A unitary enterprise is a special form of commercial organisation characterised by the absence of ownership of the property at its disposal. This structure has unique features and advantages that allow it to function effectively in market conditions. Unitary enterprises can be public and private and play an important role in the country’s economy. This article will consider the main aspects of creating a unitary enterprise, including its legal status, functions, and importance in modern business.
Which Companies are Classified as Unitary Enterprises
A unitary enterprise is a business entity, a company that was created by one owner, who owns the property assigned to the company by right of ownership. The property of a unitary enterprise assigned to it by the owner is not divided into shares or deposits.
Features of Unitary Enterprises
It is possible to create a unitary enterprise from scratch, acting as a founder or as a result of the reorganisation of a company of another organisational and legal form.
Types of Unitary Enterprises
Unitary enterprises can be public and private. The name of a unitary enterprise must indicate the form of ownership: a state unitary enterprise or a private one. Companies can also create subsidiary unitary enterprises. In this case, the word “subsidiary” must be indicated in the name.
Founders
The founders of a unitary enterprise can be:
- An individual.
- A company of any form of ownership.
- A state body or organisation represents the state.
- A municipal entity is represented by the administration of a city, district, or district.
Regulation
The unitary enterprise operates based on the charter. The content of the articles of association is subject to the usual requirements for all companies.
The charter of a private unitary enterprise is approved by the company’s property owner. The charter must specify the size of the authorised capital and meet the general requirements for the content of the company’s charter.
We recommend prescribing the procedure for the owner’s seizure of property from the enterprise in the charter of a private unitary enterprise.
Authorized Сapital
A unitary enterprise’s authorised capital must be fully formed before state registration. The minimum size of the authorised capital is not defined for a unitary enterprise. However, it is necessary to specify in the charter:
- The founder’s decision adopts the size of the authorised capital.
- The composition of the authorised capital (property, property rights, money).
- The procedure for the formation of the authorised capital.
Property
In the case of a private unitary enterprise, its property does not belong to the enterprise but is owned by:
- The private property of an individual.
- Jointly owned by the spouses if the founder of a private enterprise has a spouse.
- Owned by an organisation that founded a private unitary enterprise or a company that established a subsidiary unitary enterprise.
Disposal of Property
A private unitary enterprise uses its property based on the right of economic management. It means the following:
- Without the owner’s consent, a unitary enterprise cannot dispose of real estate: sell, lease, pledge, contribute to the authorised capital of other companies and dispose of it in other ways.
- Concerning other property that does not relate to real estate, the owner may determine the order in which the unitary enterprise disposes of such property. If the owner has not established such an order, then the unitary enterprise independently disposes of its property on the right of economic management.
- The property owner has the right to receive a part of the profit from its use, which is under the economic management of a private unitary enterprise.
- The property owner controls how the enterprise uses the property and how it is stored.
Management of a Unitary Enterprise
The unitary enterprise is managed by a person appointed by the owner of the property (founder). The head is accountable to the owner of the property.
When an individual organises a unitary enterprise, it can be the head of the enterprise.
By the decision of the owner of a unitary enterprise’s property, the enterprise’s management can be transferred to a management organisation or a manager – an individual entrepreneur.
Powers of the Owner of a Unitary Enterprise
The owner of the property of a unitary enterprise in particular:
- Accepts and forms out on paper a decision on establishing a unitary enterprise.
- Defines the objectives of the company’s activities and gives written consent to the company’s participation in other organisations.
- Approves the company’s charter and forms and modifies its authorised capital.
- Appoints the head of a unitary enterprise and forms out labour or civil relations with him.
- Controls the use and storage of the company’s property and resolves issues regarding the seizure of this property from the company in cases defined in the charter.
- Decides on the reorganisation or liquidation of the enterprise.
- Gives written consent to create, liquidate, reorganise subsidiaries, and establish and close representative offices and branches.
Responsibility of a Private Unitary Enterprise and Its Owner
According to its obligations to creditors, a private unitary enterprise is responsible for all property belonging to it.
The unitary enterprise is not responsible for the obligations of the owner of the enterprise.
The owner of a unitary enterprise’s property is not liable for its obligations except in certain cases. For example, the owner’s liability will occur when a private unitary enterprise becomes bankrupt due to the owner’s intent and does not have the means to settle debts.
Subsidiary Unitary Enterprise
A subsidiary unitary enterprise is a company founded by one company (has one founder – the company). The property of a subsidiary unitary enterprise belongs to the founding company, and the subsidiary owns the property on the right of economic management.
A private unitary enterprise may establish a subsidiary unitary enterprise with the consent of the property owner, but a subsidiary cannot create unitary enterprises.
Appoints the head of the subsidiary and approves its charter by the founder.
Features of State Unitary Enterprises
State unitary enterprises in Belarus can be republican unitary and municipal unitary, depending on the level of the owner. The state or municipal entity fully owns the property of state unitary enterprises. Here are some of their features:
- Full state ownership of the company’s property
- Unitary enterprises are owned by the state or municipality, meaning they cannot have private owners. The property of republican unitary enterprises belongs to the state, and the enterprise owns the property on the right of economic or operational management.
- The property of municipal unitary enterprises belongs to administrative-territorial units: cities, districts, districts in cities, and municipal enterprises use such property on the right of economic management.
The right of operational management of property means the following:
- The state determines the limits of the disposal of property.
- State unitary enterprises own, use, and dispose of property in accordance with their objectives, the tasks of the property owner, and its purpose.
- Lack of shares in the company’s property. Employees and managers of unitary enterprises do not have the right to a share in their ownership, which distinguishes them from joint-stock companies.
Government Funding
Most often, they are financed from the budget, which affects their financial stability and activities.
Control and accountability to the state
State unitary enterprises are required to report to the founder.
What is the Advantage of Unitary Enterprises Over Enterprises of Other Organisational and Legal Forms
Unitary enterprises have several advantages over enterprises of other organisational and legal forms. Here are the main ones:
1. Lack of Competition from Shareholders
Unitary enterprises are not influenced by shareholders, which makes their management more stable and consistent. It allows them to focus on long-term goals rather than short-term profits.
2. Ease of Decision-Making
Unitary enterprises often have a simpler management structure, which allows them to respond quickly to changes in the external environment and society’s demands. However, this does not always apply to subsidiaries of unitary enterprises, for which decisions often require the property’s owner’s consent.
3. State Control
Unitary enterprises are burdened with some responsibilities within the framework of state control, which can ensure higher standards of quality of services and products.
Despite these advantages, unitary enterprises face several challenges, such as bureaucracy, restrictions on independence, and the need to perform public duties, which may limit their efficiency and flexibility.
What is the Significance of Unitary Enterprises in Modern Business?
Unitary enterprises play an important role in modern business for several reasons:
1. Management Efficiency
Unitary enterprises are subject to a single management, which allows them to make decisions quickly and exercise control over all processes. It is especially important in a competitive environment and rapidly changing market conditions.
2. Flexibility and Adaptability
Due to their status, unitary enterprises can quickly respond to changes in demand and the market situation. They can adapt to new conditions by changing production processes or product ranges.
3. Government Support
State-owned unitary enterprises often receive support from the state in the form of subsidies and tax incentives and also have access to government contracts. It contributes to their sustainability and development in conditions of economic instability.
4. Areas of Activity
Unitary enterprises can operate in various sectors of the economy, including manufacturing, services, science and technology. This diversity promotes development and innovation in individual industries.
5. Social Responsibility
Many unitary enterprises, especially state-owned ones, adhere to the principles of social responsibility, which is manifested in their contributions to regional development, job creation, and the maintenance of social programs.
6. Monopoly Position
In some cases, unitary enterprises may occupy a monopoly position in certain industries (for example, utilities), which allows them to cope with large volumes of supplies and provide the population with the necessary resources.
7. Investment Attractiveness
Despite certain limitations related to legal status, unitary enterprises can be attractive to investors due to their stability and reliability, especially in conditions of market uncertainty.
Thus, unitary enterprises significantly impact economic development and social well-being, combining elements of efficiency, stability, and responsibility.
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