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04.01.2024

Authorized capital of a lawyer’s office and a lawyer’s association: how much to determine?

When starting a lawyer’s office or lawyer’s association, in the decision on its creation and the statute, you must specify information about the size of the authorized capital. What amount should be specified?

According to part 2 Art. 9 of the Law “On State Registration of Legal Entities, Individuals – Entrepreneurs and Public Organizations” The unified state register must contain certain data about the legal entity, including (item 15) the size of the authorized (compounded) capital (unit fund) and the size of the share of each from the founders (participants).

For certain legal entities (banks, insurance companies) there is a requirement of a minimum amount of authorized capital. Its purpose is to protect the interests of creditors. The latter can (even theoretically) satisfy the requirements for a legal entity at the expense of the authorized capital.

But there are no requirements for the minimum size of the authorized capital of AB or JSC. That is, it should be, but its size can be formal 1 hryvnia. Then what is the point in it?

Authorized capital in the case of AB or AO hardly performs an economic function. Although some still focus on its size, evaluating the reputation and reliability of the counterparty. But there are doubts about this, because here it is necessary to know how the capital was formed (in money, property or intellectual property, which the founder can value up to a billion hryvnias).

And yet, in this case, it is not the size that matters, but the distribution of the founders’ participation in its formation. However, this does not apply to the office, because it is created by one lawyer, whose contribution will always be 100%.

For the bar association, it is worth considering that the participation of the founders in the formation of the authorized capital affects corporate relations (participation in the management of the joint-stock company), as well as the distribution of profits through the calculation and payment of dividends.

We will remind, according to Art. 96-1 of the Civil Code, corporate rights are acquired by a person from the moment of acquiring the ownership right to a share in the authorized capital of a legal entity.

In particular, the founders have the right to:

– to participate in the management of a legal entity in the manner determined by the founding document;

– to participate in the distribution of the profit of a legal entity and receive a part of it (dividends), if such a legal entity aims to receive profit.

– alienate shares in the company’s authorized (compounded) capital, securities, shares and other objects of civil rights certifying participation in a legal entity;

– to receive part of the property of a legal entity in the event of its liquidation.

Corporate relations are relations between participants of legal entities, including those that arise between them before the state registration of a legal entity, as well as relations between a legal entity and its participants regarding the emergence, exercise, change and termination of corporate rights.

The material was prepared by Dmytro Khutorny, Deputy Chairman of the NAAU Committee on Advocacy Practice

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