The Director (who is also the owner) of the Private Enterprise suddenly died. His Deputy (this pisition is provided for in the Staff List) is the immediate relative – his son. There is a Power of Attorney authorizing him to sign official documents on behalf of the Private Enterprise. Does he have the right to manage the further activities of the Private Enterprise? Is it necessary in connection therewith to amend the Charter of the Private Enterprise or is PE subject to a compulsory dissolution in connection with the decease of the owner?
The legislation determines the following reasons for the dissolution of a legal entity:
- Voluntary decision made by the Founders (Participants) of the enterprise;
- Judgement of Economic Court;
- If only one Participant1 remains in the Family Enterprise.
As we can see, the decease of the Private Enterprise owner is not the reason for the dissolution of this PE2.
According to Article 17 of the Law “On Private Enterprise”, if it is found impossible to execute the duties of a Private Enterprise Manager due to his/her decease, it shall be managed in accordance with the Civil Laws and Charter of the Private Enterprise. Therefore, in the first place it is recommended to refer to the provisions of this constituent document.
The Manager’s right to issue the Power of Attorney on behalf of the enterprise is regulated by Article 14 of the said Law. As the Owner of the Private Enterprise issued the Power of Attorney to the Deputy Director for signing official documents issued on behalf of PE, such officer has the right to carry out temporary operating management of activities conducted by the Private Enterprise, provided that:
Such Power of Attorney is issued on behalf of the Private Enterprise, but not by the individual person – the owner of PE, since, according to the Civil Laws a Power of Attorney shall be terminated in connection with the decease of the issuing person (Civil Code, Article 141, Clause 6). The decease of a person carrying out management of a legal entity, on behalf of which the Power of Attorney is issued, is not provided for among the reasons for the termination of such a Power of Attorney. Please keep in mind that the Power of Attorney issued on behalf of a legal entity shall comply with the requirements of Civil Code, Article 138;
There are no other reasons for the termination of the Power of Attorney. Therefore, please pay your attention to the its expiration date (Civil Code, Article 139), fact of canceling the Power of Attorney or refusal from it and other circumstances provided for by the provisions of the Civil Code, Article 141;
The Charter of the Private Enterprise does not envisage another procedure or other conditions for the transition of management functions to another person due to the decease of its owner.
In our opinion, the authorized Deputy Director should carry out the following operating management actions:
To issue the Order on the termination of the labor contract with the PE Manager (Director) due to his/her decease (grounds – the Death Certificate issued by the Civil Status Registration Department);
To issue the Order on the payment of the burial allowance amounting to three-fold minimum wage if the deceased’s family members apply for provision of such allowance3;
To re-register the Specimen Signature Cards in the servicing bank (if temporary primary signatory authority was not previously registered to the Deputy Director). Thus, in accordance with Clause 35 of the Guidelines on Bank Accounts Opened in Banks of the Republic of Uzbekistan (registered by the Ministry Justice under No. 1948 dated 27.04.2009), when temporarily assigning primary signatory authority to a Senior Official (which is not a Manager), a temporarily authorized person’s Specimen Signature Card with the term of its validity (in the situation commented it shall not exceed the expiration time of the Power of Attorney) shall be also provided. According to these Regulations, the temporary Card shall be signed by the Manager. Therefore, when applying to the Bank, we recommend attaching a notarized copy of the Manager’s Death Certificate in addition to the Power of Attorney.
According to the Civil Code, Article 1113, inheritance includes all the rights and obligations that a Testator has at the time of inheritance release, the existence of which does not cease with his/her decease. Inheritance does not include rights and obligations that are inseparably linked with the Testator’s personality, including the right to participate in commercial organizations, which are legal entities, unless otherwise provided by the law or contract.
Given that the Owner of the Private Enterprise as opposed to members (shareholders, other interest holders or partners) in other commercial organizations during the transition of the ownership of the Private Enterprise executes the non-property right (sole participation right) and the enterprise as a property complex, the Private Enterprise (as a property complex) after the Owner’s decease shall be included to the inheritance assets4. Therefore, the Deputy Manager – the Heir of the deceased should apply to a Notary Public at the place of the deceased PE Owner’s registration with a report on the inheritance released and application for acceptance thereof5. Despite the fact that, as a general rule, a Certificate of Inheritance shall be issued on the expiry of 6 months from the date of inheritance release, this period may be substantially shortened if the Notary Public is aware of an exhaustive range of persons entitled thereto (Civil Code, Article 1146). Prior to the receiving of such Certificate, it is advisable for the Heir (Deputy Manager) to apply to a Notary Public with a request to appoint him/her as a Manager of the Private Enterprise, which is an inheritable property (Civil Code, Article 1144; Law “On Notaries Public”, Article 54).
Once the inheritance is accepted by the heirs, the Charter of the Private Enterprise shall be amended accordingly, having updated the provision about its new owner.
BAKER TILLY UZBEKISTAN
Audit and Consulting Group of Companies
Head of Legal Practice
“ANCORA Consulting and Legal Service” Law Firm
Deputy Managing Partner
1Clause 1.3 of the Regulations on Procedure of Dissolution of Enterprises That Do Not Carry out Financial and Economic Activities and That Did Not Form Their Statutory Funds in Terms Established by Law (approved by Resolution of the Cabinet of Ministers dated 03.07.199 No. 327, hereinafter referred to as the “Regulations No. 327″).
2However, in the absence of heirs of the deceased, the procedure for the dissolution of the Private Enterprise, in our opinion, may be initiated by the registering authority, similarly to Section 5 of Regulations No. 327.
3Term of the application for the funeral allowance shall not exceed 6 months. It shall be paid once, together with the salary for the second half of the month (refer to the Regulations on Appointment and Payment of Allowances on State Social Insurance, registered with the Ministry of Justice under No. 1136 dated 08.05.2002).
4Civil Code, Article 85, Part 1; Law “On Private Enterprise”, Article 27, Part 1; Resolution of the Plenum of Supreme Court “On Enforcement of Entitlement to Inherit by Courts” (No. 05 dated 20.07.2011), Clause 3.
5Law “On Notaries Public”, Articles 49 and 50. At the same time, the possibility of having a testament is not ruled out.