CORPORATE & COMMERCIAL IN THE BALTICS
Dear readers,
The date of introduction of the euro in Latvia is inevitably approaching. As from 1 January 2014 not only the cash and non-cash transactions in Latvia will be performed in euros, but merchants will be also subject to amendments to different regulatory enactments.
With respect to that, the summary prepared by TGS Baltic is aimed at drawing your attention in brief to the amendments to the Commercial Law that will come into effect as from the introduction of euro in Latvia on 1 January 2014, and in order to comply with them the capital companies (joint stock companies (AS) and limited liability companies (SIA)) will have to make some changes to their corporate documents.
All our office news are available on the webpage of TGS Baltic at www.tarkgruntesutkiene.com, as well as in our Twitter account @TGSLatvia.
Yours sincerely,
Linda Štrause
Head of Baltic Corporate & Commercial
TGS Baltic
LEGISLATIVE NEWS
Amount of share capital after introduction of euro
As from 1 January 2014 the minimum share capital of a SIA will be EUR 2,800 instead of the current LVL 2,000, which corresponds to EUR 2,846, and the minimum nominal value of a share will be EUR 1.
While the minimum share capital of an AS will be EUR 35,000, instead of the current LVL 25,000, which corresponds to EUR 35,572. The minimum nominal value of AS shares shall not be less than EUR 0.10.
Denomination of share capital, which has been registered in lats, in euro
The current SIA and AS that have been registered with the Enterprise Register of the Republic of Latvia (hereinafter, the Enterprise Register) prior to 1 January 2014 and the share capital whereof has been expressed in lats will have to express their share capital in euros, and such change will have to be registered with the Enterprise Register. The legislator does not prescribe for automatic denomination of the share capital from lats into euros.
Upon denomination of the share capital from lats into euros the following terms shall be observed:
1. denomination of the share capital from lats into euros shall be performed by maintaining the current proportionality among the shareholders of SIA (stockholders of AS) and minimizing the changes in the share capital;
2. the nominal value of shares of SIA shall be expressed in whole euros, while the nominal value of stocks of AS shall be expressed in euros and cents;
3. upon denomination of the shares (stocks) of share capital the following exchange rate shall be used LVL 1 – EUR 0.702804 and rounding down shall be performed.
The share capital of SIA and AS in euros is formed of the number of shares (stocks) of the share capital multiplied by the nominal value of a share (stock) of the share capital. The value obtained by multiplication of the number of shares (stocks) of the share capital by the remaining value obtained as the result of rounding shall be disbursed to the shareholders of SIA (stockholders of AS) in proportion to the shares (stocks) of the share capital owned by them, or, pursuant to the decision of the shareholders (stockholders), shall be transferred into the reserves of SIA or AS.
Registration of changes with the Enterprise Register
The time period for making and registration of the aforementioned changes with the Enterprise Register has been determined to be 30 months, i.e., from 1 January 2014 until 30 June 2016.
However, it should be taken into account that, although the deadline for making the changes is set to be 30 June 2016, pursuant to the transition regulations of the Commercial Law, as from 1 July 2014 SIA and AS will be able to apply for registration of the amendments to the articles of association with the Enterprise Register solely if the share capital, including the nominal value of the share/stock of the share capital, is denominated in euros and such changes have been registered with the Enterprise Register. Thus, after 1 July 2014 any amendments to the articles of association shall be made concurrently with denomination of the share capital in euros.
In order to perform re-registration of the share capital registered with the Enterprise Register from lats into euro the following documents will have to be submitted to the Enterprise Register:
1. application for changes – (Form No. 18 prepared in accordance with Cabinet Regulation No. 1079 of 8 October 2013 that will come into effect on 1 January 2014);
2. in case of AS – an excerpt from the minutes of stockholder meeting. in case of SIA – an excerpt from the minutes of shareholder meeting or the decision of the sole shareholder.
In such case the shareholders (stockholders) may take the decision of the shareholders (stockholders) on the amendments to the articles of association related to transfer from lats to euros by a simple majority of votes of the shareholders (stockholders) present at the shareholder (stockholder) meeting, i.e., without following the requirement of majority of votes for adoption of amendments to the articles of association prescribed in the Commercial Law or the articles of association;
3. full text of the new wording of the articles of association in 2 copies;
4. text of the amendments to the articles of association;
5. in case of SIA – shareholder register folio, where the nominal value of the share of the share capital has been expressed in euros. Let us remind you that on 1 July 2013 the amendments to the Commercial Law came into force prescribing new requirements for preparation of the shareholder register of SIA. Pursuant to the new preparation requirements, the shareholder register folio of SIA shall be submitted to the Enterprise Register by 30 June 2015. If SIA fails to submit thereof by the moment it applies to the Enterprise Register for making changes in order to re-register its share capital from lats into euros, SIA will be able to concurrently perform the re-registration to euro with the Enterprise Register and to prepare the shareholder register folio of SIA in accordance with the new requirements.
Release from the fee for announcement of commercial register information, the state duty and notary certification of signatures
If SIA or AS submits the documents to the Enterprise Register related solely to registration of denomination of the share capital in euros with the Enterprise Register by 30 June 2016, then the signatures on such documents shall not be notary certified, and SIA or AS will be released from payment of the state duty and the fee for publishing the information of the commercial register in the gazette Latvijas Vēstnesis, save the below case related to SIA.
If, concurrently with the registration of the share capital in euros, SIA complies with the requirement for preparation of the shareholder register folio in accordance with the new preparation requirements prescribed in the 1 July 2013 amendments to the Commercial Law and submits the current shareholder register to the Enterprise Register for the first time after the aforementioned amendments, the signatures on such shareholder register folio of SIA will have to be notary certified.
If, concurrently with the registration of the share capital in euros, any other changes are applied for, the respective state duty and fee for publishing in the gazette Latvijas Vēstnesis shall be paid, as well as, if necessary, the signatures of persons on the application and the enclosed documents to be submitted to the Enterprise Register shall be notary certified.
Sanction for the failure to perform the obligation prescribed by the law
If SIA or AS, the share capital whereof has not been denominated in euros, fails to denominate the share capital in euros and fails to register such change with the Enterprise Register by 30 June 2014, then, as from 1 July 2014, SIA and AS will not be able to apply to the Enterprise Register for the amendments to the articles of association, save the cases when the changes to the share capital of SIA or AS, i.e., denomination of the share capital, including the nominal value of the share/stock, in euros, are applied for to the Enterprise Register concurrently with the amendments to the articles of association.
If SIA or AS, the share capital whereof has not been denominated in euros, fails to denominate the share capital in euros and fails to register such change with the Enterprise Register by 1 July 2016, the corporate documents thereof will contradict to the provisions of the Commercial Law, and that may serve as basis for the Enterprise Register bringing a claim to the court regarding termination of operations of SIA or AS.
This legislative review is for information purposes only and does not reflect all aspects of legal regulation. Please note that the overview of the case law given in this newsletter is for information purposes only. Please be informed that the rules formulated by courts can be not applicable if the factual circumstances of a dispute were different from factual circumstances in those cases where such rules were formulated. For full legal advice please contact our law firm by phones or e-mails indicated above.