The commentary to Article 70 of the Civil Code speaks about the subsidiary joint liability of the founders of a general partnership for its debts; Article 84 of the Civil Code - about the subsidiary liability of participants in the TDO, and paragraph 3 of Article 96 of the Civil Code - about the subsidiary liability of members of a production cooperative for debts of the last Civil Code of the Republic of Kazakhstan  

These are all cases when the founders (participants) of a legal entity are responsible for its debts, regardless of whether they are guilty of incurring debts. But the commented article also provides for the guilty liability of the founders for the debts of the legal entity they created. So, if the insolvency is caused by the actions of the founder, for example, by his instructions on which transactions, with whom and on what terms should be concluded by a legal entity, then the legitimate interests of creditors in the event of bankruptcy of this legal entity are secured by the additional responsibility of the founder.

The responsibility of the main business partnership for the debts of its subsidiary business partnership is similar (Clause 2, Article 94 of the Civil Code).  

As a follow-up to this provision, paragraph 6 of Article 52 (previously 69) of the Law on Business Partnerships states: "In the event of forced liquidation of a company, the company's officials shall bear property liability to creditors for the company's obligations if the company's property is insufficient to pay its obligations, if the officials are guilty of gross negligence in the performance of their duties or in their non-fulfillment, and if the specified fulfillment or non-fulfillment of their duties directly led to the forced liquidation of the company."

The additional liability of the founders (participants) of legal entities for the debts of the latter may be established by the constituent documents.

However, no constituent documents of an open joint-stock company have the right to impose additional liability on the shareholders for the debts of the joint-stock company.  

The general legal status of a legal entity does not allow for its liability for the personal debts of its founders, participants, and employees. However, the property of a legal entity to which its founders (participants, employees) have a binding right may be subject to voluntary or compulsory liability (by court order). Thus, the collection of an employee's debts may be directed to his unpaid wages, and the collection of debts of a member of an economic partnership or a member of a cooperative may be directed to the share (share) of this member of the partnership (cooperative member) in the property of a legal entity (see Articles 69, 83, 100 of the Civil Code).

This general rule needs some adjustment. Firstly, the liability of a legal entity under consideration can only be subsidiary. Secondly, a joint-stock company cannot even bear additional responsibility for a shareholder's personal debts.  

The commented article establishes a very important rule that was not in the previous rules on legal entities: on the liability of a legal entity to third parties for obligations assumed by the body of a legal entity in excess of its authority. The expediency of including this provision in the Civil Code was determined by the difficulties of clarifying the exact limits of the authority of the body of a legal entity (when concluding transactions with a third party). The fact is that these limits are often set by the charter of a legal entity or by a general meeting of its participants without properly informing third parties about it.

Thus, the president of the closed joint-stock company, under an agreement with the bank, mortgaged the building belonging to the joint-stock company to secure a loan issued by the bank to a third party, who, having received a bank loan, disappeared. When, at the request of the bank, foreclosure was levied on the mortgaged building in order to repay the specified loan debt, the minutes of the general meeting of shareholders were submitted to the bank, dated the day before the pledge agreement was signed, and containing a decision prohibiting the president from mortgaging property without the permission of the general meeting of shareholders, which was not the case in this case.  

The responsibility of a legal entity for the actions of its body that exceeded its authority is established by the commented article in cases where the boundaries of the authority's competence are determined by constituent documents or decisions of the general meeting.  

In the same cases, when the authority's powers are determined directly by legislation, the rule should not apply mechanically, since we will be talking about transactions that violate the requirements of the law. The relevant rules will be discussed below when commenting on the chapter of the Civil Code on transactions.

Comments on The Civil Code The Code of Criminal Procedure The Criminal Code The Normative resolution of the Supreme Court The criminal legislation The normative legal acts of the Republic of Kazakhstan  

The commentary was prepared within the framework of the scientific and practical research program of the Scientific Research Center of Private Law of the Kazakh State Law University.  

Head of the working group on the preparation of the draft Civil Code of the Republic of Kazakhstan, Corresponding Member of the Academy of Sciences of the Republic of Kazakhstan, Professor Suleimenov M.K.

Deputy head Professor Basin Yu.G.

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