Founders vs Participants of Entrepreneurial Companies: Legislation and Legal Doctrine’s Current Situation

Abstract

The author has analyzed the current situation of legislation and legal doctrine on understanding the categories of «founder» and «participant» of an entrepreneurial company. It has been concluded that there is no distinction between them in the current legislation, which allows certain experts to identify the specified concepts. The author has substantiated opinion that the concept of «founder» is used in relation to persons who created entrepreneurial companies.
It has been proved that the main primary reason for the emergence of corporate legal relations is the creation of a company. All founders and persons who subsequently joined those companies after the state registration of companies are called participants (shareholders, members) depending on its organizational and legal form. The parallel use of both terms is inappropriate. Further change in the membership of the company does not mean that new members should be considered as founders, since an entrepreneurial company was already created (registered) by the time of their membership.
Particular attention has been paid to the fact that every entrepreneurial company necessarily has a founder (founders), however, a founder does not always receive the status of its participant (shareholder, member), just like not every participant (shareholder, member) of such a company is automatically recognized as its founder. It has been substantiated that a founder is not a participant in corporate legal relations and cannot have any corporate rights.
The feature of «membership» is not enough to characterize corporate legal relations within the framework of entrepreneurial companies, since it is advisable to take into account the possibility of a person’s participation in the management of a corporation, and, as an optional criterion, the charter capital (with its division into shares) as an indicator for determining the management procedure (delineation of the number of votes for each participant).