Before starting your business activity and wondering how to register a company in Armenia, it is very important to choose the right legal form of business. In the previous publication, we talked about the differences between IE and legal entities. Within the framework of this article, we will reflect more carefully on what are the differences between legal entities with different organizational and legal structures and which form is suitable for your business activity.
What are the types of legal entities in RA?
The most common types of legal entities in the Republic of Armenia are limited liability companies (LLC) and closed or open joint-stock companies (CJSC, OJSC), but the legislator also provided for the establishment of cooperatives, additional liability companies, general partnerships, etc.
LLCs and JSCs have significant differences, and from the point of view of corporate governance and investment attraction, the differences between these two legal forms deserve the most attention.
What is a limited liability company?
According to the current regulations, a limited liability company is considered a company founded by one or more persons, the authorized capital of which is divided into shares of the size determined by the company’s charter.
What is a joint-stock company?
A company whose capital is divided into a certain number of shares ensuring the binding right of shareholders to the Company is considered a joint-stock company. Previously, these shares were documentary (voucher), but according to today’s regulations, companies can issue only non-documentary shares. By acquiring a share, a person receives appropriate rights for management, for dividends, and some part in case of liquidation of the company. The features of these rights are differentiated according to the types of shares: ordinary and preferred shares. Moreover, each of them can have its own classes.
What do LLCs and JSCs have in common?
- Can be founded by one person;
- Participants and shareholders are not responsible for the company’s obligations, but only bear the risk of losses related to the company’s activities, of losing their investments;
- Have the right to issue bonds.
How can a participant leave the LLC?
The participant of the LLC has the right to leave the company at any time, regardless of the consent of the company or its participants, and demand that the LLC compensate him with an amount equivalent to his share or provide property. Moreover, the participant of the LLC can be forced to leave the Company. So, the participant(s) of the company, who financially own at least 10 percent of the company’s share, have the right to demand the removal from the company of another participant of the company, if he makes the normal activity of the company difficult or impossible by his actions or inaction.
Does the same procedure apply to joint-stock companies?
No, in the case of joint-stock companies, such procedure does not apply, the shareholder can leave the company by selling his share. This means that from the point of view of business management, the JSC is more stable, because in the case of an LLC, there is a risk that your partner can leave the company at any time, taking a part of the LLC. The shareholders of a joint-stock company are more guaranteed.
What are the features of registration in case of LLC and JSC?
Both LLC and JSC are registered by the State Register of Legal Entities.
Management of the register of companies
According to the law, the register of joint-stock companies must be handed over to the RA Central Depository through its Account Operators (you can get acquainted with the list of RA Central Depository Account Operators). In the case of LLCs, the register of participants is maintained by the Agency of the State Register of Legal Entities of RA, the list of participants is included in the charter. Another feature of this is that the list of participants of LLCs is open information and can be provided by the RA Legal Entities Registry Agency, while in the case of JSC, the list of shareholders is confidential for third parties. The maintenance of the register of joint-stock companies in the RA online registry is paid, meanwhile, the maintenance of the register of LLCs is free.
Features of management of joint-stock companies
Joint-stock company’s shareholders have the opportunity to conclude a shareholders’ agreement, which is an agreement on the specifics of the exercise of rights to shares. This agreement is characterized as a form of effective exercise of management rights of the shareholders of the joint-stock company.
Still wondering how to register a company in Armenia?
Our legal team will be happy to provide legal advice on the right choice of the legal form of your company.