Business Organizations.

a. Corporations.

(i) Formation.

The basic document of the Russian joint-stock legislation is the RF Federal law On Joint-Stock Companies of 26 December 1995 with latest amendments from 6 April 2004 (hereinafter “the law On Joint-Stock Companies”). Considerable amendments to this Law have been also introduced in 2001.

A joint-stock company is formed by incorporators (individuals and legal entities) acting on the basis of a foundation agreement (written form required), which determines the procedure for their joint activities for the foundation of the company, the value of the charter capital of the company, categories of shares to be issued and the procedure of their distribution and also other conditions provided by the law on joint-stock companies. In case there is only one incorporator, details set forth above are laid down in a written decision to establish a company (Art. 98 of the RF Civil Code, Art. 9 of the law On Joint-Stock Companies).

There are two types of corporations in Russian law: open and closed joint-stock companies. The basic distinction is that open joint-stock companies may carry out public and private placement of shares, their shareholders may freely trade shares. Closed or closely held joint-stock companies may only carry out private placements of shares. Shareholders of closed joint-stock companies have first refusal right in case of sale of shares by a shareholder to outsiders (Art. 7 of the law On Joint-Stock Companies).

Contributions (payment for shares) can be made by money, property and economic rights. When shares are paid up in kind an independent appraisal of the market value of contributions is required (Art. 66 (6) of the RF Civil Code, Art. 34 (3) of the law On Joint-Stock Companies).

Contribution is required, no shares may be issued gratuitously or to set off existing claims against the company. Cumulative par value of shares constitutes a charter capital. A minimal capital investment equal to 1000 minimal statutory monthly wages (MSW) is required to incorporate an open joint-stock company and 100 MSW to incorporate a closed joint-stock company (Art. 99 (1) (2) of the RF Civil Code, Art. 34 (2), 25 and 26 of the law On Joint-Stock Companies). For companies engaged in certain types of business (banks, insurance companies and others) higher amounts of initial capital are required.

A corporation is deemed to be formed at the moment when it is registered by the government. At least 50% of the charter capital contributions must be physically contributed within 3 months after the registration. The first issue of shares must be distributed between incorporators only, it may never be a public offering.

The registration procedure is governed by The RF Federal law On State Registration of Legal Entities and Individual Entrepreneurs of 8 August 2001 (as amended), which is described above.

A charter of a joint-stock company is the only constituent document. It defines the name and address of the corporation, categories of shares and quantity thereof, amount of charter capital, structure and competence of management bodies, shareholders rights, procedure of preparing and carrying out the shareholder’s general meeting, information on branch and representative offices of the company and other provisions required by federal laws (Art. 98 (3) of the RF Civil Code, Art. 11 (3) of the law On Joint-Stock Companies).

(ii) Shareholders.

Both individuals and legal entities, including foreign citizens and foreign companies, may become the company’s shareholders. State bodies may become shareholders only in cases justified by the strategic interests, defense and security of the Russian Federation, protection the rights of citizens and other cases specifically provided by the law (Art. 66 (4) of the RF Civil Code).

Shareholders have the right to participate in management of the company and in distribution of the company’s profit. They have the right to receive a part of the company’s assets in case of its liquidation, receive information and documents related to activity of the company and exercise other rights provided by the law and the company’s charter (Art. 67 (1) of the RF Civil Code).

Rights and obligations of shareholders depend on the type of the joint-stock company (i.e. whether it is an “open” or “closed” one) and on the type of shares owned by them (“common shares” or “privileged shares”).

Shareholders of open joint-stock companies may trade their shares freely (Art. 97 (1) of the RF Civil Code, Art. 7 (2) of the law On Joint-Stock Companies).

Shareholders of closed joint-stock companies have the right of first refusal in case of sale of shares by a shareholder to outsiders (Art. 97 (2) of the RF Civil Code, Art. 7 (3) of the law On Joint-Stock Companies).

Common shares confer upon their owners the right to vote on all issues handled by the general meetings of shareholders (the “GMS”). They do not provide for the fixed dividends. The amount of dividends paid to the owners of common shares depends on the financial results of the company’s activities and is determined by the annual GMS following recommendations of the Board of Directors (Art. 31 (2) and 42 of the law On Joint-Stock Companies).

Privileged shares do not, with some exceptions (such as voting on the issues of reorganization or liquidation of the company), provide for voting rights. Privileged shares ensure guaranteed dividend. Holders of such shares have the priority in distribution of the company’s assets in case of its liquidation before the holders of common shares (Art. 32 and 23 (1) of the law On Joint-Stock Companies).

The law provides for dissenters’ rights: minority shareholders who are adversely affected by decisions and actions taken by majority shareholders have the right to sell their shares to the company at the market value (Art. 75 and 76 of the law On Joint-Stock Companies). The law on joint-stock companies contains a number of other instruments for minority rights protection.

The latest amendments to the law on Joint-Stock Companies provide for additional security from dilution of shareholders’ holding in the company, such as: the pre-emptive right of shareholders to acquire additional shares placed under open subscription in all cases, not only when the charter provides for it (the general meeting of shareholders may not decide to waive this right); the pre-emptive right of shareholders to acquire shares placed under the closed subscription in certain cases (Art. 40 (1) of the law On Joint-Stock Companies).

A six months period of limitation is set forth for challenging by a shareholder of decisions of the general meeting of shareholders (Art. 49 (7) of the law On Joint-Stock Companies).

(iii) Liability and Bankruptcy.

In case a company fails to pay debts, execution may be levied on its property. A company is not liable for obligations of its shareholders (Art. 3 (1) (2) of the law On Joint-Stock Companies). The procedure of bankruptcy is governed by the law On Insolvency (Bankruptcy) of 26 October 2002, which is discussed in more details in chapter 21.

(iv) Management and Representation.

The following bodies run the business of a joint-stock company: (a) a general meeting of shareholders (“GMS”); (b) a board of directors (optional for companies with less than 50 shareholders; hereinafter “Board of Directors”); and (c) an executive organ, i.e. a director or a general director (hereinafter “General Director”) or an executive board which may function along with a General Director.

GMS is the highest managing body of the joint-stock company. The law defines matters constituting the competence of this body as well as the detailed procedure of convening and conducting the meeting (Art. 103 of the RF Civil Code and Art. 47-63 of the law On Joint-Stock Companies). The charter of the company may not extend the competence of the general meeting beyond the issues specified in the law. In case a company has only one shareholder all matters reserved for GMS will be decided by such a shareholder.

The Board of Directors carries out the overall management of the company’s activities, except for the issues falling under the competence of the GMS. Number of its members should be defined by the Charter of company, shall not be less then five persons. The Board of Directors is elected for one year by means of cumulative voting and may be reelected by the decision of GMS (Art.66 of the law On Joint-Stock Companies). Art. 65 of the law On Joint-Stock Companies defines matters of competence of this body, which may not be delegated to other managing bodies of the company.

The General Director runs current business of the company. It may handle all issues of the daily activities of the company, except for those related to the competence of the GMS and the Board of Directors (Art. 69 of the law On Joint-Stock Companies). Powers of a General Director may be limited by the charter.

The General Director represents the company and acts on its behalf, in particular by entering into transactions (Art. 69 (2) of the law On Joint-Stock Companies). Election of a General Director is generally related to the competence of shareholders meeting, but may be delegated to the competence of the Board of Directors by the charter (Art. 48 (1) and 65 (1) of the law On Joint-Stock Companies). If an executive body is elected and dismissed by the shareholders meeting, the charter may authorize the Board of Directors to suspend its powers (Art. 69 (4) of the law On Joint-Stock Companies).

An individual entrepreneur (the manager) or a company (the managing company) may be contracted to fulfill the functions of the executive body of a joint-stock company as a managing agent (Art. 103 (3) of the RF Civil Code and Art. 69 (1) of the law On Joint-Stock Companies).

(v) Profit and Losses.

The profit of the joint-stock company may be allocated for payment of dividends or reinvested by the decision of GMS (Art. 42 of the law On Joint-Stock Companies).

The company may pay dividends quarterly, annually or semi-annually. Dividends are paid from the profit left after the taxation (net profit) (Art. 42 (1) (2) of the law On Joint-Stock Companies).

The company may not pay dividends to its shareholders, if it is insolvent or may become insolvent as a result of payment the dividends, or if the amount of the company’s assets falls below certain limit, and in some other cases (Art. 102 (3) of the RF Civil Code and Art. 43 of the law On Joint-Stock Companies).

A joint-stock company must establish a Reserve Fund for the purpose of covering its losses, that should amount to at least 5% of the charter capital (Art. 35 (1) of the law On Joint-Stock Companies).

In case the amount of the company’s net assets at the end of the second and each following year of the company’s activities becomes less than the amount of the charter capital, the company must correspondingly decrease its charter capital. If the amount of such assets becomes less than the minimum amount of the charter capital, established by the law, the company should take a decision on liquidation (Art. 35 (4) (5) of the law On Joint-Stock Companies). Otherwise creditors of the company gain the right to pre-term performance and compensation of damages.

(vi) Termination.

A joint-stock company may be liquidated after a voluntary decision of GMS, in particular, in connection with the expiration of the time limit or achievement of the purpose for which it was created, or by the court. The latter kind of liquidation can take place if the company is insolvent, carries out forbidden activities and in some other cases, specified by the law (Art. 61 (2) and 104 (1) of the RF Civil Code and Art. 21 (1) of the law On Joint-Stock Companies).

A procedure of liquidation and ranking of creditors’ claims is defined in Art. 61-64 of the RF Civil Code and Art. 21-24 of the law On Joint-Stock Companies. Assets remaining after settlements with the creditors are distributed between the company’s shareholders, subject to the ranking established by the law (Art. 23 of the law On Joint-Stock Companies).

The company is considered liquidated when the relevant record is entered into the State Register of legal entities (Art. 24 of the law On Joint-Stock Companies).

(vi) Liability of directors and managers.

Members of a Board of Directors, collegiate executive body, and the general manager must comply with statutory and contractual obligations and act in the interests of a company in good faith and rationally. They are liable before the company for losses caused by their negligent or deliberate actions (or failure to act) (Art. 53 (3) of the RF Civil Code and Art. 71 of the law On Joint-Stock Companies). Members of the collective body who voted against a decision which caused the losses to the company or who did not take part in such vote are not liable. In case acts of several persons were conductive to the damage caused, these persons are jointly and severally liable. The action for damages may be initiated by a company itself or by a shareholder(s) owning at least 1 per cent of company’s shares (Art. 71 (2) (4) (5) of the law On Joint-Stock Companies).

Apart from civil (material) liability in a form of compensation of damages and/or penalties, an executive officer may be subject: disciplinary (labour), administrative and criminal liability. The scope of liability fully extends to foreigners who hold a position of an executive officer of a Russian legal entity.

An executive officer may be subject to administrative and/or criminal liability both for (a) violations of its statutory duties before a company and (b) for non-compliance with the rules and conditions of business and other activities by a company itself (labour and work safety rules, tax, currency and antimonopoly regulations, etc.). For instance, an executive officer is subject to administrative fines and/or disqualification for abuse of authority. Abuse of authority inflicted substantial harm or other grave consequences, and commercial bribery may entail a criminal prosecution initiated by a company’s private complaint.

An executive officer is subject to disciplinary liability in case of violation any of labour obligations provided for by a labour contract, collective agreements, local acts of a company and labour law. Disciplinary liability may take such forms as (a) a notice, (b) a reprimand or (c) a dismissal.

(vii) Liability of Shareholders.

Shareholders generally are not liable for obligations of the company; although shareholders that did not pay for companies shares in full, may be required to contribute the balance due to cover debts of the company (Art. 2 (1) of the law On Joint-Stock Companies).

Shareholders and other persons which by virtue of their participation or otherwise may give binding directives or influence in other way acts of a joint-stock company bear subsidiary (vicarious) liability for obligations of such company before third parties if they have used their influence to cause actions of a corporation, which resulted in a corporation becoming insolvent (Such liability takes place only if the shareholder knows that its actions will cause bankruptcy.). Shareholders of subsidiaries have the cause of action against the principal (mother) company for damages caused to a subsidiary by an action taken by the subsidiary under the directive or influence of such principal company (Art. 56 (3) and 105 (3) of the RF Civil Code and Art. 3 (3), 6 (3) of the law On Joint-Stock Companies).

b. Limited Liability Companies.

(i) Formation.

A limited liability company is a company with a charter capital divided into members’ participatory shares. Member’s shares may be of equal or different par value (portion of charter capital).

A limited liability company is formed by incorporators acting on the basis of foundation agreement (in written form) governing the procedure for incorporation and running of the company including such details as the value of the charter capital of the company, the value of share of each company’s member, contributions to the company’s capital and the procedure and deadlines for making such contributions, the structure of management bodies, the procedure and conditions of distribution of the company’s profit among its members, and other conditions provided by the law on limited liability companies. Foundation agreement and charter are constituent documents of a limited liability company. They determine the legal standing of the company as well as rights and obligations of its members (Art. 89 of the RF Civil Code of the RF and Art. 11 and 12 of the law On Limited Liability Companies).

In case there is only one incorporator, a company is formed by a written decision of such incorporator, which is not a constituent document of the company and may omit some terms, which are required for foundation agreement.

Both individuals and legal entities, including foreign citizens and foreign companies, may become company members. State bodies may become members only in cases specifically provided by the law. The total number of the company’s members may not exceed 50 (Art. 66 of the RF Civil Code of the RF and Art. 7 of the law On Limited Liability Companies).

Startup investments (payment for shares in a company) can be made by money, property and economic rights. An investment is required, no shares may be acquired gratuitously or by setting off against the existing claims against the company. Cumulative par values of members’ shares constitutes a charter capital. Minimal charter capital of 100 minimal statutory monthly wages (MSW) is required for a limited liability company (Art. 14-16 of the law On Limited Liability Companies). For companies engaged in certain types of business (e.g. bank services, insurance activity, etc.) higher amounts of charter capital are required.

A limited liability company comes into existence at the moment when it is registered by the government (companies registrar). 50% of the charter capital investments must be physically contributed (for money - deposited on a special bank account, for other property given to a designated trustee) before the registration. The remaining part of investments must be made within the deadlines set forth by the foundation agreement (which may not exceed one year from the moment of the state registration of the company) (Art. 51 (2), 90 (3) of the RF Civil Code of the RF and Art. 2 (3), 16 of the law On Limited Liability Companies). A certificate of registration issued by a companies registrar confirms the standing of the company.

The Charter of the company defines the name and address of the company, the amount of charter capital, the value of share of each company’s member, the structure and competence of management bodies and procedure of taking decisions, members’ rights and obligations, information on branch and representative offices of the company and sets forth other required details, provided by the law (Arts. 12 and 5 (5) of the law On Limited Liability Companies).

Members of a limited liability company have the first refusal right in case of sale of shares to outsiders by other members. Charter may stipulate the first refusal right of the company itself. A company charter may prohibit transfer of a share (or part thereof) to outsiders. Normally the shares are automatically transferred to universal successors (such as heirs) of a member. However, a charter of the company may provide that universal successors (such as heirs) of a member may become a member only from consent of other members, and in the absence of such consent are only eligible to receive compensation (Art. 93 of the RF Civil Code of the RF and Art. 21 of the law On Limited Liability Companies).

A member of a limited liability company may terminate his membership at any time at his discretion. In such a case he is entitled to receive compensation (determined by reference to his share in net assets of the company) payable by money or in kind within 6 months after the end of the fiscal year in which he declared exit from the company (Art. 94 of the RF Civil Code of the RF and Art. 26 of the law On Limited Liability Companies).

(ii) Liability and Bankruptcy.

Claims against a limited liability company may be recovered at the expense of any and all of its property. A company is not liable for the obligations of its members (Art. 3 of the law On Limited Liability Companies). The members are not liable for obligations of company as well, except for cases when the members haven’t paid entirely their shares (Art.87 of the RF Civil Code of the RF). The procedure of bankruptcy is governed by the law on Insolvency (Bankruptcy) of 26 October 2002 which is discussed in more details in chapter 21.

(iii) Management and Representation.

The following bodies run the business of a limited liability company: (a) a general meeting of members (“GMM”); (b) a board of directors which is optional (“Board of Directors”); and (c) an executive organ represented by a director or a general director (“General Director”) or also by an executive board...

GMM is the highest managing body of a limited liability company. The law defines matters constituting the exclusive competence of this body as well as the detailed procedure of convening and conducting the meeting. Charter of a company may extend the competence of a general meeting beyond the issues of mandatory (exclusive) competence specified in the law (Art. 91 (2) (3) of the RF Civil Code of the RF and Art. 33-38 of the law On Limited Liability Companies). If a limited liability company has only one member, decisions on the issues of GMM’s competence are made by such member solely in a written form. In this situation provisions of the law on the procedure of convening and conducting general meetings do not apply, except for those establishing deadlines for conducting annual GMM (Art. 39 of the law On Limited Liability Companies).

The voting power of members in GMM is proportionate to par value of their shares unless charter provides otherwise (Art. 32 (1) of the law On Limited Liability Companies).

Board of Directors is optional for limited liability companies. Competence of Board of Directors is determined by charter, provided that Board of Directors may not handle those matters, which are within the exclusive competence of GMM, subject to some exemptions, provided by Art. 32 (2) of the law On Limited Liability Companies.

General Director runs current business of the company. A collective executive body may exist along with General Director. General Director handles all issues of the daily activities of the company, except for those within the competence of GMM, Board of Directors and a collective executive body. Powers of General Director may be limited by charter or other constitutive documents (Art. 32 (4) and 40 of the law On Limited Liability Companies).

General Director represents the company and acts on its behalf, in particular by entering into transactions. Election of General Director may be related to the competence of GMM or to the competence of Board of Directors (Art. 40 and 32 (2) of the law On Limited Liability Companies).

Where charter of a company expressly provides so, the powers of the executive body of a limited liability company may be transferred to a managing agent (an individual or a company) on the contractual basis (Art. 42 of the law On Limited Liability Companies).

(v) Profit and Losses.

The net profit of a limited liability company may be used for reinvestment into company’s business and/or distributed among its members(Art. 28 of the law On Limited Liability Companies).

A company may distribute the net profit among its members once in a quarter, half of the year and/or once a year. GMM has an exclusive competence to determine which part of the net profit of the company shall be distributed among its members. Such net profit is distributed pro rata the member’s shares in the company’s capital, unless otherwise provided by the company’s charter (Art. 28 of the law On Limited Liability Companies).

A company may not distribute its profit among the members, if its charter capital has not been fully paid up, if the company is insolvent or will become insolvent as a result of such distribution, if the amount of the company’s assets is below certain limit, and in other cases provided by the law on limited liability companies and other federal laws (Art. 29 of the law On Limited Liability Companies).

A limited liability company may maintain a Reserve Fund for the purpose of covering its losses and other funds (Art. 30 of the law On Limited Liability Companies).

In case the amount of the company’s net assets at the end of the second and each subsequent year of the company’s activities becomes less than the amount of the charter capital, the company must correspondingly decrease its charter capital. If the amount of such assets becomes less than the minimum amount of the charter capital established by the law (which was effective on the date of the state registration of the company), the company must be liquidated (Art. 20 of the law On Limited Liability Companies).

(vi) Termination.

A limited liability company may be liquidated by unanimous action of the GMM, or by the court. Causes for mandatory liquidation are limited to insolvency, involvement in forbidden activities and some other cases, specified by the law (Art. 61 and 92 of the RF Civil Code of the RF and Art. 57 of the law On Limited Liability Companies).

A procedure of liquidation and ranking of creditors’ claims is defined in Arts. 62-64 of the RF Civil Code of the RF except for liquidation in case of bankruptcy. Assets remaining after settlements with the creditors are distributed among the members, subject to the ranking, established by the law (Art. 58 of the law On Limited Liability Companies).

The company is considered liquidated when the relevant record is entered into the State Register of legal entities (Art. 63 (8) of the RF Civil Code of the RF).

(vii) Liability of Members.

Members of a limited liability company generally are not liable for the obligations of the company. Members that did not make their investment in full, may be required to pay in the balance due to cover debts of the company (Art. 56 (3) of the RF Civil Code of the RF and Art. 87 (1) of the law On Limited Liability Companies).

Members and other persons which by virtue of their participation or otherwise may give binding directives or influence in other way acts of a limited liability company bear subsidiary (vicarious) liability for obligations of such company before third parties if they have used their influence to cause actions of the company, which resulted in the company becoming insolvent. Members of subsidiaries have the cause of action against the principal (mother) company for damages incurred by a subsidiary as a result of an action taken under the directive or influence of such principal company (Art. 56 (3), 105 (3) of the RF Civil Code of the RF and Art. 3 (3), 6 (3) of the law On Limited Liability Companies).

Members who violate their obligations or render impossible or substantially interfere the company’s activities may be excluded from the company’s members by the court upon the petition of other members jointly holding at least 10 per cent of the company’s shares (Art. 10 of the law On Limited Liability Companies).

(viii) Supplemental Liability Companies.

The Russian law provides for a type of a company similar to a limited liability company - the supplemental liability company. It is regulated by the same rules as set forth for limited liability companies, subject to the following exemption: its members jointly are vicariously liable before third parties for obligations of the company, but such liability is limited by a certain amount determined by multiplying the value of their shares by a certain index determined in constituent documents (Art. 95 of the RF Civil Code of the RF).

c. Partnerships.

(i) Formation.

A partnership is a commercial (business) organization with partnership capital divided into share parts. The Russian law defines two forms of incorporated partnerships: unlimited (general) partnership and limited partnership. Both forms of partnerships are legal entities. It is important to distinguish them from an unincorporated partnership (joint venture): the term “simple partnership” is used by the law to refer to co-partnership acting on the basis of the contract for joint activities (section 55 of the RF Civil Code of the Russian Federation). Such partnership is not a legal entity and therefore is not considered here.

A partnership is formed on the basis of the contract for unlimited partnership/limited partnership (partnership agreement) by at least two parties. The agreement is signed by all partners of unlimited partnership and by all general partners of a limited partnership. The partnership agreement shall include the following stipulations: name of partnership, its domicile, rules of management of partnership, total amount and composition of partnership capital, total amount and composition of capital contributions by partners, rules of changing of shares of each partner in partnership, rules for making capital contributions, and liability for breach of such rules. Besides that, the partnership agreement for limited partnership shall stipulate total amount of capital contributions made by limited partners. The partnership agreement must be made in written form and be signed by all its parties (Art. 70 and 83 of the RF Civil Code of the RF).

A partnership is deemed duly organized and acquires the status of legal entity from the moment of registration of a partnership agreement by companies registrar. Before such registration rights and liabilities of partners are determined by analogy with unincorporated partnership.

Only individual entrepreneurs and commercial (business) organizations may become general partners in unlimited partnerships and general partners in limited partnerships. A person may act as a general partner in the only partnership. A partner has the right to withdraw from the partnership at any time, subject to advance notice and certain other requirements (Art. 66 (4), 69 (2), 82 (3) and 77 of the RF Civil Code of the RF).

(ii) Liability and Bankruptcy.

Partnerships are liable with all their assets. Partnerships are subject to bankruptcy proceedings according to general rules provided by the Russian law.

(iii) Management and Representation.

An unlimited partnership is managed by the mutual consent of all its general partners. The foundation agreement of an unlimited partnership may provide for cases when a decision must be taken by the majority of general partners. Each partner has one vote, unless the partnership agreement provides otherwise. Limited partners do not participate in the management of partnership (Art. 71 and 84 of the RF Civil Code of the RF).

In relations with third parties the partnership may be represented by any partner acting alone, unless the foundation agreement specifies that the partnership shall be represented by several, all or specifically designated partners. In a latter case, other partners of the partnership may act on behalf of the partnership on the basis of a power of attorney (Art. 72 of the RF Civil Code of the RF).

A limited partnership is managed by its general partners. Such management must be carried out in accordance with the same rules as described above for unlimited partnerships. “Limited partners” may not act on behalf of the partnership, unless they are authorized to do so by a power of attorney (Art. 84 of the RF Civil Code of the RF).

(iv) Profits and Losses.

Profits and losses of an unlimited partnership/limited partnership are distributed between the partners pro rata to their shares in the partnership capital, unless otherwise provided by the partnership agreement. No one of the partners may be excluded from allocation of profit and losses (Art. 74 of the RF Civil Code of the RF). In case of liquidation of a limited partnership, limited partners shall have the priority before general partners in recovering their contributions to the partnership’s capital (Art. 86 (2) of the RF Civil Code of the RF).

If net assets of partnership become less than the amount of the partnership capital, no distributions to partners shall be made (Art. 74 (2) of the RF Civil Code of the RF). However, the partners in such situation are not required to replenish value of assets to the declared level of partnership capital.

(v) Termination.

Special grounds are provided by the law for termination of partnerships.

Unless a partnership agreement provides otherwise, a partnership is liquidated when (i) a partner withdraws from the partnership or dies, is declared missing, fully or partially incapable or insolvent; (ii) a partner is subject to involuntary reorganization by court decision; (iii) a partner legal entity is liquidated, or (iv) partner’s creditor enforces its claims against the partner’s share in the partnership (Art. 76 and 81 of the RF Civil Code of the RF).

A partnership is terminated if it becomes to include the only partner provided that this remaining solo partner instead of terminating the partnership may elect to reorganize it to company (Art. 81 of the RF Civil Code of the RF).

A limited partnership must be terminated if all limited partners leave the partnership with the provision that in such a case general partners have an option to reorganize the limited partnership into an unlimited one instead of liquidation. A limited partnership does not have to be liquidated, if at least one full partner and one limited partner remain in the company (Art. 86 of the RF Civil Code of the RF).

General provisions for liquidation of legal entities are valid for termination of partnerships. This relates to (i) a voluntary decision on liquidation taken by the companies general partners, or (ii) a decision on liquidation taken by the court. The latter ground for liquidation can take place if the company suffers insolvency, carries out forbidden activities and in some other cases, specified by the law (Art. 61 and 81 of the RF Civil Code of the RF).

(vi) Liability of Partners.

General partners are vicariously liable for partnership obligations with all their assets. This liability continues to exist for two years after retirement of a partner from partnership (Art. 69 and 75 of the RF Civil Code of the RF).