partnership or company and to be acquainted with its books and other documentation by the procedure established by the founding documents;

      to take part in the distribution of profit;

      to receive, in case of liquidation of the partnership or company, the part of the property left after settlements with creditors, or its value.

      Participants in a partnership or company may also have other rights provided by the present Code, statutes on business companies, or the founding documents of the partnership or company.

      2. Participants in a business partnership or company are obligated:

      to make their investments by the procedure, in the amounts, by the means, and within the periods that are provided by the founding documents;

      not to divulge confidential information about the activity of the partnership or company.

      Participants in a business partnership or company may also bear other obligations provided by its founding documents.

      Article 71. Transformation of Business Partnerships and Companies

      1. Business partnerships and companies of one type may be transformed into business partnerships and companies of another type or into production cooperatives by decision of the general meeting of members by the procedure established by the present Code.

      2. In case of the transformation of a partnership into a company, each general partner that has become a participant (or stockholder) of the company bears for two years subsidiary liability with all his property for obligations that have passed to the company from the partnership. The alienation by the former partner of the shares (or stock) belonging to him does not free him from such liability. The rules stated in the present Paragraph shall be applied respectively in case of transformation of a partnership into a production cooperative.

2.   Full Partnership

      Article 72. Basic Provisions on a Full Partnership

      1. A full partnership is one whose participants (general partners), in accordance with a contract concluded among them, are engaged in entrepreneurial activity in the name of the partnership and jointly and severally bear liability for its obligations with all property belonging to them.

      2. A person may be a participant in only one full partnership.

      3. The firm name of a full partnership must contain either the names (or designations) of all its participants and the words Ófull partnershipÔ or the name (or designation) of one or more participants with the addition of the words Óand companyÔ and the words Ófull partnership.Ô

      Article 73. The Founding Contract of a Full Partnership

      1. A full partnership shall be created and act on the basis of a founding contract which also serves as a charter of a full partnership. The founding contract must be signed by all of its participants.

      2. The founding contract of a full partnership must contain, in addition to the information indicated in Paragraph 2 of Article 52 of the present Code, terms on the amount and composition of the contributed capital of the partnership; on the amount of and procedure for change in the shares of each of the participants in the contributed capital; on the amount, composition, periods, and procedure for making their contributions, and on the liability of the participants for violating duties to make contributions.

      Article 74. Management in a Full Partnership

      1. Management of the activity of a full partnership shall be conducted by the general agreement of all the participants. The founding contract of the partnership may provide cases when a decision may be taken by a majority of votes of the participants.

      2. Each participant in a full partnership shall have one vote, unless the founding contract provides a different procedure for determining the number of votes of its participants.

      3. Each participant in a partnership, regardless of whether he is authorized to conduct the affairs of the partnership, shall have the right to be acquainted with all documentation for the conduct of affairs. A waiver of this right or a limitation of it, including by agreement of the participants in the partnership, shall be void.

      Article 75. Conduct of the Affairs of a Full Partnership

      1. Each participant in a full partnership has the right to act in the name of the partnership unless the founding contract establishes that all its participants conduct affairs jointly or the conduct of affairs is delegated to individual participants.

      In the joint conduct of the affairs of a partnership by its participants, the consent of all the participants in the partnership is required for the making of each transaction.

      If the conduct of the affairs of a partnership has been delegated by its participants to one or more of them, then the remaining participants, to conduct affairs in the name of the partnership, must have a power of attorney from the participant (or participants) to whom the conduct of the affairs of the partnership is assigned.

      In relations with third persons the partnership does not have the right to rely upon provisions of the founding contract limiting the authority of participants in the partnership with the exception of cases when the partnership shows that the third person at the time of making a transaction knew or obviously should have known of the absence for a participant in the partnership of the right to act in the name of the partnership.

      2. Authorizations for the conduct of the affairs of a partnership granted to one or several participants may be terminated by a court on demand of one or several of the other participants in the partnership in case of serious grounds therefore, in particular as the consequence of a gross violation by the authorized person (or persons) of his obligations or of his revealed inability for the sensible management of affairs. On the basis of the judicial decision, the necessary changes shall be made in the founding contract of the partnership.

      Article 76. Duties of a Participant in a Full Partnership

      1. A participant in a full partnership is obligated to participate in its activity in accordance with the terms of the founding contract.

      2. A participant in a full partnership is obligated to provide not less than half of his contribution to the contributed capital of the partnership by the time of its registration. The remaining part must be provided by the participant within the periods established by the founding contract. In case of nonfulfillment of this obligation the participant is obligated to compensate the partnership for losses caused, unless other consequences are established by the founding contract.

      3. A participant in a full partnership does not have the right, without the consent of the remaining participants, to conduct in his own name in his own interests or in the interests of third persons transactions of the same type as those that constitute the subject of activity of the partnership.

      In case of violation of this rule the partnership shall have the right at its choice to demand from such a participant compensation for the losses caused to the partnership or to transfer to the partnership of all benefits obtained from such transactions.

      Article 77. Distribution of the Profit and Losses of a Full Partnership

      1. The profit and losses of a full partnership shall be distributed among its participants in proportion to their shares in the contributed capital unless otherwise provided by the founding contract or by other agreement of the parties. An agreement for the elimination of any of the participants in the partnership from participation in the profit or in the losses is not allowed.

      2. If, as the result of losses incurred by the partnership, the value of its net assets becomes less than the amount of its contributed capital, profit received by the partnership shall not be distributed among the participants until the value of the net assets exceeds the amount of its contributed capital.

      Article 78. Liability of the Participants in a Full Partnership for Its Obligations

      1. The participants in a full partnership jointly and severally bear subsidiary liability with their property for the obligations of the partnership.

      2. A participant in a full partnership who is not a founder shall be liable equally with other participants for obligations that arose before his entry into the partnership.

      3. A participant who has left a partnership shall be liable for obligations of the partnership that arose up to the time he left equally with the remaining participants for three years from the day of approval of the report on the activity of the partnership for the year in which he left the partnership.

      4. An agreement of participants in a partnership for the limitation or elimination of the liability provided in the present Article is void.

Article 79. Transfer of the Share of a Participant in the Contributed Capital of a Full Partnership

      1. A participant in a full partnership has the right, with the consent of its remaining participants, to transfer his share in the property of the partnership proportional to his share in the contributed capital or part of it to another participant in the partnership or to a third person.

      2. In case of transfer of a share (or part of a share) to another person, the rights belonging to the participant who transferred the share (or part of a share) pass to it in full or in corresponding part. The person to whom a share (or part of a share) passes shall bear liability for the obligations of the partnership by the procedure established by Paragraph 2 of Article 78 of the present Code.

      3. The transfer of a whole share to another person by a participant in the partnership terminates the participant's participation in the partnership and entails the consequences provided by Paragraph 3 of Article 78 of the present Code.

      Article 80. Levy of Execution on a Participant's Share in the Property of a Full Partnership

      Levy of execution on a participant's share in the contributed capital of a full partnership for individual debts of the participant shall be allowed only in case of insufficiency of his other property to cover the debts. Creditors of such a participant have the right to demand of the full partnership either to pay the value of the part of  the property of the partnership proportional to the debtorÒs share in the contributed capital or to separate such part of the property of the partnership with the purpose of levying execution on this property. The part of the property of the partnership or its value subject to separation shall be determined according to a balance sheet compiled at the time of presentation by creditors of demands for separation.

      The levying of execution on property corresponding to the whole share of a participant in the contributed capital of a full partnership shall terminate his participation in the partnership and shall entail the consequences provided by Paragraph 3 of Article 78 of the present Code.

      Article 81. Exit of a Participant from a Full Partnership

      1. A participant in a full partnership has the right to exit from it, by stating his refusal to participate in the partnership.

      A refusal to participate in a full partnership founded without a specification of a term must be stated by the participant not less than six months before actual exit from the partnership. An early refusal to participate in a full partnership founded for a definite term shall be allowed only for a compelling reason.

      2. An agreement among participants in the partnership to refuse the right to exit from the partnership is void.

      Article 82. Exclusion of a Participant from a Full Partnership

      1. In cases of the declaration of one of the participants as missing, without dispositive capacity or with limited dispositive capacity, such participant may be excluded from the partnership by the unanimous decision of the remaining participants. By the same procedure a legal person being a participant may be excluded from the partnership if reorganization procedures have been commences by decision of a court in respect to such legal person. 

      2. The participants in a full partnership have the right to demand by judicial procedure the exclusion of any of the participants from the partnership by unanimous decision of the remaining participants and in case of the existence of compelling reasons therefore, in particular as the result of gross violation by this participant of his obligations or of his revealed inability for sensible management of affairs.

      3. The exclusion of a participant from the partnership terminates his participation in the partnership and entails consequences set forth in Paragraph 3 of Article 78 of the present Code.

      Article 83. Consequences of Exit of a Participant from a Full Partnership

      1. A participant who has exited from a full partnership shall be paid the value of the part of the property of the partnership corresponding to the share of this participant in the contributed capital, unless otherwise provided by the founding contract. By agreement of the exiting participant with the remaining participants, payment of the value of the property may be replaced by turning over property in kind.

      The part of the property due the exiting participant or its value shall be determined according to the balance sheet compiled, with the exception of the situation provided in Article 80 of the present Code, at the time of his exit.

      3. The exclusion of a participant from the partnership terminates his participation in the partnership and entails consequences set forth in Paragraph 3 of Article 78 of the present Code.

      Article 84. Succession in a Full Partnership

      1. In case of the death of a participant in a full partnership, his heir may enter the full partnership only with the consent of the other participants.

      2. A legal person that is the legal successor of a reorganized legal person that participated in a full partnership shall have the right to enter the partnership regardless of the consent of its other participants unless otherwise provided by the founding contract of the partnership.

      3. The heir (or legal successor) of the participant who has not entered the partnership shall bear liability for the obligations of the partnership to third persons for which in accordance with Paragraph 3 of Article 78 of the present Code a participant who exited would have been liable, within the limits of the property of the exited member of the partnership that passed to him.

      Article 85. Liquidation of a Full Partnership

      1. A full partnership shall be liquidated on the bases indicated in Article 62 of the present Code and also in the situation when a single participant remains in the partnership. Such a participant shall have the right for six months from the time when he became the sole participant in the partnership to transform such a partnership into a business company by the procedure established by the present Code.

      In case of exit from the partnership or death of one of the participants in the full partnership, exclusion of one of them from the partnership, liquidation of a legal person being a participant in the partnership or levying of execution on the whole part of property of a participant proportional to his share in the contributed capital, the partnership may continue its activity if this is provided by the founding contract of the partnership or an agreement between the remaining participants.

Article 86. Settlements in Case of the Exit of Participants from a Full Partnership

      1.  A participant who has exited or been excluded from a full partnership shall be paid the value of the part of the property of the partnership corresponding to the share of this participant in the contributed capital, unless otherwise provided by the founding contract. By agreement of the exiting participant with the remaining participants, payment of the value of the property may be replaced by turning over property in kind.

      Settlements shall be made by a corresponding liquidation commission in case of the liquidation of a legal person being a participant in the partnership.

      The part of the property due the exiting participant or its value shall be determined according to the balance sheet compiled at the time of his exit with the exception of the situation provided in Article 80 of the present Code.

      2. Settlement with an heir of a participant in the full partnership who has not entered the partnership or with a successor of a legal person that has been a participant in the full partnership shall be made in accordance with Paragraph 1 of the present Article.

      3. If one of the participants has exited from the partnership, the shares of the remaining participants in the contributed capital of the partnership shall be correspondingly increased unless otherwise provided by the founding contract or by other agreement of the participants.

# 3.      Limited Partnership

      Article 87. Basic Provisions on Limited Partnership

      1. A limited partnership (special partnership) is a partnership in which, along with participants conducting entrepreneurial activity in the name of the partnership and answering for the obligations of the partnership with their property (general partners), there are one or more investor-participants (limited partners), who bear the risk of losses connected with the activity of the partnership within the limits of the amounts of investments contributed by them and do not take part in the conduct by the partnership of entrepreneurial activity.

      2. The position of general partners participating in a limited partnership and their liability for the obligations of the partnership shall be determined by the rules of the present Code on participants in a full partnership.

      3. A person may be a general partner only in one limited partnership.

      A participant in a full partnership may not be a general partner in a limited partnership.

      A general partner in a limited partnership may not be a participant in a full partnership.

      4. The firm name of a limited partnership must contain either the names (or designations) of all the general partners and the words Ólimited partnershipÔ or Óspecial partnership,Ô or the name (or designation) of not less than one general partner with the addition of the words Óand companyÔ and the words Ólimited partnershipÔ or Óspecial partnership.Ô

      If the name of an investor is included in the firm name of a limited partnership, this investor shall become a general partner.

      5. The rules of the present Code on a full partnership shall be applied to a limited partnership to the extent that this does not contradict the rules of the present Code on the limited partnership.

      Article 88. The Founding Contract of a Limited Partnership

      1. A limited partnership shall be created and shall act on the basis of a founding contract. The founding contract must be signed by all general partners.

      2. The founding contract of a limited partnership must contain, in addition to the information indicated in Paragraph 2 of Article 53 of the present Code, terms on the size and composition of the contributed capital of the partnership; on the size and procedure for change of the shares of each of the general partners in the contributed capital; on the size of, composition of, periods for, and procedure for their contributing their investments; on their liability for the violation of obligations for the contribution of investments; and on the total size of investments contributed by the investors.

      Article 89. Management of a Limited Partnership and Conduct of Its Affairs

      1. Management of the activity of a limited partnership shall be conducted by the general partners. The procedure for managing and conducting the affairs of such a partnership by its general partners is established by them in accordance with the rules of the present Code on a full partnership.

      2. Investors do not have the right to participate in the management and conduct of affairs of a limited partnership nor to act in its name otherwise than by a power of attorney. They do not have the right to contest the actions of general partners in the management and conduct of the affairs of the partnership.

      Article 90. Rights and Duties of an Investor in a Limited Partnership

      1. An investor in a limited partnership has the obligation to contribute its investment in the contributed capital. The contribution of the investment shall be certified by a certificate of participation issued to the investor by the partnership.

      2. An investor in a limited partnership has the right:

      1) to receive the part of profit of the partnership due for its share in the contributed capital by the procedure provided by the founding contract;

      2) to be acquainted with the annual report and balance sheets of the partnership;

      3) at the end of the fiscal year to leave the partnership and receive its investment by the procedure provided by the founding contract;

      4) to transfer its share in the contributed capital or part of it to another investor or a third person. The investors shall enjoy a priority right before third persons for the purchase of a share (or parts of it) by analogy with the conditions and procedure provided by Paragraph 2 of Article 100 of the present Code. The transfer by an investor of the whole share to another person shall end his participation in the partnership.

      The founding contract of a limited partnership may also provide for other rights of an investor.

      Article 91. Liquidation of a Limited Partnership

      1. A limited partnership shall be liquidated upon the exit of all investors participating in it. However, the general partners shall have the right instead of liquidation to turn the limited partnership into a full partnership.

      A limited partnership shall also be liquidated on the bases for liquidation of a full partnership (Article 85). However, a limited partnership shall be maintained if at least one general partner and one investor remains in it.

      2. Upon liquidation of a limited partnership, including in case of bankruptcy, the investors shall have a priority right ahead of the general partners to receipt of

their investments from the property of the partnership remaining after satisfaction of the claims of its creditors.

      The property of the partnership remaining after this shall be distributed among the general partners and the investors in proportion to their shares in the contributed capital of the partnership unless another procedure is established by the founding contract or by agreement of the general partners and the investors.

# 4. Joint-Stock Partnership in Commendam

      Article 92. Concept of a Joint-Stock Partnership in Commendam

      A joint-stock partnership in commendam is a partnership in which, along with one or several participants conducting entrepreneurial activity in the name of the partnership and answering for the obligations of the partnership with all their property (general partners), there are participants (limited stockholders) who participate in the formation of a part of the contributed capital allocated into shares of stock and bear the risk of losses connected with the activity of the partnership within the limits of the value of shares of stock belonging to them.

Article 93. Rights and Obligations of Participants in a Joint-Stock Partnership in Commendam

            1. The position of general partners participating in a joint-stock partnership in commendam and their liability for the obligations of the partnership shall be determined by rules of the present Code on participants in a full partnership.

            2. Limited stockholders shall not participate in the conduct of entrepreneurial activity by the partnership. The rest of the rights and obligations of limited stockholders shall be determined by the rules of the present Code on participants in a closed joint-stock company to the extent that these rules do not contradict to the nature of a joint-stock partnership in commendam. 

# 5.      Limited Liability Company

      Article 94. Basic Provisions on the Limited Liability Company

      1. A limited liability company is a company founded by one or several persons, the charter capital of which is divided into shares of amounts determined by the founding documents; the participants in a limited liability company are not liable for its obligations; they bear the risk of losses connected with the activity of the company within the limits of the value of the investments contributed by them.

      Participants in the company who have not fully contributed their investments bear joint and several liability for its obligations within the limits of the value of the unpaid part of the investment of each of the participants.

      2. The firm name of a limited liability company must contain the name of the company and the words Ówith limited liability.Ô

      3. The legal position of a limited liability company and the rights and duties of its participants shall be determined by the present Code and the statute on limited liability companies.

      Article 95. Participants in a Limited Liability Company

      1. The number of participants in a limited liability company must not exceed thirty. Otherwise the company will be subject to transformation into a joint-stock company within a year and, upon expiration of this period, to liquidation by judicial procedure if the number of its participants is not reduced to the level established by the statute.

      2. A limited liability company may not have as a sole participant another business company consisting of one person.

      Article 96. Founding Documents of a Limited Liability Company

      1. The founding documents of a limited liability company are a founding contract, signed by its founders and a charter approved by them. If the company is founded by one person, its founding document is a charter.

      2. The founding documents of a limited liability company must contain, in addition to the matters listed in Paragraph 2 of Article 53 of the present Code, conditions on the size, composition, periods, and procedure for their contributing investments; on the size of the charter capital of the company; on the liability of participants for violation of the obligation to contribute investments; on the size of the charter capital of the company; on the composition and competence of the agencies of administration of the company and the procedure for their making decisions, including on questions decisions on which are taken unanimously or by a qualified majority of votes; and also on other matters provided by the statute on limited liability companies.

      Article 97. The Charter Capital of a Limited Liability Company

      1. The charter capital of a limited liability company consists of the value of the investments of its participants.

      The charter capital determines the minimum amount of the property of the company guarantying the interests of its creditors. The amount of charter capital cannot be less than the amount determined by the statute on limited liability companies.

      2. It is not permitted to free a participant in a limited liability company from liability for the obligation to contribute an investment to the charter capital of the company. This prohibition includes setoff of claims against the company.

      3. Not less than half of the charter capital of a limited liability company must be paid by its participants by the time of registration. The part of the company's charter capital remaining unpaid is subject to payment by its participants during the first year of activity of the company. In case of violation of this obligation the company must either declare a reduction of its charter capital and register this reduction by the established procedure, or cease its activity by way of liquidation.

      4. If at the end of the second or each following financial year the value of the net assets of a limited liability company is less than the charter capital, the company is obligated to report the reduction of its charter capital and to register its reduction by the established procedure. If the value of these assets of the company is less than the minimum amount of charter capital set by a statute, the company is subject to liquidation.

      5. A reduction of the charter capital of a limited liability company is allowed only after notification of all of its creditors. The latter have the right in this case to demand early termination or fulfillment of the respective obligations and compensation for damages.

      6. An increase of charter capital of a company is allowed after contribution by all its participants of their investments in full amount.

      7. By the decision of the general meeting of participants in the limited liability company taken by the majority of votes equal to two-thirds of votes of all participants in the company, the company may establish an obligation for its participants to contribute additional investments in proportion to their shares in the charter capital of the company. 

      Article 98. Management of a Limited Liability Company

      1. The highest body of a limited liability company is the general meeting of its participants.

      In a limited liability company an executive body (collegial or one-individual) shall be created that conducts the current management of its activity and reports to the general meeting of its participants. A one-individual body of administration may also be elected from among non-participants.

      2. The competence of the bodies of management of the company and also the procedure for their making decisions and acting in the name of the company shall be determined in accordance with the present Code by the statute on limited liability companies and the charter of the company.

      3. The following are in the exclusive competence of the general meeting of participants in a limited liability company:

      1) changing the charter of the company, changing the size of its charter capital;

      2) forming executive bodies of the company and terminating their powers early;

      3) approving annual reports and accounting balances of the company and distributing its profits and losses;

      4) deciding on the reorganization or liquidation of the company;

      5) electing the auditing commission (or the auditor) of the company.

      The statute on limited liability companies may also assign the decision of other questions to the exclusive competence of the general meeting.

      Questions assigned to the exclusive competence of the general meeting of participants in the company may not be transferred by them for decision by the executive body of the company.

      4. For review and approval of the correctness of the annual financial report of a limited liability company, it has the right to invite each year a professional auditor not connected by property interests with the company or its founders (an outside audit). Audit verification of the annual financial report of the company may also be conducted on demand of any of its participants.

      The procedure for conducting audit reviews of the activity of the company shall be determined by a statute and the charter of the company.

      5. Publication by the company of information on the results of conducting its affairs (or a public report) is not required with the exception of cases provided by the statute on limited liability companies.

      Article 99. Reorganization and Liquidation of a Limited Liability Company