Essence of a legal entity’s reorganization from the standpoint of recognizing hive-out as one of its types

Abstract

The traditional approach to consider reorganization as a succession, as well as the form of termination of a legal entity does not fully meet the requirements of practice. However, most definitions of the category of «reorganization» contain its understanding as a «civil institution», «special procedure», «special process», «special legal phenomenon», «lengthy process», etc., when some legal entities terminate their business and other organizations arise on their property basis. The above indicates the lack of a clear position of both the legislator and doctrinal approaches to understanding the general provisions applicable during the reorganization of legal entities. Based on the conducted analysis we should pay attention on the following aspects: 1) the current legislation provides five methods of reorganization, but the termination of a legal entity’s business is typical for four of them – merger, acquisition, separation and reconstruction, and none of the legal entities terminates its business during the hive-out. Therefore, it is more correct to talk about the termination of a legal entity by the universal succession than of its termination by reorganization; 2) succession is a special legal term that determines the process of «transfer of the rights and responsibilities» from one legal entity to another one. The essence of a merger, acquisition, separation, hive-out and reconstruction should be determined not through the category of termination and emergence of legal entities, but through the transfer of the rights and responsibilities from legal entities that have terminated their business to legal entities that have emerged as a result of reorganization; 3) foreign legislation does not prohibit mixed reorganization, in contrast to domestic one. The current legislation of Ukraine, having established an exhaustive list of reorganization methods, actually prohibits it.