Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
18 June 2015 [shall come
into force on 3 July 2015];
16 June 2016 [shall come into force on 6 July
2016];
15 March 2018 [shall come into force on 3 April
2018];
13 June 2019 [shall come into force on 1 January
2020];
10 December 2020 [shall come into force on 17 December
2020];
17 December 2020 (Constitutional Court Judgment) [shall
come into force on 21 December 2020];
6 May 2021 [shall come into force on 8 May 2021];
11 November 2021 [shall come into force on 8 December
2021];
15 November 2021 [shall come into force on 1 February
2022].
If a whole or part of a section has been amended, the
date of the amending law appears in square brackets at
the end of the section. If a whole section, paragraph or
clause has been deleted, the date of the deletion appears
in square brackets beside the deleted section, paragraph
or clause.
|
The Saeima1 has adopted and
the President has proclaimed the following Law:
Law on
Governance of Capital Shares of Public Entity and Management of
Capital Companies Thereof
Division
A
General Provisions
Chapter I
Terms Used in this Law, Purpose and Scope of this Law
Section 1. Terms Used in the Law
(1) The following terms are used in this Law:
1) capital shares - capital shares in a limited
liability company or stocks in a joint-stock company;
2) capital shares of a public entity - capital shares
owned by a public entity in a limited liability company or stocks
owned thereby in a joint-stock company;
3) capital company of a public entity - a capital
company in which all capital shares or voting stocks belong to
one public entity;
4) capital company controlled by a public entity - a
capital company in which one or several public entities have a
direct decisive influence;
5) public private capital company - a capital company
in which all capital shares or voting stocks belong to several
public entities;
6) private capital company - a capital company in which
capital shares or stocks belong to a public entity and another
person (except owners of employee stocks);
7) subsidiary - a capital company in which a capital
company of a public entity or a public private capital company
has obtained a direct decisive influence on the basis of
participation within meaning of the Group of Companies Law;
8) State capital shares - capital shares owned by the
State in a limited liability company or stocks owned thereby in a
joint-stock company;
9) State capital company - a capital company in which
all capital shares or voting stocks belong to the State;
10) capital shares of a derived public entity - capital
shares owned by a derived public entity in a limited liability
company or stocks owned thereby in a joint-stock company;
11) capital company of a derived public entity - a
capital company in which all capital shares or voting stocks
belong to one derived public entity;
12) capital shares of a local government - capital
shares owned by a local government in a limited liability company
or stocks owned thereby in a joint-stock company;
13) local government capital company - a capital
company in which all capital shares or voting stocks belong to
one local government;
14) highest decision-making body of a public
entity:
a) in relation to the governance of State capital shares and
management of capital companies - the Cabinet;
b) in relation to the governance of the capital shares and
management capital companies of a local government - the local
government council;
c) in relation to the governance of capital shares of derived
public entities, except for local governments - in accordance
with the law governing the operation of the respective derived
public entity;
15) corporate governance - an aggregate of measures for
achieving the operational objectives of the capital company and
operational control of the capital company, as well as for the
assessment and management of risks associated with the operation
of the capital company;
16) non-financial objectives - objectives of the
capital company which arise from the general strategic objective
determined for the capital company, from legal acts and policy
planning documents, and are related to ensuring the performance
of the functions specified for a public entity;
17) financial objectives - objectives of the capital
company related to the status of its financial operation
(including profitability, capital structure, turnover, dividends,
and profit);
18) general strategic objectives - objectives of the
capital company specified by the highest decision-making body of
the public entity which the public entity wants to achieve
through participation in the capital company and which arise from
legal acts and policy planning documents;
19) medium-term operational strategy - a document for
planning the operation of the capital company for a time period
of at least three years on the basis of which the operation of
the capital company, the profit share to be disbursed in
dividends, and the budget of the capital company are planned;
20) recapitalisation instrument - an instrument as a
result of the use of which aid for commercial activity is
provided to a capital company by investing it in the equity
capital of the capital company and receiving a relevant number of
new capital shares or stocks in return;
21) transaction of significant amount - a transaction
of a capital company as a result of which the amount of money
paid or to be received, the value of the assets acquired or
alienated, or the liabilities of a capital company which have
arisen as a result of the transaction or may arise in the future
are at least 10 per cent of the equity capital of the capital
company or at least 10 per cent of the own capital of the capital
company in accordance with the last audited annual statement or
consolidated annual statement (if any is prepared) - depending on
whichever of the indicators is smaller but not less than EUR 35
000.
(2) Other terms in this Law are used within the meaning of the
Commercial Law, the Group of Companies Law, and the State
Administration Structure Law.
[6 May 2021; 11 November 2021]
Section 2. Purpose of this Law
The purpose of this Law is to promote efficient governance of
the capital shares owned by a public entity and capital companies
of a public entity, rational and economically justified use of
the resources of capital companies of a public entity, compliance
with the principles of good corporate governance, and also to
ensure compliance with the conditions for the participation of a
public entity.
Section 3. Application of this
Law
(1) This Law determines the procedures by which:
1) a public entity shall obtain, terminate and change the
amount of participation in capital companies;
2) obligations of the public entity as a shareholder
(stockholder) of a capital company shall be fulfilled and rights
shall be exercised;
3) capital companies of a public entity and public private
capital companies, as well as subsidiaries shall be managed;
4) capital companies of a public entity shall be established,
operate and be liquidated;
5) capital companies of a public entity shall be
reorganized;
6) capital shares of a public entity shall be alienated;
7) a capital company of a public entity shall become a private
capital company or a public private capital company;
8) a capital company of a public entity shall be restructured
into an institution or a public agency.
(2) The activities provided for in this Law shall be performed
also by complying with the laws and regulations governing the
control of aid for commercial activity.
(3) The provisions of the Commercial Law and the Group of
Companies Law shall be applied to issues that are not governed by
this Law.
(4) [13 June 2019]
(5) [13 June 2019]
(6) [13 June 2019]
[15 March 2018; 13 June 2019]
Chapter
II
Participation of a Public Entity and Capital Company of a Public
Entity and Decisive Influence in a Capital Company
Section 4. Conditions for
Participation of a Public Entity
(1) A public entity may obtain and keep participation in a
capital company according to Section 88 of the State
Administration Structure Law.
(2) A capital company of a public entity and a public private
capital company may have participation in another capital
company, if one of the following conditions is in effect:
1) the operation of the capital company conforms to the
conditions for the participation of a public entity provided for
in Section 88, Paragraph one of the State Administration
Structure Law;
2) the participation directly ensures achievement of general
strategic objectives and objectives determined in the medium-term
operational strategy of the capital company of a public entity or
public private capital company.
(3) In addition to the conditions referred to in Paragraph two
of this Section, a capital company which wants to obtain
participation in another capital company shall, prior to taking a
decision, submit an assessment to the highest decision-making
body of a public entity, whether participation in another capital
company will provide rational and economically justified use of
the resources of the capital company, in compliance with the
principles of good corporate governance.
[15 March 2018]
Section 5. Obtaining of and Changes
in Participation
(1) The decision to obtain participation of a public entity or
to obtain or terminate decisive influence in a capital company
shall be taken by the highest decision-making body of the
respective public entity.
(2) The highest decision-making body of the respective public
entity shall give a permission for the capital company of a
public entity to obtain participation, to obtain decisive
influence or to terminate decisive influence in another capital
company.
(3) The decision on the necessity of a public private capital
company to obtain participation, to obtain decisive influence or
to terminate decisive influence in another capital company taken
by the highest decision-making body of the respective public
entity shall be binding on the representative of the holder of
capital shares when exercising the rights of a shareholder
(stockholder) in a meeting of shareholders (stockholders) and
deciding on the abovementioned issue.
(4) The decisions referred to in Paragraphs one, two, and
three of this Section shall include:
1) an assessment in relation to conformity with the conditions
of Section 4 of this Law;
2) the general strategic objective.
(5) Paragraphs two and three of this Section shall not be
applied to capital companies which operate as credit institutions
or as investment management companies.
Section 6. Prohibition to Conclude a
Group of Companies Contract
(1) A capital company of a public entity or a public private
capital company shall not be permitted to conclude the group of
companies contracts provided for in the Group of Companies
Law.
(2) If a meeting of shareholders (stockholders) of a capital
company controlled by a public entity intends to decide on the
conclusion of a group of companies contract specified in the
Group of Companies Law with another capital company, the
representative of the holder of capital shares of the public
entity has, by exercising the rights of a shareholder
(stockholder), an obligation to vote so that the capital company
would not conclude the group of companies contract.
(3) The capital company of a public entity or the public
private company shall ensure that its subsidiary do not conclude
the group of companies contracts provided for in the Group of
Companies Law with other capital companies.
Section 7. Revaluation of
Participation
(1) A public entity has an obligation to, not less than once
in five years, revaluate each of its direct participations in a
capital company and the conformity thereof with the conditions of
Section 4 of this Law. This requirement shall not be applied if
the law stipulates that the capital shares or stocks of the
respective capital company are not to be alienated.
(2) The decision to retain participation of a public entity in
capital companies shall be taken by the highest decision-making
body of the respective public entity. The decision shall
include:
1) an assessment in relation to conformity with the conditions
of Section 4 of this Law;
2) the general strategic objective.
(3) A public entity has an obligation to, at least once in
five years, reassess the general strategic objective for a
capital company of a public entity the capital shares or stocks
of which cannot be alienated.
[11 November 2021]
Section 8. Legal Consequences upon
Obtaining Decisive Influence
(1) If a capital company of a public entity obtains all
capital shares or voting stocks in another capital company
(dependent capital company), then:
1) the dependent capital company shall draw up a medium-term
operational strategy in accordance with Section 57 of this
Law;
2) the profit share to be disbursed as dividends of the
dependent capital company shall be determined in accordance with
the Section 28 or 35 of this Law;
3) members of the executive board and of the supervisory board
of a dependent capital company shall be nominated by the
executive board of a capital company of a public entity or the
supervisory board of a dependent capital company in accordance
with Section 31 (except for the condition regarding participation
of the representative nominated by the coordinating authority in
the nomination committee) or Section 37 of this Law;
4) the dependent capital company shall establish a supervisory
board in the cases referred to in Section 78, Paragraph two and
Section 106 of this Law;
5) the number, monthly remuneration, bonuses of and withdrawal
benefit to members of the executive and supervisory boards of the
dependent capital company shall be determined in conformity with
the restrictions provided for members of the executive and
supervisory boards in this Law and the Cabinet regulations issued
on the basis thereof;
6) the dependent capital company shall publish the information
on the capital company in accordance with Section 58, Paragraphs
one, 1.1, 1.2, and two of this Law.
(2) The holder of capital shares shall ensure that in a
capital company controlled by a public entity:
1) the medium-term operational strategy is drawn up in
accordance with Section 57 of this Law;
2) the information on the capital company is published in
accordance with Section 58, Paragraphs one, 1.1,
1.2, and two of this Law;
3) the profit share to be disbursed as dividends is determined
in accordance with Section 28 or 35 of this Law.
(3) The capital company of a public entity shall ensure that
its subsidiaries:
1) do not obtain participation in another capital companies,
except when it conforms to that laid down in Section 4, Paragraph
two, Clause 1 of this Law and a permission of the highest
decision-making body of the respective public entity has been
received;
2) the medium-term operational strategy is drawn up in
accordance with Section 57 of this Law;
3) the information on the capital company is published in
accordance with Section 58, Paragraphs one, 1.1, and
two of this Law;
4) the profit share to be disbursed as dividends is determined
in accordance with Section 28 or 35 of this Law.
(4) In the dependent capital companies referred to in
Paragraph one of this Section where the supervisory board shall
not be established, the meeting of shareholders (stockholders)
shall fulfil the tasks of the supervisory board in accordance
with Section 292, Paragraph one of the Commercial Law.
(5) In the dependent capital companies referred to in
Paragraph one of this Section where the supervisory board shall
not be established, the executive board must receive a consent of
the meeting of shareholders (stockholders) for deciding the
issues specified in Section 294, Paragraph one of the Commercial
Law.
(6) The conditions of this Section shall not be applied to the
subsidiaries operating as credit institutions, investment
management companies or capital companies registered abroad.
[18 June 2015; 15 March 2018; 13 June 2019; 11 November
2021]
Section 9. Termination of
Participation
(1) The highest decision-making body of the respective public
entity shall take the decision to terminate participation of the
public entity in a capital company.
(2) The highest decision-making body of a public entity shall
take the decision to terminate the participation of the capital
company of the respective public entity in another capital
company.
(3) The decision taken by the highest decision-making body of
a public entity to terminate participation of a public private
capital company in another capital company shall be binding on
the representative of the holder of capital shares in exercising
the rights of the shareholder (stockholder) in the meeting of
shareholders (stockholders) and deciding on the abovementioned
issue.
(4) The procedures for terminating participation of a public
entity shall be indicated in the decisions referred to in
Paragraphs one, two and three of this Section.
(5) Paragraphs two and three of this Section shall not be
applied to capital companies which operate as credit institutions
or investment management companies.
Division
B
Governance of Capital Shares of a Public Entity
Part III
Holder of Capital Shares and Representative of a Holder of
Capital Shares
Section 10. Holder of State Capital
Shares
(1) A holder of State capital shares in a capital company
shall be:
1) a ministry or other State administration institution
appointed as the holder of State capital shares by the
Cabinet;
2) the institution which alienates or privatizes State capital
shares in accordance with this Law or the law On Privatisation of
State and Local Government Property Objects.
(2) The Cabinet shall determine the ministry which is
essential for the governance of specific State capital shares in
the respective field (hereinafter - the sectoral ministry).
(3) State capital shares in one capital company may have only
one holder.
(4) If the holder of State capital shares is reorganised, the
authority which is the successor to the rights and obligations of
the holder of capital shares shall become the holder of the
respective capital shares, unless the Cabinet determines another
holder of State capital shares.
(5) If the holder of State capital shares is liquidated, the
Cabinet shall appoint another holder of State capital shares.
Section 11. Holder of Capital Shares
of a Derived Public Entity
(1) A holder of capital shares of a derived public entity in a
capital company shall be:
1) a derived public entity which owns such capital shares;
2) a State administration institution appointed as the holder
of capital shares of a derived public entity by the Cabinet upon
request of the highest decision-making body of the derived public
entity.
(2) Capital shares of a derived public entity may have only
one holder in one capital company.
(3) If the respective derived public entity is reorganised,
the derived public entity which is the successor to the rights
and obligations of the reorganised derived public entity shall
become the holder of capital shares belonging thereto, unless the
decision to reorganise the derived public entity provides
otherwise.
(4) If the respective derived public entity is being
liquidated, the holder of capital shares belonging thereto shall
be determined in the law or the decision to liquidate the derived
public entity.
Section 12. Ministry as the Holder
of Capital Shares
(1) If a ministry is the holder of State capital shares,
decisions of the holder of capital shares provided for in this
Law shall be taken by the State Secretary of the ministry or
another official of the ministry determined by an order of the
State Secretary who has all the rights, obligations and
responsibility of the representative of the holder of capital
shares provided for in laws and regulations (hereinafter - the
representative of the holder of capital shares).
(2) In the absence of the official of the ministry (leave,
illness or other similar situation when the functions of the
representative of the holder of capital shares are not ensured)
referred to in Paragraph one of this Section, the State Secretary
of the ministry is entitled to take decisions of the holder of
capital shares by himself or herself or to authorise another
official of the ministry to take such decisions in the absence of
the abovementioned official. In the absence of the State
Secretary, the respective decisions shall be taken by the person
who fulfils the duties of the State Secretary.
(3) The State Secretary of the ministry shall appoint a
responsible employee from amongst the civil servants of the
ministry who shall provide the necessary information to him or
her or the official appointed by an order of the State Secretary
who performs the duties of the representative of the holder of
capital shares and prepare documents so that the State Secretary
or the respective official could fulfil the functions of the
holder of capital shares in a State capital company, public
private capital company or private capital company or to take
decisions in the meeting of shareholders (stockholders) in a
State capital company.
(4) The representative of the holder of capital shares shall
fulfil his or her duties in conformity with the official duties
specified for him or her at the respective ministry and receive
remuneration for the fulfilment of such duties within the scope
of the monthly wage determined for the position. A supplement may
be determined for the responsible employee for the fulfilment of
the respective duties in accordance with Section 14 of the Law on
Remuneration of Officials and Employees of State and Local
Government Authorities if the duties of the responsible employee
are to be considered as additional duties. The representative of
the holder of capital shares and the responsible employee may not
receive remuneration for any legal transactions which have been
concluded with the respective capital company.
Section 13. Another State
Administrative Authority as the Holder of Capital Shares
(1) If the holder of capital shares of a public entity is
another State administrative authority, the head of the
respective authority (hereinafter - the representative of the
holder of capital shares) shall take the decisions of the holder
of capital shares provided for in this Law or other laws and
regulations governing commercial activity.
(2) In the absence of the head of the authority (leave,
illness or other similar situation when functions of the
representative of the holder of capital shares are not ensured),
the decisions referred to in Paragraph one of this Section shall
be taken by the person who fulfils the duties of the head of the
authority.
(3) The head of the authority shall appoint the responsible
employee from amongst the officials of the authority who shall
provide the necessary information to him or her and prepare
documents so that the head of the authority could fulfil the
functions of the holder of capital shares in a capital company of
a public entity, public private capital company or private
capital company, or take decisions in the meeting of shareholders
(stockholders) in a capital company of a public entity.
(4) The representative of the holder of capital shares shall
fulfil his or her duties in conformity with the official duties
specified for him or her at the respective authority and receive
remuneration for the fulfilment of such duties within the scope
of the monthly wage determined for the position. A supplement may
be determined for the responsible employee for the fulfilment of
the respective duties in accordance with Section 14 of the Law on
Remuneration of Officials and Employees of State and Local
Government Authorities if the duties of the responsible employee
are to be considered as additional duties. The representative of
the holder of capital shares and the responsible employee may not
receive remuneration for any legal transactions which have been
concluded with the respective capital company.
Section 14. Local Government as the
Holder of Capital Shares
(1) If a local government is the holder of capital shares of a
local government, the decisions of the holder of capital shares
provided for in this Law shall be taken by the executive director
of the local government (hereinafter also - the representative of
the holder of capital shares).
(2) The executive director of the local government may
transfer the decision-making right of the holder of local
government capital shares to another official subordinated
thereto by an order, including to the head of such city
(municipality) government unit who has been assigned to govern
the respective capital shares of the local government
(hereinafter also - the representative of the holder of capital
shares).
(3) In the absence of the executive director of the local
government or the official referred to in Paragraph two of this
Section (leave, illness, or other similar situation when the
functions of the representative of the holder of capital shares
are not ensured), decisions of the holder of capital shares shall
be taken by the person who fulfils the duties of the executive
director of the local government or of the respective official
subordinated thereto.
(4) The executive director of the local government shall
appoint a responsible employee from amongst the employees of the
local government or local government institutions or the official
referred to in Paragraph two of this Section from amongst the
employees of the subordinate units who shall provide the
necessary information to the executive director or the respective
official and prepare documents so that the executive director or
the respective official could fulfil the functions of the holder
of capital shares in a local government capital company, private
capital company, or public private capital company or to take
decisions in the meeting of shareholders (stockholders) in a
local government capital company. The responsible employee need
not be appointed if the fulfilment of the duties of the
responsible employee is within the competence of a unit
established by the local government.
(5) The representative of the holder of capital shares shall
fulfil his or her duties in conformity with the official duties
specified for him or her at the respective local government and
receive remuneration for the fulfilment of such duties within the
scope of the monthly wage determined for the position. A
supplement may be determined for the responsible employee for the
fulfilment of the respective duties in accordance with Section 14
of the Law on Remuneration of Officials and Employees of State
and Local Government Authorities if the duties of the responsible
employee are to be considered as additional duties. The
representative of the holder of capital shares and the
responsible employee may not receive remuneration for any legal
transactions which have been concluded with the respective
capital company.
[13 June 2019]
Section 15. Derived Public Entity
Except for the Local Government as a Holder of Capital Shares
(1) If the holder of capital shares of a derived public entity
(except for a local government) is a derived public entity, the
decisions provided for in this Law of the holder of capital
shares shall be taken by the head of the highest executive body
of the derived public entity (hereinafter - the representative of
the holder of capital shares).
(2) The highest decision-making body of the derived public
entity may hand over the decision-making rights of the holder of
capital shares of a derived public entity to the head of the
institution (unit) established by the derived public entity to
whom the governance of capital shares of the derived public
entity is assigned (hereinafter - the representative of the
holder of capital shares).
(3) In the absence of the head of the highest executive body
of the derived public entity or the official referred to in
Paragraph two of this Section (leave, illness or other similar
situation when the functions of the representative of the holder
of capital shares of a derived public entity are not ensured),
decisions of the holder of capital shares shall be taken by the
person who fulfils the duties of the head of the highest
executive body of the derived public entity or duties of the head
of the respective institution (unit).
(4) The head of the highest executive body of the derived
public entity shall appoint the responsible employee from amongst
the employees of institutions of the derived public entity or the
official referred to in Paragraph two of this Section from
amongst the employees of the subordinate institution (unit) who
shall provide the necessary information to the head of the
highest executive body or the respective official and prepare
documents so that the head of the highest executive body or the
respective official could fulfil the functions of the holder of
capital shares in a capital company of the derived public entity,
private capital company or public private capital company, or to
take decisions in the meeting of shareholders (stockholders) in
the capital company of the derived public entity.
(5) The representative of the holder of capital shares shall
fulfil his or her duties in conformity with the official duties
specified for him or her at the respective derived public entity
and receive remuneration for the fulfilment of such duties within
the scope of the monthly wage determined for the position. A
supplement may be determined for the responsible employee for the
fulfilment of the respective duties in accordance with Section 14
of the Law on Remuneration of Officials and Employees of State
and Local Government Authorities if the duties of the responsible
employee are to be considered as additional duties. The
representative of the holder of capital shares and the
responsible employee may not receive remuneration for any legal
transactions which have been concluded with the respective
capital company.
[18 June 2015]
Section 16. Duties of the
Responsible Employee
(1) The responsible employee shall inform the representative
of the holder of capital shares of each meeting of shareholders
(stockholders) immediately after receipt of a notification on
convening a meeting of shareholders (stockholders) and acquaints
the representative of the holder of capital shares with the
agenda of the meeting.
(2) The responsible employee shall, without delay, provide the
representative of the holder of capital shares with all the
information at the disposal of the employee which is necessary
for taking decisions within the competence of the representative
of the holder of capital shares.
(3) The responsible employee shall perform other actions and
tasks assigned to him or her by the representative of the holder
of capital shares in writing.
Section 17. Participation of the
Representative of the Holder of Capital Shares in a Meeting of
Shareholders (Stockholders) of a Public Private Capital Company
or Private Capital Company
(1) The representative of the holder of capital shares shall
represent the holder of capital shares in a meeting of
shareholders (stockholders) of a capital company.
(2) The representative of the holder of capital shares may
authorise the responsible employee or another person (hereinafter
- the authorised person) to represent the holder of capital
shares in the meeting of shareholders (stockholders) of the
capital company. In such case the representative of the holder of
capital shares shall issue a power of attorney and a written
voting assignment to the authorised person for every issue
included on the agenda of the meeting of shareholders
(stockholders). The authorised person may vote in the meeting of
shareholders (stockholders) only as specified in the voting
task.
(3) If an issue not indicated in the notification on convening
a meeting of shareholders (stockholders) is examined in the
meeting of shareholders (stockholders), the authorised person
shall act as the representative of the holder of capital shares
would act under the respective circumstances in order to achieve
the necessary or the most favourable result.
Section 18. Restrictions Stipulated
for the Authorised Persons of the Representative of the Holder of
Capital Shares of a Public Private Capital Company or Private
Capital Company
(1) The authorised person of the representative of the holder
of capital shares may perform only such actions which are
provided for by the fulfilment of the obligations and exercising
of the rights of a shareholder (stockholder) in a capital company
and which are closely related thereto.
(2) If the authorised person has conducted another matter in
addition to the assigned matter, he or she shall be subject to
the provisions of the Civil Law regarding unauthorised management
in relation to such matter.
(3) The authorised person is prohibited to refuse from
exercising the voting right in a meeting of shareholders
(stockholders) of a public private capital company or private
capital company.
(4) Non-attendance of the meeting of shareholders
(stockholders) after receipt of a respective authorisation shall
also be deemed a refusal to exercise the voting right, if the
authorised person has not informed the representative of the
holder of capital shares of his or her inability to participate
in the meeting of shareholders (stockholders) in a timely manner
which ensures the possibility to authorise another person for
participation in the respective meeting of shareholders
(stockholders).
(5) The authorised person is prohibited from delegating his or
her duties to another person, namely, to perform re-authorisation
(substitution).
(6) The authorised person may not exceed the scope of the
voting task assigned to him or her, and he or she must act
according to instructions of the representative of the holder of
capital shares.
(7) The authorised person who is not a public official shall
receive a prior written consent of the representative of the
holder of capital shares for the election of the authorised
person as a member of the executive or supervisory board,
controller or auditor of the capital company. The authorised
person who is a public official shall receive a permit for
holding of multiple offices in accordance with the procedures
laid down in the law On Prevention of Conflict of Interest in
Activities of Public Officials.
Section 19. Duties of the
Representative of the Holder of Capital Shares in a Public
Private Capital Company or Private Capital Company
(1) The representative of the holder of capital shares shall
provide the authorised person with the information and documents
on the capital company necessary for successful fulfilment of the
duties of the authorised person.
(2) The representative of the holder of capital shares shall
issue the power of attorney referred to in Section 17, Paragraph
two of this Law, the voting assignment, other documents and
information to the authorised person within a time period which
ensures the authorised person the possibility to fulfil his or
her duties.
(3) The representative of the holder of capital shares in a
capital company controlled by a public entity shall promote the
implementation of the objectives and tasks laid down in laws,
Cabinet regulations, and approved sectoral development concepts
and strategies, and other documents governing the development of
the field, as well as the fulfilment of the conditions of this
Law.
Section 20. Resources Necessary for
Fulfilling the Obligations of the Representative of the Holder of
Capital Shares or Authorised Person
The holder of capital shares shall provide the representative
of the holder of capital shares or the authorised person with the
resources necessary for the fulfilment of their obligations,
however, if the representative of the holder of capital shares or
the authorised person uses his or her own resources, the holder
of capital shares shall, without delay, reimburse such expenses
as soon as the representative of the holder of capital shares or
the authorised person has submitted documents justifying such
expenses.
Section 21. Responsibility of the
Authorised Person
The authorised person shall not be responsible for the
activities which he or she has performed according to the voting
assignment given by the representative of the holder of capital
shares referred to in Section 17, Paragraph two of this Law.
Chapter
IV
Coordinating Authority
Section 22. Coordinating Authority
and its Tasks
(1) The Cabinet shall determine the State administration
institution which shall perform the tasks determined in this Law
and other laws and regulations in relation to the administration
of State capital companies and State capital shares (hereinafter
- the coordinating authority).
(2) The coordinating authority shall perform the following
tasks:
1) draw up guidelines for efficient management of capital
companies and governance of capital shares;
2) issue an opinion to holders of State capital shares on the
financial objectives set in the medium-term operational strategy
of the capital company and on the financial indicators of the
performance (profit share to be disbursed in dividends, profit
indicators, return on capital, etc.), as well as on the
conformity of such objectives with the non-financial objectives
set in the medium-term operational strategy;
3) advise the Cabinet, holders of capital shares of a public
entity, and capital companies on issues related to the
implementation of the corporate governance;
4) arrange training of such members of the executive and
supervisory boards, officials and employees of capital companies
of a public entity and of capital companies controlled by a
public entity, and also officials and employees of holders of
capital shares of a public entity whose work duties are related
to the governance of capital shares of a public entity on issues
related to corporate governance;
5) ensure that current information on State capital companies
and capital companies under decisive influence of the State is
published, and also the preparation of an annual public report on
State capital companies and State capital shares in the previous
year;
6) issue an opinion to the Cabinet on obtaining, maintaining
or terminating State participation, and also, upon request of the
derived public entity, issue an opinion on obtaining or
terminating participation of the respective derived public entity
in a specific capital company;
7) according to the competence draw up and, in accordance with
the procedures laid down in laws and regulations, submit draft
legal acts and policy planning documents to the Cabinet for
approval;
71) co-operate with other State administration,
non-governmental and international institutions in issues related
to the management of capital companies and governance of capital
shares;
72) supervise how the holders of State capital
shares and State capital companies fulfil the requirements for
the publication of the information laid down in Section 29,
Paragraph two and Section 58 of this Law;
73) supervise how the local governments and capital
companies of local governments (limited liability companies and
joint-stock companies) which meet the criteria laid down in
Section 78, Paragraph two of this Law fulfil the requirements for
the publication of the information laid down in Sections 36 and
58 of this Law;
74) fulfil the functions of the holder of capital
shares in the State capital companies in which the Cabinet has
appointed the coordinating authority as the holder of State
capital shares;
8) perform other tasks which are laid down in this Law and
other laws governing the operation of an institution of direct
administration.
[18 June 2015; 13 June 2019 / See Paragraph 27 of
Transitional Provisions]
Section 23. Rights of the
Coordinating Authority
(1) When performing the tasks laid down in Section 22 of this
Law, the coordinating authority has the right to:
1) request and receive from institutions of public entities,
holders of capital shares or State capital companies information
necessary for the performance of the respective tasks;
2) issue an opinion on policy planning documents and legal
acts prepared by other State authorities which directly or
indirectly concern issues related to the governance of capital
shares of a public entity;
3) [18 March 2015].
(2) The coordinating authority has the right to perform other
activities permitted in laws and regulations in order to perform
the tasks laid down in the law.
[18 June 2015]
Section 24. Supervisory Board of the
Coordinating Authority
(1) In order to ensure efficient management of capital
companies of public entities and governance of capital shares,
the Cabinet shall establish the supervisory board of the
coordinating authority.
(2) The supervisory board of the coordinating authority is a
collegial authority which:
1) reviews the draft guidelines drawn up by the coordinating
authority in the field of governing capital shares of a public
entity and agrees upon them before approval;
2) assesses the opinion of the coordinating authority on the
draft medium-term operational strategy of a capital company
referred to in Section 26 of this Law if the holder of State
capital shares or the supervisory board of a State capital
company (if such has been established) does not agree with the
opinion prepared by the coordinating authority and the holder of
State capital shares or the supervisory board of a capital
company has requested to examine the issue at the supervisory
board of the coordinating authority;
3) examines the opinion of the coordinating authority on the
transaction of a capital company referred to in Section 26,
Paragraph six of this Law if the holder of State capital shares
or the supervisory board of a State capital company (if such has
been established) does not agree with the opinion prepared by the
coordinating authority and the holder of State capital shares or
the supervisory board of a State capital company has requested to
examine the issue at the supervisory board of the coordinating
authority, and provides an assessment of the abovementioned
opinion to the holder of State capital shares or the supervisory
board of a State capital company;
4) provides proposals to the coordinating authority for other
issues related to the governance of capital shares of a public
entity.
(3) The by-law and staff of the supervisory board of the
coordinating authority shall be approved by the Cabinet. Members
of the supervisory board of the coordinating authority shall not
receive any remuneration for their work in the supervisory
board.
[18 June 2015]
Chapter V
Management of State Capital Shares
Section 25. Assessment of the
Necessity for State Participation in Capital Companies
(1) The sectoral ministry or the holder of State capital
shares may propose the obtaining or termination of State
participation, as well as the obtaining or termination of
decisive influence in a capital company by submitting a
respective proposal to the Cabinet. An assessment of the
conformity of obtaining participation or decisive influence with
the conditions of Section 88, Paragraph one of the State
Administration Structure Law in relation to participation of a
public entity in a capital company, as well as with the general
strategic objective that the submitter of the proposal offers for
the State to achieve through participation in the capital
company, shall be appended to the proposal.
(2) An opinion of the coordinating authority shall be appended
to the proposal referred to in Paragraph one of this Section and
submitted to the Cabinet.
(3) Whenever necessary, but no less than once in every five
years, the coordinating authority shall ensure that the holder of
State capital shares submits to the Cabinet the assessment of
State participation in the respective capital company and the
conformity of such participation with conditions of Section 4 of
this Law.
(4) If the assessment referred to in Paragraph three of this
Section includes a proposal to retain State participation in a
capital company, the general strategic objective shall be
included therein.
(5) The coordinating authority shall draw up the guidelines
for the determination of general strategic objectives of State
participation.
Section 26. Drawing up and
Assessment of the Medium-Term Operational Strategy
(1) If the holder of State capital shares in a capital company
in which the State holds the decisive influence is not a sectoral
ministry and if a supervisory board has not been established in
the capital company, the holder of capital shares shall, prior to
approval [exercising of the voting right in the meeting of
stockholders (shareholders)] of the medium-term operational
strategy drawn up by the capital company, receive an opinion of
the sectoral ministry and the coordinating authority.
(2) If the sectoral ministry is the holder of State capital
shares in a capital company in which the State holds the decisive
influence and if the supervisory board has not been established
in the capital company, the holder of capital shares shall, prior
to approval [exercising of the voting right in the meeting of
stockholders (shareholders)] of the medium-term operational
strategy drawn up by the capital company receive an opinion of
the coordinating authority.
(3) If a supervisory board has been established in the capital
company in which the State holds the decisive influence, it
shall, prior to approval of the medium-term operational strategy
drawn up by the capital company, receive an opinion of the
sectoral ministry and the coordinating authority.
(4) In the opinion referred to in Paragraphs one, two and
three of this Section, the coordinating authority shall provide
an assessment of the financial objectives brought forward in the
medium-term operational strategy of the capital company and the
financial performance indicators (profit indicators, profit share
to be disbursed in dividends, return on capital, etc.), as well
as their conformity with the non-financial objectives brought
forward in the medium-term operational strategy. The coordinating
authority shall provide an opinion on the medium-term operational
strategy within three months after its receipt.
(5) In the opinion referred to in Paragraphs one and three of
this Section, the sectoral ministry shall provide an assessment
of the non-financial objectives brought forward in the
medium-term operational strategy of the capital company and their
conformity with the sectoral policy objectives.
(6) The holder of State capital shares in a State capital
company or the supervisory board of the State capital company (if
such has been established) shall receive an opinion of the
coordinating authority prior to approval [exercise of the voting
right in the meeting of stockholders (shareholders) or in the
decision-making process] of a transaction which has significant
influence (at least by 15 per cent and such action is not
provided for in the medium-term operational strategy) on the
amount of assets determined in the medium-term operational
strategy of the capital company.
(7) The coordinating authority shall assess the impact of the
transaction referred to in Paragraph six of this Section on the
value of the capital company and achievement of its financial
objectives by evaluating the risks or benefits related to the
planned decisions, long-term costs and alternatives, as well as
expedience of the transaction.
(8) If the holder of State capital shares or the supervisory
board of a State capital company or the capital company under the
decisive influence of the State (if such has been established)
disregards that indicated in the opinion of the coordinating
authority, then, in approving [exercising the voting right in the
meeting of stockholders (shareholders)] the medium-term
operational strategy of the capital company or giving consent to
the transaction referred to in Paragraph six of this Section,
respective arguments shall sent to the coordinating authority in
writing.
(9) If the supervisory board of a State capital company or the
capital company under the decisive influence of the State (if
such has been established) disregards that indicated in the
opinion of the sectoral ministry, then the supervisory board
shall send its arguments to the sectoral ministry in writing upon
approving the medium-term operational strategy of the capital
company.
(10) If the holder of State capital shares disregards that
indicated the opinion of the sectoral ministry and cannot reach
an agreement on the non-financial objectives to be included in
the medium-term operational strategy of the capital company, the
respective issue shall be examined by the Cabinet. In such case,
the holder of State capital shares, in approving the medium-term
operational strategy of the capital company [application of the
voting right in the meeting of stockholders (shareholders)],
shall conform to the respective decision of the Cabinet on the
non-financial objectives to be included in the medium-term
operational strategy of the capital company.
(11) The sectoral ministry, the coordinating authority and the
supervisory board of the coordinating authority which provides an
opinion to the holder of State capital shares or the supervisory
board of the State capital company (if such has been established)
in accordance with the procedures laid down in this Law, shall be
responsible for the assessment provided thereby.
(12) If in approving the medium-term operational strategy of
the capital company or giving consent to the transaction referred
to in Paragraph six of this Section, the holder of State capital
shares does not comply with that indicated in the opinion of the
coordinating authority, the holder of State capital shares shall
be responsible for the respective decision taken.
(13) The holder of State capital shares or the supervisory
board of the State capital company (if such has been established)
shall send the approved medium-term operational strategy of the
capital company to the coordinating authority.
(14) The coordinating authority shall send the assessment of
the supervisory board of the coordinating authority to the holder
of State capital shares or the supervisory board of the State
capital company (if such has been established), if such
assessment has been adopted in accordance with the procedures
laid down in Section 24, Paragraph two, Clauses 2 and 3 of this
Law.
[18 June 2015; 13 June 2019]
Section 27. Assessment of
Performance Results of a Capital Company
(1) The coordinating authority shall draw up methods
(guidelines) for a capital company in which the State holds the
decisive influence for the assessment of its performance results,
providing that reports on achievement of financial objects are to
be provided according to a unified form.
(2) Each year the representative of the holder of State
capital shares shall assess the achievement of the objectives
bought forward for the capital company in conformity with the
opinion of the sectoral ministry and the coordinating
authority.
(3) In the opinion referred to in Paragraph two of this
Section the coordinating authority (if it is not the holder of
capital shares) shall provide an assessment on achievement of the
financial objectives determined in the medium-term operational
strategy in the previous year.
(4) In the opinion referred to in Paragraph two of this
Section the sectoral ministry shall provide an assessment on
achievement of the non-financial objectives determined in the
medium-term operational strategy of the capital company in the
previous year, as well as proposals for further activities.
(5) In assessing the achieved objectives, the representative
of the holder of State capital shares shall take th decision on
further activities in order to ensure an increase in return on
assets and their value, as well as to achieve the objectives
brought forward in the medium-term operational strategy.
(6) The coordinating authority may propose for the holder of
State capital shares to perform an audit in a capital company if
there are grounds to suspect inexpedient, inefficient actions or
violations and if substantial risks in relation to the
possibility to achieve the objectives brought forward are
found.
(7) The Cabinet shall determine the procedures by which the
performance results and financial indicators of the capital
company shall be assessed in accordance with conditions of this
Section.
[18 June 2015]
Section 28. Procedures for
Determining the Profit Share to be Foreseen and Disbursed as
Dividends in State Capital Companies, Dependent Capital Companies
and Subsidiaries Thereof, Capital Companies Controlled by a
Public Entity, Public Private Capital Companies where the State
is a Stockholder (Shareholder) and Subsidiaries Thereof
(1) The foreseeable profit share to be disbursed in dividends
and the profit share to be disbursed in dividends shall be
determined on the basis of the medium-term operational strategy
of the capital company, the objectives of the capital company
brought forward in the strategy and their implementation.
(2) The executive board of the capital company shall, on the
basis of the medium-term operational strategy, prepare a proposal
on the foreseeable profit share to be disbursed in dividends and
the profit share to be disbursed in dividends, and submit the
proposal to the holder of capital shares.
(3) If the proposal of the executive board of the capital
company on the foreseeable profit share to be disbursed in
dividends and the profit share to be disbursed in dividends
differs from the one determined in the medium-term operational
strategy, the holder of State capital shares shall submit a
proposal to the Ministry of Finance and to the coordinating
authority on justification for the profit share to be disbursed
in dividends.
(4) If the coordinating authority does not reach an agreement
with the Ministry of Finance and the holder of State capital
shares on the foreseeable profit share to be disbursed in
dividends and the profit share to be disbursed in dividends, the
holder of State capital shares shall prepare and submit a draft
order to the Cabinet, which shall take a decision binding to the
holder of State capital shares.
(5) The meeting of shareholders (stockholders) shall decide on
the profit share to be disbursed in dividends after approval of
the annual statement of the company.
(6) The Cabinet shall govern, in accordance with the
conditions of this Section, the procedures by which the profit
share to be disbursed in dividends shall be foreseen and
determined in State capital companies, dependent capital
companies and subsidiaries thereof, capital companies controlled
by a public entity, public private capital companies where the
State is a stockholder (shareholder) and subsidiaries thereof,
the actions of the holder of State capital shares or stockholder
(shareholder) in exercising the right of the stockholder
(shareholder) to decide on the profit share to be disbursed in
dividends, the procedures by which the capital company shall
demonstrate the distributed profit in the financial statements,
and also the procedures by which the control of dividend payments
is ensured.
(7) A capital company shall calculate, pay, and demonstrate
the enterprise income tax in the accounting in accordance with
the procedures laid down in the laws and regulations governing
enterprise income tax.
[18 June 2015; 15 March 2018; 15 November 2021]
Section 29. Ensuring Disclosure of
Information
(1) The coordinating authority shall:
1) provide free access to comparable information on return on
State capital, assets and their value, financial efficiency,
disbursement of dividends, and other issues of importance to the
management of capital companies;
2) draw up unified guidelines for the framework of disclosure
of information and provision of reports of capital companies for
State capital companies and holders of capital shares;
3) establish an interactive website on the Internet - a
database providing access to current information on the State
capital shares and their governance, introduction of corporate
governance principles and individual aspects of governance,
including the following information:
a) a list of capital companies grouped by criteria of the
holder, sector or size, by volume of State participation in the
capital;
b) the average financial results of the group of selected
capital companies;
c) the development of funding allocated by the State by years,
the funding allocated to the group of selected capital companies
or a specific sector;
d) payments of the capital company made into the State budget,
including dividends, tax payments;
4) post the latest information on its website on the current
amendments to the laws and regulations directly affecting the
management of the capital company of a public entity and capital
shares, as well as publish explanatory materials.
(2) The holder of State capital shares shall provide the
latest information on capital companies in which it is the holder
of shares on its website on the Internet, including the following
information:
1) the firm name, legal address, volume of the equity capital
and size of the State participation in the capital company;
2) conformity of State participation with the conditions of
Section 4, Paragraph one of this Law, and the general strategic
objective;
3) participation of the capital company in other companies and
its conformity with the conditions of Section 4, Paragraph two of
this Law;
4) representative of the holder of State capital shares in the
capital company;
5) approved annual statement of the capital company;
6) dividends disbursed to the State by the capital company and
payments made into the state budget;
7) information that the State has intended to terminate
participation in the capital company;
8) information regarding the initiated reorganisation or
transformation of the capital company;
9) other information, which the holder of State capital shares
considers as necessary for publishing or publishing of which is
determined in the guidelines drawn up by the coordinating
authority.
(3) If there are objective reasons, due to which the
information referred to in Paragraphs one and two of this Section
to which the status of commercial secret has been determined in
accordance with Section 19 of the Commercial Law cannot be
published, the coordinating authority or the holder of State
capital shares shall publish the explanation provided by the
respective capital company.
Section 30. Annual Public Report
(1) The coordinating authority shall, by 1 October of the
current year, prepare and submit to the Cabinet and the
Saeima the annual public report on capital companies and
capital shares belonging to the State in the previous year.
(2) The report referred to in Paragraph one of this Section
shall include consolidated information on the State participation
in capital companies, the resources invested thereby and the
return of such resources, the services provided by capital
companies, the contributions in the State budget and local
government budgets, the subsidies from the State or local
government budget received, information on the sectors in which
capital companies operate with State participation, information
on the performed procedures for the nomination of members of the
executive board and supervisory board, and also other information
necessary in order to provide an insight in State capital
companies and capital shares. The report shall also include the
information on how the requirements of Section 29, Paragraph two,
Section 36 (in respect of local governments), and Section 58 of
this Law are fulfilled and the conditions of Section 22,
Paragraph two, Clauses 7.2 and 7.3 of this
Law have been complied with.
(3) In accordance with the procedures stipulated by the
coordinating authority, the holder of State capital shares shall
provide thereto the information necessary for preparation of the
report referred to in Paragraph one of this Section.
[15 March 2018; 13 June 2019]
Section 31. Procedures for
Nominating Members of the Executive Board and the Supervisory
Board in Case of Governance of State Capital Shares
(1) The holder of State capital shares shall ensure nomination
of a candidate for the position of a member of the executive
board (if supervisory board has not been established in the
capital company). The coordinating authority shall ensure
nomination of a candidate for the position of a member of the
supervisory board of the capital company in co-operation with the
holder of State capital shares. The supervisory board of the
capital company (if such has been established) shall ensure
nomination of the candidate of a member of the executive board of
the capital company.
(2) The nomination proceedings of a member of the executive
board and supervisory board shall conform to the principles of
good corporate governance, ensure open, fair and professional
selection of members of the executive and supervisory boards,
promoting the establishment of a professional and competent
administrative body of the capital company.
(3) Potential candidates of members of the executive board and
supervisory board are selected by organising a public application
procedure for candidates. When selecting members of the executive
board or supervisory board in a joint-stock company and a limited
liability company, if they meet the requirements of Section 78,
Paragraph two of this Law, a recruitment consultant shall be
additionally involved in the nomination procedure.
(4) The following persons may not be nominated as members of
the executive board or supervisory board:
1) a person with no higher education;
2) a person who has been punished for an intentional criminal
offence without extinguishing or removing the criminal
record;
3) a person who on the basis of the decision taken within the
scope of criminal proceedings has been removed the right to
perform a specific or any commercial activity or any other
professional activity;
4) a person on whom insolvency proceedings have been
declared.
5) a person who is or who, during the last 24 months until the
final date for the submission of applications within the scope of
the public application procedure for candidates, has been an
official of a political party or an alliance of political parties
who implements the management of a political party or an alliance
of political parties, including takes decisions or implements
representation on its behalf (for example, a member of the
executive board, manager, president, chairperson,
Secretary-General).
(41) A candidate of a member of the executive board
or supervisory board, when submitting the application within the
scope of the public application procedure for candidates, shall
certify the conformity with the requirements of Paragraph four of
this Section.
(5) The holder of State capital shares or the supervisory
board of the capital company (if such has been established), or
the coordinating authority (for the nomination of members of the
supervisory board of the State capital company) shall establish a
nomination committee the task of which is to assess the
candidates of members of the executive board or supervisory
board. The nomination committee shall include the representatives
nominated by the holder of State capital shares or the
supervisory board of the capital company (if such has been
established) and by the coordinating authority (except for the
nomination committees of dependent capital companies), and also
independent experts and, if necessary, observers with advisory
rights.
(6) The nomination committee shall assess and nominate a
candidate (candidates) for election to the position of the member
of the executive board or supervisory board from those candidates
who have applied in accordance with the public application
procedure for candidates. In order to ensure professional and
objective work of the v of the capital company which promotes a
long-term increase in the value of the capital company and
efficiency of the activities thereof, the holder of capital
shares shall ensure that at least half of the members of the
supervisory board are independent and meet all of the following
criteria:
1) within the last three years, a member of the supervisory
board has not been a member of the supervisory board, a
controller, an employee, a proctor, or a person with a commercial
power of attorney, an external auditor of the relevant capital
company or a capital company related thereto (dependent capital
company, capital company controlled by a capital company of a
public entity), or an employee in the capital company which
fulfils the functions of an external auditor in the capital
company in which he or she holds the office of the member of the
supervisory board;
2) a member of the supervisory board or his or her family
members (spouse, children, parents) do not receive and, during
the last three years, have not received remuneration from the
relevant capital company or dependent company thereof, except for
the case when the member of the supervisory board receives or has
received remuneration for the fulfilment of the duties of a
member of the supervisory board and conforms to the criteria of
an independent member of the supervisory board referred to in
this Paragraph;
3) after election in a position, a member of the supervisory
board earns income in the relevant capital company only for the
fulfilment of the duties of a member of the supervisory
board;
4) a member of the supervisory board or his or her family
members (spouse, children, parents) have not had transactions of
significant amount neither directly, nor indirectly, neither as
partners, stockholders nor senior managers with the relevant
capital company during the last three years;
5) a member of the supervisory board does not hold the
position of a member of the executive board or a leading position
in another capital company which has a transaction of significant
amount with the capital company represented by the member of the
supervisory board;
6) during the last three years, a member of the supervisory
board has not been:
a) an official or employee of the holder of capital shares or
a subordinate institution thereof;
b) a member of the executive board of the capital company in
the holding of the holder of capital shares or a dependent
capital company or parent undertaking thereof;
c) an administrative official within the meaning of the State
Administration Structure Law for more than one year.
(7) On the basis of justified arguments, the holder of State
capital shares or the supervisory board has right to reject the
candidates proposed by the nomination committee. In such case the
process for selecting the necessary candidates referred to in
this Section shall be organised repeatedly.
(8) The conditions of this Section, except for the
restrictions laid down in Paragraph four of this Section, shall
not be applied, if:
1) after assessing the performance of a member of the
executive board or supervisory board in the previous term of
office, the holder of State capital shares or the supervisory
board has decided to nominate the member for the next term of
office;
2) the candidate of the member of the executive board or
supervisory board cannot be nominated in a time period that would
ensure the capacity to act of the body of the capital company. In
such case the holder of State capital shares or the supervisory
board (if such has been established) shall appoint such candidate
as the member of the executive board or supervisory board who
complies with the criteria of professionalism and competence of
the respective candidate of the member of the executive board or
supervisory board.
(9) A person elected in accordance with the procedures laid
down in Paragraph eight, Clause 2 of this Section shall fulfil
the official duties until the moment when the holder of State
capital shares or the supervisory board of the State capital
company elects him or her or other candidate to the position in
accordance with the nomination procedures laid down this Section.
This time period may not be longer than one year.
(10) The Cabinet shall determine the procedures by which
candidates shall be nominated for the positions of members of the
executive board and supervisory board in capital companies in
which the State as the shareholder (stockholder) has the right to
nominate members of the executive board or supervisory board, and
members of the executive board in State capital companies in
which the supervisory board has been established, including:
1) the procedures for the co-operation between the
coordinating authority and the holder of capital shares, the
procedures for the establishment of the nomination committee and
the composition thereof, and the requirements to be brought
forward for the members of the nomination committee;
2) the minimum requirements in respect of the education,
language skills, and work experience of the members of the
executive board and supervisory board;
3) the competences necessary for the members of the executive
board and supervisory board and the procedures for the assessment
thereof;
4) the procedures by which the information on the course and
results of the nomination process is documented and
published;
5) the duties of a recruitment consultant and the procedures
for covering the expenses related to the fulfilment thereof.
[13 June 2019; Constitutional Court Judgment of 17 December
2020; 6 May 2021; 11 November 2021]
Chapter
VI
Governance of Capital Shares of a Derived Public Entity
Section 32. Procedures for Receiving
an Opinion of the Coordinating Authority
Prior to taking the decision referred to in Sections 5, 7, and
9 of this Law to terminate the participation or decisive
influence of a derived public entity in a capital company, to
revaluate the participation or to terminate the participation of
a derived public entity in a capital company, the derived public
entity may request the coordinating authority to provide an
opinion. The coordinating authority shall provide an opinion
within one month. The opinion of the coordinating authority shall
be of recommendatory nature. Prior to taking the decision
referred to in Section 5 of this Law to obtain participation or
decisive influence of a derived public entity in a capital
company, the derived public entity shall receive an opinion from
the coordinating authority.
[13 June 2019]
Section 33. Assessment of the
Medium-Term Operational Strategy Drawn up by a Capital
Company
The highest decision-making body of the derived public entity
shall determine the procedures by which the representative of the
holder of capital shares of the derived public entity or the
supervisory board of the capital company shall receive and assess
the opinion of individual bodies of derived public entities
before approval of the medium-term operational strategy.
[13 June 2019]
Section 34. Assessment of
Performance Results of a Capital Company
(1) Each year the representative of the holder of capital
shares of a derived public entity shall perform a comprehensive
assessment of efficiency of financial activities of the capital
company and achievement of the financial and non-financial
objectives specified in the medium-term operation strategies.
(2) Upon assessing the progress of implementation of
objectives, the representative of the holder of capital shares of
a derived public entity shall, as necessary, decide on further
activities in order to ensure return on assets and increase in
value, as well as achievement of the objectives specified in the
medium-term operational strategy.
(3) The highest decision-making body of the derived public
entity shall determine the procedures by which the representative
of the holder of capital shares of th derived public entity shall
assess the performance results of the capital company referred to
in Paragraph one of this Section.
[13 June 2019]
Section 35. Determination of Profit
Share to be Disbursed in Dividends in a Capital Company in which
the Derived Public Entity has the Decisive Influence
(1) The highest decision-making body of the derived public
entity shall stipulate the procedures for determining the profit
share to be disbursed in dividends in a capital company in which
the derived public entity has decisive influence.
(2) In determining the profit share to be disbursed in
dividends in a capital company, in which the derived public
entity has decisive influence, the representative of the holder
of capital shares shall take into account the following:
1) the objectives of the capital company and their
implementation;
2) the budget of the capital company and the profit prognosis
included therein;
3) information included in the medium-term operational
strategy on the company budget planned for next years, further
directions for the development of and attraction of investments
for the capital company, financial investments and their sources,
and other measures increasing the value of the capital company
and further return on capital;
4) the necessity to ensure optimal structure of capital (ratio
between own funds and borrowed capital) by balancing financial
risks, as well as assessing indicators of capital sufficiency and
return.
Section 36. Provision of Disclosure
of Information
A derived public entity shall ensure that current information
on capital companies in which it participates is published on its
website, including the following information:
1) a list of capital companies grouped by the criteria of
field or size;
2) the firm name, legal address, size of the equity capital of
the capital company and amount of participation of the derived
public entity;
3) conformity of the derived public entity with the conditions
of Section 4, Paragraph one of this Law and the general strategic
objective;
4) participation of the capital company in other companies and
its conformity with the conditions of Section 4, Paragraph two of
this Law;
5) the representative of the holder of capital shares of the
derived public entity in the capital company;
6) approved annual statement of the capital company;
7) the dividends disbursed by the capital company to the
derived public entity and payments of the capital company into
the State and local government budgets (including deductibles and
tax payments);
8) information that the derived public entity has intended to
terminate participation in the capital company;
9) information on the commenced reorganisation or
transformation of the capital company;
10) other information considered by the derived public entity
necessary to be published;
11) not later than by 1 October of each year - annual report
on the capital companies and capital shares belonging to the
derived public entity. The abovementioned report shall include
consolidated information on the participation of the derived
public entity in capital companies, the resources invested
thereby and the return of such resources, the services provided
by capital companies, the contributions in the State budget and
local government budgets, the subsidies received from the State
or local government budget, information on the sectors in which
capital companies operate with the participation of the derived
public entity, information on the performed procedures for the
nomination of members of the executive board and supervisory
board, and also other information necessary in order to provide
an insight in capital companies and capital shares of the derived
public entity. The information on how the derived public entity
and the capital companies belonging thereto have fulfilled the
requirements of Sections 36 and 58 of this Law shall also be
included in the report.
[13 June 2019 / See Paragraph 28 of Transitional
Provisions]
Section 37. Procedures for
Nominating Members of the Executive Board and the Supervisory
Board in Case of Governance of Capital Shares of a Derived Public
Entity
(1) The holder of capital shares shall ensure nomination of a
candidate for the position of a member of the executive board (if
the supervisory board has not been established in the capital
company). The supervisory board of the capital company (if such
has been established) shall ensure nomination of the candidate of
a member of the executive board of the capital company.
(2) The nomination proceedings of a member of the executive
board and supervisory board shall conform to the principles of
good corporate governance, ensure open, fair and professional
selection of members of the executive and supervisory boards,
promoting the establishment of a professional and competent
administrative body of the capital company.
(3) Potential candidates of members of the executive board and
the supervisory board are selected by organising a public
application procedure for candidates. When selecting members of
the executive board or supervisory board in a joint-stock company
and a limited liability company, if they meet the requirements of
Section 78, Paragraph two of this Law, a recruitment consultant
shall be additionally involved in the nomination procedure.
(4) The following persons may not be nominated as members of
the executive board or supervisory board:
1) a person with no higher education;
2) a person who has been punished for an intentional criminal
offence without extinguishing or removing the criminal
record;
3) a person who on the basis of the decision taken within the
scope of criminal proceedings has been removed the right to
perform a specific or any commercial activity or any other
professional activity;
4) a person on whom insolvency proceedings have been
declared;
5) a person who is or who, during the last 24 months until the
final date for the submission of applications within the scope of
the public application procedure for candidates, has been an
official of a political party or an alliance of political parties
who implements the management of a political party or an alliance
of political parties, including takes decisions or implements
representation on its behalf (for example, a member of the
executive board, manager, president, chairperson,
Secretary-General).
(41) A candidate of a member of the executive board
or supervisory board, when submitting the application within the
scope of the public application procedure for candidates, shall
certify the conformity with the requirements of Paragraph four of
this Section.
(5) The holder of capital shares or the supervisory board of
the capital company (if such has been established) shall
establish a nomination committee the task of which is to assess
the candidates of members of the executive board or supervisory
board. The nomination committee shall include the representatives
nominated by the holder of capital shares or the supervisory
board (if such has been established), and also independent
experts and, if necessary, observers with advisory rights.
(6) The nomination committee shall assess and nominate a
candidate (candidates) for election to the position of the member
of the executive board or supervisory board from those candidates
who have applied in accordance with the public application
procedure for candidates. In order to ensure professional and
objective work of the supervisory board of the capital company
which promotes a long-term increase in the value of the capital
company and efficiency of the activities thereof, the holder of
capital shares shall ensure that at least half of the members of
the supervisory board are independent and meet all of the
following criteria:
1) during the last three years, a member of the supervisory
board has not been a member of the supervisory board, a
controller, an employee, a proctor, or a person with a commercial
power of attorney, an external auditor of the relevant capital
company or a capital company related thereto (dependent capital
company, capital company controlled by a capital company of a
public entity), or an employee in the capital company which
fulfils the functions of an external auditor in the capital
company in which he or she holds the office of the member of the
supervisory board;
2) a member of the supervisory board or his or her family
members (spouse, children, parents) have not received
remuneration during the last three years from the relevant
capital company or dependent company thereof, except for the case
when the member of the supervisory board receives or has received
remuneration for the fulfilment of the duties of a member of the
supervisory board and conforms to the criteria of an independent
member of the supervisory board referred to in this
Paragraph;
3) after election in a position, a member of the supervisory
board earns income in the relevant capital company only for the
fulfilment of the duties of a member of the supervisory
board;
4) a member of the supervisory board or his or her family
members (spouse, children, parents) have not had transactions of
significant amount neither directly, nor indirectly, neither as
partners, stockholders nor senior managers with the relevant
capital company during the last three years;
5) a member of the supervisory board does not hold the
position of a member of the executive board or a leading position
in another capital company which has a transaction of significant
amount with the capital company represented by the member of the
supervisory board;
6) during the last three years, a member of the supervisory
board has not been:
a) an official or employee of the holder of capital shares or
a subordinate institution thereof;
b) a member of the executive board of the capital company in
the holding of the holder of capital shares or a dependent
capital company or parent undertaking thereof.
(7) On the basis of justified arguments, the holder of capital
shares or the supervisory board has right to reject the
candidates brought forward by the nomination committee. In such
case the process for selection of the necessary candidates
referred to in this Section shall be organised repeatedly.
(8) The conditions of this Section, except for the
restrictions laid down in Paragraph four, shall not be applied,
if:
1) after assessing the performance of a member of the
executive board or supervisory board in the previous term of
office, the holder of capital shares or the supervisory board has
decided to nominate the member for the next term of office;
2) the candidate of the member of the executive board or
supervisory board cannot be nominated in a time period that would
ensure the capacity to act of the institution of the capital
company. In such case the holder of capital shares or the
supervisory board (if such has been established) shall appoint
such candidate as the member of the executive board or
supervisory board who meets the criteria of professionalism and
competence necessary for the respective candidate of the member
of the executive board or supervisory board.
(9) The person appointed in accordance with the procedures
laid down in Paragraph eight, Clause 2 of this Section shall
fulfil the official duties until the moment when the holder of
capital shares or the supervisory board of the State capital
company appoints such person or another candidate to the position
in accordance with the nomination procedures laid down this
Section. This time period may not be longer than one year.
(10) The Cabinet shall determine the procedures by which
candidates shall be nominated for the positions of members of the
executive board and supervisory board in capital companies in
which a derived public entity as the shareholder (stockholder)
has the right to nominate members of the executive board or
supervisory board, and members of the executive board in capital
companies of a derived public entity in which the supervisory
board has been established, including:
1) the procedures for the establishment of the nomination
committee, the composition thereof, and the requirements to be
brought forward for the members of the nomination committee;
2) the minimum requirements in respect of the education,
language skills, and work experience of the members of the
executive board and supervisory board;
3) the competences necessary for the members of the executive
board and the supervisory board and the procedures for the
assessment thereof;
4) the procedures by which the information on the course and
results of the nomination process is documented and
published;
5) the duties of a recruitment consultant and the procedures
for covering the expenses related to the fulfilment thereof.
[13 June 2019; Constitutional Court Judgment of 17 December
2020; 6 May 2021; 11 November 2021]
Division
C
Capital Companies of a Public Entity and Public Private Capital
Companies
Chapter
VII
General Provisions for the Management of Operation of Capital
Companies of a Public Entity and Public Private Capital
Company
Section 38. Stocks of a Joint-Stock
Company of a Public Entity
Stocks of a joint-stock company of a public entity and of a
public private joint-stock company may not be an object of public
circulation, except when the highest decision-making body of the
respective public entity takes the decision to alienate the
stocks by quoting them on the stock market.
[6 May 2021]
Section 39. Capital Company with
Supplemental Liability
A capital company of a public entity and a public private
capital company may not be founded as a capital company with
supplemental liability.
Section 40. Exceptions from the Duty
of Certifying a Signature of a Public Entity
(1) A signature of the representative of the holder of capital
shares of a public entity on an application of a capital company
of a public entity and a public private capital company in the
Commercial Register need not be publicly certified.
(2) Also signature of a person regarding issuance, revocation
of a procuration or any changes in its amount, as well as on
documents to be appended to the application to be submitted to
the Commercial Register, which are referred to in Section 10,
Paragraph two, Clause 2 of the Commercial Law, except the consent
of a person specified in Sub-clauses "f" and "g" of this Clause
to take the position of the member of the executive board or
liquidator of the capital company, need not be publicly
certified.
Section 41. Requirements to be
Conformed to in the Management of a Public Private Capital
Company
All the requirements and restrictions laid down in Divisions
B, D, and E of this Law, which are applicable to the executive
board and supervisory board, as well as members of the executive
and supervisory boards of a capital company of a public entity
(including the criteria for the establishment of the supervisory
board, the requirements for members of the executive and
supervisory boards, determination of monthly remuneration,
restrictions on disbursement of premiums and other requirements
laid down in this Law), shall be conformed to in the management
of a public private capital company.
Chapter
VIII
Founding of a Capital Company of a Public Entity
Section 42. Founding of a State
Capital Company
(1) The Cabinet shall determine the following in an order
regarding foundation of a State capital company:
1) the firm name of the capital company;
2) the type of the capital company;
3) the amount of equity capital of the capital company and
type of its payment;
4) the holder of capital shares of the capital company;
5) other issues related to founding of the capital
company.
(2) The holder of capital shares shall fulfil the functions of
the founder of a State capital company laid down in this Law,
issuing respective orders.
Section 43. Founding of a Capital
Company of a Derived Public Entity
(1) The following shall be indicated in a decision to found a
capital company of a derived public entity:
1) the name and address the location of the capital company of
a derived public entity;
2) the firm name of the capital company;
3) the type of the capital company;
4) the amount of equity capital of the capital company and
type of its payment;
5) the holder of capital shares of the capital company;
6) other issues related to founding of the capital
company.
(2) In the decision, no specific right or privilege during
founding of the capital company shall be specified to any
person.
(3) The representative of the holder of capital shares of a
derived public entity shall fulfil the functions specified in
this Law for the founder of a capital company of a derived public
entity, taking respective decisions or signing documents.
Section 44. Documents of
Incorporation of a Capital Company
(1) Documents of incorporation of a State capital company are
the Cabinet order regarding founding of a capital company, an
order of the holder of capital shares (Section 45 of this Law)
and articles of association of the capital company.
(2) Documents of incorporation of a capital company of a
derived public entity are the decision to found a capital company
issued by the highest decision-making body of the derived public
entity and articles of association of the capital company.
Section 45. Orders of the Holder of
State Capital Shares
(1) The provisions of the Commercial Law regarding a
memorandum of association (Section 143, Paragraph five of the
Commercial Law) shall apply to orders of the holder of State
capital shares.
(2) The holder of State capital shares shall indicate the
following information on the founder of a State capital company
in the order:
1) the name and address of the State administration
institution;
2) the given name, surname, personal identification number and
position of the person who signs the order.
(3) In an order of the holder of State capital shares, no
specific right or privilege during founding of the capital
company shall be specified for any person.
Section 46. Articles of Association
of a Capital Company
(1) A capital company of a public entity shall operate on the
basis of articles of association which are drawn up according to
standard articles of association of a capital company of a public
entity (hereinafter - the standard articles of association).
(2) Standard articles of association shall be approved by the
Cabinet.
(3) The conditions of standard articles of association may be
different from the provisions of this Law and the Commercial Law
only if these laws directly allow such difference.
(4) Conditions of articles of association of a capital company
of a public entity may differ from provisions of standard
articles of association only if standard articles of association
directly allow such difference.
(5) The meeting of shareholders (stockholders) shall approve
the articles of association of a capital company of a public
entity. In such case the representative of the holder of capital
shares shall sign the articles of association (also amendments
thereto) of the capital company of the public entity.
Section 47. Election of the
Executive Board, Supervisory Board and Auditor of a Capital
Company
The executive board and supervisory board established until
registration of the company is elected, as well as the auditor is
appointed for a full term of office.
Section 48. Activities Prior to
Entering a Capital Company in the Commercial Register
The holder of capital shares may not act on behalf of the
capital company to be founded before it is entered into the
Commercial Register, except for the performance of activities
directly related to founding of the capital company.
Chapter
IX
Equity Capital of a Capital Company of a Public Entity and Public
Private Capital Company
Section 49. Evaluation of Financial
Investment
(1) The financial investment shall be evaluated in accordance
with Section 154 of the Commercial Law.
(2) If the equity capital of a capital company of a public
entity is paid with financial investment the total value of which
does not exceed EUR 14 000 the holder of capital shares may
assess the financial investment and provide a opinion.
Section 50. Consequences of
Non-conformity with the Time Period for the Payment of Share
If a public entity does not pay the full price of the signed
share within the time period of payment for capital shares
indicated in the provisions for increase of equity capital, only
the paid amount of shares in the capital company shall be
registered for the public entity.
Chapter X
Liability, Prohibition of Competition and Prevention of a
Conflict of Interest
Section 51. Liability of Members of
the Executive Board and Supervisory Board, a Shareholder
(Stockholder) and Holder of Capital Shares
(1) A member of the executive board and supervisory board of a
capital company of a public entity and a public private capital
company shall not be liable for the losses caused to the capital
company if he or she has acted as a prudent and careful manager,
and also in good faith according to a lawful decision of the
highest decision-making body of a public entity, meeting of
shareholders (stockholders), a shareholder (stockholder) or the
representative of the holder of capital shares.
(2) If losses to the capital company of a public entity or its
dependent capital company, or to the capital company under its
decisive influence are caused by implementing a lawful decision
of the shareholder (stockholder) or the representative of the
holder of capital shares, the respective shareholder
(stockholder) or the representative of the holder of capital
shares shall be liable for them. If losses to the capital company
of a public entity or its dependent capital company, or to the
capital company under its decisive influence are caused if the
meeting of shareholders (stockholders), supervisory board (if any
has been established) and executive board implements a lawful
decision of the highest decision-making body of a public entity,
the highest decision-making body of the public entity shall be
responsible for them and shall decide on the covering thereof.
The shareholder (stockholder) who voted for taking of the
abovementioned decision shall be liable for losses caused to the
public private capital company by implementation of a lawful
decision of the meeting of shareholders (stockholders).
(3) The capital company of a public entity and public private
capital company may release a member of the executive board or
supervisory board from liability or enter into settlement with
him or her (within the meaning of Section 173 of the Commercial
Law) for the activities performed, if the meeting of shareholders
(stockholders) makes a respective decision.
[15 March 2018]
Section 52. Prohibition of
Competition and Prevention of a Conflict of Interest for Members
of the Executive Board of a Capital Company
(1) A member of the executive board of a capital company of a
public entity and a public private capital company must comply
with the following in his or her activities:
1) the provisions of the Commercial Law in relation to
restrictions on concluding transactions with associated
persons;
2) the prohibition of competition (Section 171 of the
Commercial Law);
3) the restrictions determined in the law On Prevention of
Conflict of Interest in Activities of Public Officials.
(2) If a member of the executive board of a capital company of
a public entity and a public private capital company violates the
restrictions laid down in Paragraph one, Clause 2 of this
Section, the capital company has the right to request
compensation for losses or recognition of respective transactions
as such which have been concluded on behalf of the capital
company, and transfer of the derived income or right of claim it
to the capital company.
(3) The claims referred to in Paragraph two of this Section
shall expire within six months from the day when other members of
the executive board, supervisory board (if such has been
established) or the representative of the holder of capital
shares have discovered the violation of the prohibition of
competition, but not later than within five years from the day of
committing the violation.
[15 March 2018]
Chapter
XI
Annual Statement and Profit Distribution of a Capital
Company
Section 53. Auditor
The executive board or supervisory board of a capital company
of a public entity and a public private capital company may not
object to the auditor elected by the meeting of shareholders
(stockholders).
Section 54. Approval of the Annual
Statement of a Capital Company
The executive board of a capital company of a public entity
and a public private capital company shall ensure that the annual
statement (Section 174 of the Commercial Law) is prepared and the
meeting of shareholders (stockholders) is convened in order to
approve the annual statement of the capital company by 30 April
(including) of the respective year, but if the capital company,
in accordance with the criteria of the Law on the Annual
Statements and Consolidated Statements, is a medium-sized or
large capital company, or the capital company is the parent
capital company of a group of companies which prepares a
consolidated annual statement - by 31 May (including) of the
respective year, unless it is otherwise provided for in
international agreements.
[16 June 2016]
Section 55. Disbursement of Cash
Funds of a Capital Company to the Holder of Capital Shares
(1) The cash funds of a capital company of a public entity and
a public private capital company may be disbursed to the
shareholder (stockholder) in conformity with the restrictions
specified in Section 182 of the Commercial Law.
(2) The cash funds disbursed by a capital company of a public
entity and a public private capital company shall be transferred
into the budget of the respective public entity.
Section 56. Distribution of Profit
of a Capital Company of a Public Entity
(1) The meeting of shareholders (stockholders) of a State
capital company shall determine the profit share to be disbursed
dividends in conformity with Section 28 of this Law.
(2) The meeting of shareholders (stockholders) of a capital
company of a derived public entity shall determine the profit
share to be disbursed in dividends in conformity with Section 35
of this Law.
(3) The meeting of shareholders (stockholders) of a capital
company of a public entity shall determine the principles for the
distribution of the profit of the capital company in conformity
with the performance results of the capital company and the
medium-term operational strategy.
Chapter
XII
Individual Issues Related to the Management of a Capital
Company
Section 57. Drawing up of the
Medium-Term Operational Strategy
(1) A capital company of a public entity and a public private
capital company shall draw up the medium-term operational
strategy, taking into account:
1) the general strategic objectives of the capital company
determined by the highest decision-making body of the public
entity;
2) the non-financial objectives brought forward by the
sectoral ministry or a body of a derived public entity (if
applicable);
3) the financial objectives of the capital company, as well as
result-based parameters characterising the operational efficiency
of the capital company (for example, market share, efficiency of
disbursement and processes, customer satisfaction, productivity
of employees).
(2) The supervisory board of the capital company or the
meeting of shareholders (stockholders) (if the supervisory board
has not been established) shall approve the medium-term
operational strategy drawn up by the capital company.
(3) The coordinating authority shall prepare the guidelines
for drawing up of the medium-term operational strategy. Such
guidelines shall be of recommendatory nature in relation to a
capital company of a derived public entity and a public private
capital company.
(4) The medium-term operational strategy includes at least the
following information:
1) general information on the capital company [firm name of
the capital company, amount of equity capital, composition of
stakeholders (shareholders) and the number of shares owned by
them, payments made into State or local government budget,
information on the financing received from State or local budget,
information on the property structure (including participation in
other companies), type of operation, history, management model of
the capital company];
2) information on the business model, including products and
services of the capital company;
3) analysis of strengths and weaknesses of the capital
company;
4) market analysis, description of competitors and
clients;
5) general strategic objectives of the capital company;
6) non-financial objectives (if applicable);
7) financial objectives, as well as result-based indicators
characterising the efficiency of operation of the capital
company;
8) forecast profit and loss calculation, balance sheet and
cash flow statement;
9) risk analysis.
[15 March 2018]
Section 58. Publishing Information
on a Capital Company
(1) A capital company of a public entity and a public private
capital company shall publish general strategic objectives of the
capital company, information on the types of operation and
commercial activity of the capital company, as well as the
following information on its website, but if there is none - on
the website of the holder of capital shares:
1) at least once in a year:
a) the results of implementation of financial objectives
(according to an approved annual statement) and non-financial
objectives (including total sum of balance, net turnover, profit
or loss calculation, cash flow report, different result-based
indicators characterising the operation of the capital company)
for at least the last five years;
b) the contributions made into the State or local government
budget (including dividends, deductions, tax payments) for at
least the last five years;
c) information on the funding received from the State or local
government budget and its use (if applicable) for at least the
last five years;
d) [13 June 2019],
e) [13 June 2019];
2) the reports developed by the capital company for at least
the last five years:
a) an interim report not checked by a sworn auditor for three,
six, and nine months, and also an annual statement not checked by
a sworn auditor (within two months after the end of the reporting
period);
b) an annual statement not checked by a sworn auditor (within
five months after the end of the reporting year);
3) constantly, with necessary updates:
a) information on the property structure (including
participation in other companies);
b) information on the organisational structure;
c) information on the sum of each donation (gift) received and
performed and the recipients for at least the last five
years;
d) information on procurements for at least the last five
years;
e) other significant information unless it is related to
disclosure of a commercial secret;
f) the articles of association;
g) the by-laws of the executive board, supervisory board (if
such has been established) or another equivalent document
regulating the operation thereof;
h) information on the members of the supervisory board (if
such has been established) and the executive board (for each
separately): professional work experience, education, positions
in other capital companies, terms of office, and also the
conformity of the member of the supervisory board with the
criteria for an independent member of the supervisory board laid
down in this Law;
i) information regarding all notified meetings of shareholders
(stockholders) of the capital company, including on the agenda
and decisions;
j) the remuneration policy principles and information on the
remuneration of each member of the executive board and the
supervisory board;
k) the strategy of donating (giving gift) and the procedures
for donating (giving gifts) of a capital company.
(11) A capital company of a public entity and a
public private capital company (joint-stock company or limited
liability company which conforms to the requirements of Section
78, Paragraph two of this Law) shall additionally publish the
following information on the website thereof:
1) at least once in a year:
a) the information on the foreseeable risk factors;
b) the information on the main elements of the internal
control and risk management system which are applied to the
preparation of financial statements;
c) the composition and description of activities of
administrative bodies, and also the committees thereof;
d) if a capital company implements the policy in respect of
the variety of the composition of members of administrative
bodies of the capital company (multilateral policy) - a
description of the objectives of such policy, the implementation
measures, and the results in a reporting year;
e) the information on the committees of the supervisory board
(if such has been established) and the audit committee (if such
has been established), including the by-laws, and also the
information on the members of the committee (professional work
experience, education, positions in other capital companies,
terms of offices);
f) a notification of corporate governance;
2) constantly, with necessary updates:
a) information on the transactions which are atypical or
transactions of significant amount with related parties within
the meaning of Section 59.1 of the Financial
Instrument Market Law for at least the last five years;
b) the most significant policies of the capital company in
which the principles of activities of the capital company in
respect of risk management, prevention of the conflicts of
interest, corruption combating, corporate governance, and other
issues are defined.
(12) A capital company of a public entity and a
public private capital company shall additionally publish on its
website also non-financial statements or consolidated
non-financial statements for the last five years if two years in
succession its average number of employees has exceeded 250 and
it conforms to one of the following criteria:
1) the sum total of the balance exceeds 20 million euros;
2) the net turnover exceeds eight million euros.
(2) If there are impartial reasons due to which the capital
company cannot publish the information referred to in Paragraphs
one and 1.1 of this Section to which the status of a
commercial secret has been assigned in accordance with Section 19
of the Commercial Law, the capital company shall publish a
respective explanation on its website.
(3) A capital company of a public entity and a public private
capital company shall ensure that its subsidiary also publishes
the information referred to in Paragraph one of this Section and
the explanation referred to in Paragraph two of this Section.
(4) The interim reports referred to in Paragraph one, Clause
2, Sub-clause "a" of this Section shall be prepared in accordance
with the laws and regulations governing the preparation of annual
statements, and they shall include:
1) an interim financial statement which consists of a balance
sheet, profit or loss statement, a report on changes of the
equity capital, an interim cash flow statement and an appendix.
The appendix shall provide information which ensures
comparability of the balance of interim statement with the
balance at the end of the previous reporting period (a balance
sheet) or in the respective period of the previous reporting year
(a profit or loss statement, cash flow statement, report on
changes of the equity capital), as well as sufficient information
and explanations, so that the user of the interim financial
statement could obtain a reliable and clear overview of any
significant changes in the items of the balance sheet and profit
or loss statement items and the development trend of the capital
company;
2) an interim management report that provides information on
significant events in the time period from the beginning of the
financial year to the reporting date and on their impact on the
interim financial reports, describes the main risks and indicates
those potential uncertain circumstances which the capital company
could face in the coming months of the financial year and which
could affect its financial position and financial performance. A
capital company of a public entity and a public private capital
company (joint-stock company or limited liability company which
conforms to the requirements of Section 78, Paragraph two of this
Law) shall also include the information referred to in Paragraph
one, Clause 1, Sub-clauses "a", "b", and "c" of this Section, and
also the information on the remuneration disbursed to the members
of the executive board and the supervisory board in the interim
management report;
3) a statement of the liability of the management which is
prepared in addition to the statutory requirements for the
preparation of annual statements. It shall be indicated in the
statement that, on the basis of the information at the disposal
of the executive board of the capital company, the interim
financial statements are prepared in accordance with the
requirements of the applicable laws and regulations and provide a
reliable and clear overview of assets, financial position and
profit or loss of the capital company and the consolidated group,
and that the interim management report includes true
information.
[18 June 2015; 15 March 2018; 13 June 2019; 11 November
2021]
Section 58.1 Notification
of Corporate Governance
(1) A capital company of a public entity and a public private
capital company (joint-stock company or limited liability company
which conforms to the requirements of Section 78, Paragraph two
of this Law) shall prepare a notification of corporate
governance. The Cabinet shall determine the applicable corporate
governance recommendations.
(2) A notification of corporate governance shall include the
following information:
1) a reference to the corporate governance recommendations
which the capital company applies;
2) the information on whether and how the capital company
applies certain principles included in the corporate governance
recommendations;
3) if the capital company does not apply certain principles
included in the corporate governance recommendations - the
information on which principles are not applied and the
justification for such action by explaining clearly, correctly,
and extensively enough:
a) the reasons for non-application of each particular
principle and the possible consequences thereof, and also the
manner for taking the decision to not apply such principle;
b) when it is planned to commence the application of the
particular principle if the decision referred to in Sub-clause
"a" of this Clause applies to a limited period of time;
c) how the measure which is taken instead of application of
the particular principle (if any) meets the objective of such
principle or corporate governance recommendations (in which such
principle is included) or promotes good corporate governance in
the capital company.
(3) A capital company shall include the notification of
corporate governance in the management report or prepare as a
separate part of the annual statement.
(4) If a capital company prepares the annual statement and
consolidated annual statement, it shall prepare one notification
of corporate governance and include it in one of these statements
in accordance with the requirements of Paragraph three of this
Section.
(5) If transferable securities of the capital company referred
to in Paragraph one of this Section are admitted on a regulated
market, it shall prepare the notification of corporate governance
in accordance with the provisions of the Financial Instrument
Market Law.
[11 November 2021 / See Paragraph 32 of Transitional
Provisions]
Section 58.2
Non-financial Statement
(1) The capital company referred to in Section 58, Paragraph
1.2 of this Law shall prepare a non-financial
statement which is included in the management report or prepare
it as a separate part of the annual statement.
(2) At least the following information shall be included in
the non-financial statement:
1) the information on the development, performance results and
financial standing of the capital company, and also on the impact
of its commercial activity on the environment, social and
employee-related aspects, compliance with human rights, and
anti-corruption and bribery prevention measures (hereinafter -
the corporate social responsibility fields);
2) description of the implementation of the policies of the
capital company in respect of the corporate social responsibility
fields, including description of the procedures which are
introduced in the capital company in order to ensure due
attention to the implementation process of such policies;
3) the information on the main risks related to the corporate
social responsibility fields which are characteristic to
transactions of a capital company, and if it is significant and
commensurate, also the information on the risks which are arising
from the legal transactions entered into within the scope of the
commercial activity of the capital company or are related to the
goods produced or services provided by it and which may cause
adverse effects in the corporate social responsibility fields,
and also on that how the capital company manages such risks;
4) the main non-financial indicators of the corporate social
responsibility fields which are characteristic to the particular
capital company and sector in which it operates.
(3) References to the amounts indicated in the financial
statement and additional explanations regarding them shall also
be included in the non-financial statement if the amount
indicated in the financial statement is related to any of the
corporate social responsibility fields of a capital company.
(4) In order to provide the information on the corporate
social responsibility fields, a capital company may use the
guidelines or recommendation included in the legal acts of the
Republic of Latvia or the European Union or in the documents
issued by the United Nations, the Organisation for Economic
Cooperation and Development, the International Labour
Organisation, the International Organisation for Standardisation,
or other international organisation (hereinafter - the guidelines
or recommendations included in the documents issued by Latvia,
the European Union, or other international organisations). The
guidelines or recommendations included in the documents issued by
Latvia, the European Union, or other international organisations
which are used by the capital company shall be indicated in the
management report.
(5) If a capital company does not implement the policy in
respect of one or several corporate social responsibility fields,
a clear and substantiated justification why it is not done shall
be provided in the non-financial notification.
(6) A capital company shall be exempted from the obligation to
include a non-financial statement in the management report if it
prepares a non-financial statement as a separate document in
which information is provided in accordance with the requirements
laid down in this Section in respect of the non-financial
statement, and it shall be published together with the management
report as a part of the annual statement.
(7) If a capital company has included a non-financial
statement in the management report or has prepared it as a
separate document referred to in Paragraph six of this Section,
it shall be exempted from the obligation specified in the laws
and regulations governing the preparation of annual statements in
respect of the provision of certain non-financial indicators and
the analysis thereof in the management report.
(8) If the capital company referred to in Section 58,
Paragraph 1.2 of this Law the transferable securities
of which are admitted on a regulated market meets the criteria
laid down in respect of the obligation to prepare a non-financial
statement, it shall prepare the non-financial statement in
accordance with the provisions of the Financial Instrument Market
Law.
[11 November 2021 / See Paragraph 32 of Transitional
Provisions]
Section 58.3 Consolidated
Non-financial Statement
(1) The capital company referred to in Section 58, Paragraph
1.2 of this Law which is the parent capital company of
a group of companies which prepares a consolidated annual
statement has the obligation to include a consolidated
non-financial statement in the consolidated management
report.
(2) Insofar as it is necessary in order to obtain
understanding about the development, performance results, and
financial standing of the group of companies referred to in
Paragraph one of this Section, and also the impact of its
commercial activity on the corporate social responsibility
fields, the information on this group of companies in general
shall be provided in the consolidated non-financial statement by
applying the provisions of Section 58.2, Paragraphs
two and four of this Law accordingly.
(3) If the group of companies referred to in Paragraph one of
this Section does not implement the policy in respect of one or
several corporate social responsibility fields, clear and
substantiated justification why it is not done shall be provided
in the consolidated non-financial statement.
(4) References to the amounts indicated in the consolidated
financial statement and additional explanations regarding them
shall also be included in the consolidated non-financial
statement if the amount indicated in the consolidated financial
statement refers to any of the corporate social responsibility
fields of a group of companies.
(5) The parent company of a group of companies referred to in
Paragraph one of this Section shall not include the consolidated
non-financial statement in the consolidated management report if
it prepares such statement as a separate document in which
information is provided in accordance with the requirements laid
down in Paragraphs two, three, and four of this Section in
respect of the consolidated non-financial statement, and it shall
be published together with the management report as a part of the
consolidated annual statement.
(6) If the parent company of the group of companies referred
to in Paragraph one of this Section has included the consolidated
non-financial statement in the consolidated management report or
has prepared it as a separate document referred to in Paragraph
five of this Section, it shall be exempted from the obligation
specified in the laws and regulations governing the preparation
of annual statements and consolidated annual statements in
respect of the provision of certain non-financial indicators and
the analysis thereof in the management report and the
consolidated management report.
(7) In respect of the consolidated non-financial statement,
that laid down in Section 58.2, Paragraph eight of
this Law shall be applied.
[11 November 2021 / See Paragraph 32 of Transitional
Provisions]
Division
D
Limited Liability Company of a Public Entity
Chapter
XIII
Equity Capital and Capital Shares
Section 59. Payment of Equity
Capital, Nominal Value and Registration of Capital Shares
(1) Equity capital of a limited liability company of a public
entity (hereinafter in this Division - the company) shall be paid
in full until registration application is submitted to the
Commercial Register Office.
(2) The nominal value of a capital share of the company
(hereinafter in this Division - the shares) shall be determined
in the articles of association. The nominal value of the share
may not be less than one cent. All shares of one category shall
have the same nominal value.
(3) The register of shareholders of the company shall be kept
in accordance with the provisions of the Commercial Law.
(4) Any person has the right to become acquainted with the
register of shareholders of the company.
(5) The representative of the holder of capital shares, the
responsible employee and the authorised representative of the
holder of capital shares have the right to receive an extract
from the register of shareholders of the company, certified by a
person authorised by the executive board, regarding shares owned
by the public entity in the company.
[6 May 2021]
Section 59.1 Categories
of Shares
(1) The company is entitled to issue shares of other category
according to the relevant decision of the highest decision-making
body of a public entity in order to use them as the
re-capitalisation instrument of the company.
(2) If the company has several categories of shares, then the
rights arising from the shares, including the right to receive
dividends, the right to receive the liquidation quota, and the
right to voting rights in the meeting of shareholders, or other
rights, and the number and nominal value of the shares of each
category shall be corroborated in the articles of association of
the company.
(3) The shares in which equal amount of rights has been
corroborated shall be shares of one category. If the company has
several categories of shares, a different designation shall be
assigned to each of them.
(4) If the company has several categories of shares, the
decision to amend the articles of association which provide for
amending, restricting, or cancelling the rights determined for
the relevant category of shares shall be taken if all the holders
of the relevant category of shares agree to it, unless it is
otherwise provided for in the articles of association.
[6 May 2021]
Section 60. Pledging of Shares
Shares of the company may not be pledged.
Section 61. Acquisition of Own
Shares
The company may not acquire own shares, except when the
company reduces the equity capital by withdrawing the shares.
Chapter
XIV
Changes in Equity Capital
Section 62. Decision on Changes in
the Equity Capital
The equity capital may be increased or reduced only on the
basis of a decision of a meeting of shareholders which includes
the provisions for increasing or reducing the equity capital.
Section 63. Increase of the Equity
Capital
(1) The equity capital of the company may be increased:
1) by shareholders investing in the equity capital of the
company and receiving a respective amount of new shares in
return;
2) after the annual statement or report on economic activity
for a time period of less than one year is approved, including
the positive difference between the own capital and the sum
formed by the equity capital reserves which may not be
transferred for increasing the equity capital in accordance with
the law, in the equity capital in full or partially, and
receiving a respective amount of new shares in return. The report
on economic activity shall be prepared in accordance with the
requirements of the Law on Annual Statements and Consolidated
Annual Statements.
(2) If the equity capital of the company is increased in the
way referred to in Paragraph one, Clause 1 of this Section,
complete increase of the equity capital shall be paid for by the
shareholder within the time period specified in the decision to
increase the equity capital. The abovementioned time period may
not exceed three months from the day on which the decision to
increase the equity capital was taken.
(3) The holder of capital shares of a public entity need not
submit to the company an application for obtaining shares.
(4) The company shall enter the new shares of the shareholder
in the register of shareholders on the basis of documents
certifying payment for such shares.
(5) The executive board shall submit an application to the
Commercial Register Office for increasing the equity capital
after payment for shares has been made and new shares have been
recorded into the register of shareholders.
[16 June 2016]
Section 64. Type of Reduction of
Equity Capital
The equity capital of the company shall be reduced by
withdrawing shares.
Chapter
XV
Management of the Company
Section 65. Administrative Bodies of
the Company
(1) The management of the company shall be implemented by a
shareholder, the meeting of shareholders and the executive board,
as well as the supervisory board (if such has been
established).
(2) The decisions within the competence of the meeting of
shareholders shall be taken by the representative of the holder
of capital shares.
Section 66. Competence of the
Meeting of Shareholders
(1) Only the meeting of shareholders has the right to take
decisions:
1) to approve the annual statement of the company;
2) to distribute the profit;
3) to elect and revoke members and chairperson of the
executive board, except when a supervisory board has been
established in the company;
4) to elect and revoke members of the supervisory board (if
such has been established);
5) to elect and revoke of an auditor;
6) to bring a claim against a member of the executive board or
supervisory board (if such has been established) or withdraw the
claim against them, as well as to appoint a representative of the
company to represent the company in court;
7) to approve and amend the articles of association of the
company;
8) on the amount of remuneration for an auditor, members of
the supervisory board (if such has been established) and members
of the executive board (except when a supervisory board has been
established);
9) to increase or decrease the equity capital;
10) to reorganise the company;
11) to elect and revoke of a liquidator;
12) on the medium-term operational strategy, except when a
supervisory board has been established;
13) on other issues, if it is provided for in the law.
(2) Upon request of the executive board, the meeting of
shareholders shall examine and take decisions also on such issues
for the deciding of which the executive board requires a prior
consent of the meeting of shareholders (Section 82 of this
Law).
(3) The meeting of shareholders shall perform the tasks of the
supervisory board if such has not been established in the
company.
[13 June 2019]
Section 67. Competence of a
Shareholder
(1) In accordance with Sections 5, 7, and 9 of this Law, a
shareholder shall take decisions to obtain, continue or terminate
participation in the company.
(2) The decisions referred to in Paragraph one of this Section
in the name of the respective public entity shall be taken by the
highest decision-making body of the public entity.
Section 68. Convening a Meeting of
Shareholders
(1) Regular meetings of shareholders and extraordinary
meetings of shareholders shall be convened.
(2) Meetings of shareholders shall be convened by the
executive board, except in cases provided for in this Law.
Section 69. Convening a Regular
Meeting of Shareholders
(1) The executive board shall convene a regular meeting of
shareholders within a time period which provides a possibility
for approving the annual statement by the time limit provided for
in this Law.
(2) If the executive board has not convened the regular
meeting of shareholders in the intended time period, it shall be
convened by the supervisory board (if such has been established)
or the representative of the holder of capital shares within not
more than five working days from the day on which the executive
board had to convene the meeting of shareholders. Such action of
the executive board may be the basis for the decision of the
supervisory board or the meeting of shareholders to revoke the
executive board on the basis of non-fulfilment of the duties.
(3) If the supervisory board (if such has been established)
has not convened the regular meeting of shareholders in the case
and within the time period referred to in Paragraph two of this
Section, the decision to convene a meeting of shareholders shall
be taken by the representative of the holder of capital shares
within not more than five days from the day on which the
supervisory board had to convene the meeting of shareholders.
(4) If the supervisory board (if such has been established)
does not convene the meeting of shareholders in the case referred
to in Paragraph two of this Section without a justified reason,
such action of the supervisory board may be the basis for the
decision of the meeting of shareholders to revoke members of the
supervisory board on the basis of non-fulfilment of the
duties.
(5) If a dispute arises whether the action of members of the
executive board or supervisory board have justified reason, the
burden of proof shall lie with members of the executive board and
supervisory board accordingly.
Section 70. Convening an
Extraordinary Meeting of Shareholders
(1) The executive board shall convene an extraordinary meeting
of shareholders upon its own initiative or if it is requested in
writing by the supervisory board (if such has been established),
the auditor or the representative of the holder of capital
shares.
(2) The initiators of convening an extraordinary meeting of
shareholders shall indicate the reasons for convening the meeting
and the agenda in the request, as well as submit draft decisions
on issues of the agenda. The request to convene a meeting shall
be submitted to the executive board and supervisory board (if
such has been established), and the auditor and the holder of
capital shares shall be notified thereof.
(3) The executive board shall convene an extraordinary meeting
of shareholders not later than within two weeks after receipt of
the request.
(4) If the executive board does not convene an extraordinary
meeting of shareholders within the time period laid down in
Paragraph three of this Section, it may be convened by the
initiator of convening an extraordinary meeting of shareholders
himself or herself.
(5) If the issue to be examined must be decided urgently, an
extraordinary meeting of shareholders shall be convened within a
time period which provides a possibility for timely receipt of a
notification on convening a meeting of shareholders, as well as
draft decisions and other materials of the meeting of
shareholders. The time period for convening an extraordinary
meeting of shareholders shall not be less than seven days. The
initiator of the urgent convening of the meeting of shareholders
shall justify the urgency in writing.
(6) If the executive board does not convene the extraordinary
meeting of shareholders without a justified reason, the meeting
of shareholders may revoke it by itself or to propose the
supervisory board (if such has been established) revocation of
the members of the executive board on the basis of non-fulfilment
of the duties.
(7) If a dispute arises whether actions of members of the
executive board have a justified reason, the burden of proof
shall lie with the members of the executive board.
Section 71. Convening a Meeting of
Shareholders in Special Cases
If losses of the company exceed half of the equity capital of
the company or the company has a limited solvency, indications of
insolvency are established or are likely to set in, the executive
board shall notify the supervisory board (if such has been
established) thereof, convene a meeting of shareholders in
accordance with Section 70 of this Law and provide explanations
therein.
Section 72. Convening a Meeting of
Shareholders if a Company is Being Liquidated
(1) If the decision to terminate the operation of the company
and to elect a liquidator has been taken, the meeting of
shareholders shall be convened by the liquidator.
(2) The liquidator shall convene the regular meeting of
shareholders within a time period which provides a possibility
for approving the annual statement by the time limit provided for
in the law.
(3) The liquidator shall convene the extraordinary meeting of
shareholders upon its own initiative or if it is requested in
writing by the representative of the holder of capital
shares.
(4) The initiators of convening an extraordinary meeting of
shareholders shall indicate the reasons for convening the meeting
and the agenda in the request. The request to convene a meeting
shall be submitted to the liquidator and the auditor and the
holder of capital shares shall be notified thereof.
(5) If the issue to be examined must be decided urgently, an
extraordinary meeting of shareholders shall be convened in
accordance with the procedures laid down in Section 70, Paragraph
five of this Law.
(6) If the liquidator has not convened a regular or
extraordinary meeting of shareholders within the intended time
period, the representative of the holder of capital shares shall
convene it.
(7) If the liquidator does not convene the meeting of
shareholders without a justified reason, the meeting of
shareholders may revoke the liquidator.
(8) If there is a dispute regarding whether the actions of a
liquidator have a justified reason, the burden of proof shall lie
with the liquidator.
Section 73. Procedures for Convening
a Meeting of Shareholders
(1) The executive board shall send a notification on convening
a meeting of shareholders to the representative of the holder of
capital shares, all members of the supervisory board and the
auditor not later than two weeks before the meeting.
(2) The place and time for the meeting of shareholders, the
type of the meeting, the body which requested to convene the
meeting, the agenda of the meeting of shareholders, draft
decisions, as well as other information related to convening and
course of the meeting shall be indicated in the notification.
(3) If the meeting of shareholders is convened in accordance
with the procedures laid down in Section 69, Paragraphs two and
three or Section 70, Paragraph five of this Law, the initiator of
convening the meeting shall ensure that the holder of capital
shares, members of the supervisory board and the auditor receive
the draft decisions of the meeting and other materials not later
than two working days before the meeting.
Section 74. Issues to be Examined in
a Meeting of Shareholders
(1) A meeting of shareholders may take decisions only on such
issues which are indicated in the notification specified in
Section 73 of this Law, except the cases referred to in Paragraph
two of this Section.
(2) A meeting of shareholders may take decisions on the
following issues (also if they have not been indicated in the
notification specified in Section 73 of this Law):
1) revocation of members of the executive board, members of
the supervisory board, the liquidator or the auditor and election
of new ones, as well as determination of remuneration of the new
members of the executive board, members of the supervisory board,
the liquidator or the auditor;
2) bringing of a claim against members of executive and
supervisory boards, the liquidator or the auditor;
3) performance of an internal audit of the capital
company;
4) determination of a new time period or date of the meeting
of shareholders.
(3) A meeting of shareholders may take decisions only if the
time and means of convening a meeting of shareholders provided
for in this Law has been conformed to (this provision does not
apply issues referred to in Paragraph two of this Section).
Section 75. Participation in a
Meeting of Shareholders
(1) A representative of the holder of capital shares shall
participate in a meeting of shareholders.
(2) Members of executive and supervisory boards, as well as
the liquidator have an obligations to participate in the meeting
of shareholders. The auditor has an obligation to participate in
the meeting of shareholders when the issue of approval of an
annual statement is examined.
(3) The representative of the holder of capital shares shall
determine the other persons who must also participate in a
meeting of shareholders.
Section 76. Course of a Meeting of
Shareholders
(1) A representative of the holder of capital shares shall
open and chair a meeting of shareholders.
(2) The representative of the holder of capital shares shall
appoint a secretary (minute-taker) of the meeting of
shareholders.
(3) After an issue is examined, the representative of the
holder of capital shares shall announce his or her decision in
relation to the issue examined.
Section 77. Minutes of a Meeting of
Shareholders
(1) The course of a meeting of shareholders shall be recorded
in minutes.
(2) The following shall be included in the minutes:
1) the firm name of the company;
2) the location, date and time of the meeting of
shareholders;
3) the given name, surname and position of the persons who
participate in examining the issue;
4) the size of the subscribed equity capital, paid-up equity
capital and equity capital with voting rights of the company;
5) the given name and surname of the chairperson and secretary
(minute-taker) of the meeting;
6) the agenda of the meeting;
7) the course of discussion and content of issues of the
agenda;
8) decisions of the meeting taken on all issues of the
agenda;
9) objections of members of the executive board and
supervisory board, the auditor or the liquidator.
(3) Minutes shall be signed by the chairperson and secretary
(minute-taker) of the meeting of shareholders.
Section 78. Supervisory Board
(1) The provisions of Sections 106, 107, 108, 109, 110, 111,
and 112 of this Law shall be applied in relation to the operation
and competence of the supervisory board, unless otherwise
provided by this Chapter.
(2) A supervisory board shall be established in a company if
the indicators of the company in the previous reporting year meet
all of the following criteria:
1) the net turnover exceeds 21 million euros;
2) the sum total of the balance exceeds four million
euros.
(3) A supervisory board may be established in a company if the
indicators of the company in the previous reporting year meet all
of the following criteria:
1) the net turnover exceeds eight million euros;
2) the sum total of the balance exceeds four million
euros.
(4) If a supervisory board has been established in a limited
liability company and any of the conditions of Paragraph three of
this Section is not met for two consecutive reporting years, the
supervisory board shall be liquidated.
(5) The number of members of the supervisory board shall be at
least three, but not more than seven. The Cabinet shall determine
the number of members of the supervisory board according to the
criteria characterising the size of the company.
[13 June 2019]
Section 79. Executive Board
(1) The Cabinet shall determine the number of members of the
executive board according to the indicators characterising the
size of the company.
(2) A natural person whose work experience, education and
qualification ensures professional fulfilment of the duties of a
member of the executive board and who is elected in conformity
with Section 31 or 37 of this Law is elected as a member of the
executive board of the company.
(3) A member of the executive board shall be elected for five
years.
(4) Monthly remuneration of a member of the executive board
shall be determined in conformity with the maximum amount of
monthly remuneration provided for in Cabinet regulations. The
Cabinet shall determine the maximum amount of the monthly
remuneration of a member of the executive board, taking into
account the average remuneration for the management in similarly
sized (net turnover, total sum of the balance, number of
employees) capital companies in the private sector or - in
individual cases - in the field in which the respective capital
company is operating. The maximum amount of the monthly
remuneration of a member of the executive board may not exceed
the amount of the average monthly work remuneration of the
previous year for persons working in the State published in the
official statistics report of the Central Statistical Bureau,
which has been rounded up to full euros and to which the
coefficient 10 has been applied. The monthly remuneration of a
member of the executive board shall be determined for the whole
term of office of the member with the right to review it once a
year.
(5) An authorisation contract for the fulfilment of the duties
of a member of the executive board shall be concluded with the
member of the executive board of the company.
(6) The contract referred to in Paragraph five of this Section
may provide for insurance and revocation benefit. The contract
may include a revocation benefit only if the member of the
executive board is revoked from the position before expiry of the
term of office and the revocation is not related to violation of
authorisation, non-fulfilment or insufficient fulfilment of
duties, as well as harm caused to the interests of the company. A
revocation benefit may not be provided for if a member of the
executive board has been elected in accordance with the
procedures laid down in Section 31, Paragraph eight, Clause 2 or
Section 37, Paragraph four, Clause 2 of this Law. If the
authorisation contract does not provide for insurance and a
revocation benefit, they shall not be granted.
(7) A member of the executive board may be disbursed a premium
once a year after approval of the annual statement. The premium
may not exceed the amount of remuneration for two months of the
member of the executive board of the capital company. The
following criteria shall be taken into account in determining the
premium:
1) performance results of the capital company in the previous
reporting year;
2) implementation of the medium-term operational strategy and
performance results of the capital company in accordance with the
defined financial and non-financial objectives;
3) performance results of the member of the executive board in
the previous reporting year.
(8) The contract referred to in Paragraph five of this Section
may provide for a revocation benefit in the amount not exceeding
three monthly remunerations if the member of the executive board
loses the position in case of reorganisation or liquidation of
the company, as well as in the cases specified in Paragraph six
of this Section.
(9) The contract referred to in Paragraph five of this Section
may, for a member of the executive board, provide for civil legal
liability insurance, life insurance without accumulation of
funds, accident insurance, health insurance for which the amount
of premium which is covered from the means of a capital company
does not exceed the amount specified in the laws and regulations
regarding personal income tax, and also insurance related to
sending on official travel. Before provision of insurance in the
contract, its financial justification and usefulness shall be
assessed.
[18 June 2015; 11 November 2021 / See Paragraph 34
of Transitional Provisions]
Section 80. Rights of Representation
of the Executive Board
The executive board is the executive body of the company which
jointly manages and represents the company.
Section 81. Revocation of Members of
the Executive Board
(1) A member of the executive board may be revoked if there is
an important reason for it, as well as in the cases determined in
Section 31, Paragraph nine or Section 37, Paragraph five of this
Law.
(2) In any case, an important reason is violation of
authorisation, non-fulfilment or insufficient fulfilment of
duties, inability to manage the company, causing of harm to the
interests of the company, as well as the decision of the meeting
of shareholders on the loss of trust.
Section 82. Taking Decisions of the
Executive Board
(1) The executive board shall take decisions on all issues
related to the operation of the company, except for the issues on
which decisions in accordance with this Law and the articles of
association of the company are taken by shareholder, holder of
capital shares, meeting of shareholders as well as supervisory
board (if such has been established) accordingly.
(2) The executive board shall need a prior consent of the
highest decision-making body of a public entity to obtain or
terminate participation, as well as to obtain or terminate
decisive influence in another company.
(3) The executive board shall need a prior consent of the
meeting of shareholders to decide on the following issues:
1) acquisition or alienation of an undertaking;
2) termination of specific kinds of operation and commencement
of new kinds of operation.
(4) The executive board shall need a prior consent of the
supervisory board on the following issues:
1) opening or closing of branches and representative
offices;
2) entering into such transactions which exceed the sum
stipulated in the articles of association or decisions of the
supervisory board;
3) issuing of such loans which are not related to the regular
commercial activity of the company;
4) issuing of credits to employees of the company;
5) determining the general principles for commercial
activity.
(5) The executive board of a State capital company shall need
a prior consent of the supervisory board to conclude the
transactions referred to in Section 26, Paragraph six of this
Law.
(6) If the supervisory board rejects the proposal of the
executive board on the issues referred to in Paragraphs four and
five of this Section, the executive board has the right to hand
over the examination of such issue to the meeting of shareholders
which shall decide on the respective issue.
(7) The articles of association of the company may also
provide for other issues that require for the executive board to
receive a written prior consent of the meeting of shareholders or
supervisory board (if such has been established).
(8) If the company does not establish a supervisory board, the
meeting of shareholders shall decide on the issues referred to in
Paragraphs four and five of this Section.
(9) The executive board shall have a quorum if more than one
half of members of the executive board participate in the meeting
thereof. If there are less members in the composition of the
executive board than provided for in the articles of association,
a quorum shall be determined according to the number of members
of the executive board provided for in the articles of
association.
(10) The executive board shall take its decisions with simple
majority of present votes, unless a larger number of votes is
determined in the articles of association.
Section 83. Minutes of a Meeting of
the Executive Board
(1) Minutes shall be taken at meetings of the executive board.
The following information shall be indicated in the minutes:
1) the firm name of the company;
2) the location, date and time of the meeting of the executive
board;
3) the members of the executive board and other persons who
participate in the meeting;
4) the agenda issues;
5) the decision taken on every issue;
6) the results of voting, indicating the vote of each member
of the executive board separately for each decision with an entry
"for" or "against";
7) other information which a member of the executive board
requests to be included in the minutes or which is necessary in
order to accurately record the course of the meeting of the
executive board.
(2) If a member of the executive board does not agree with a
decision of the executive board and votes against it, the
dissenting opinion of the member of the executive board shall be
recorded in the minutes of the meeting of the executive board
upon his or her request.
(3) Minutes of meetings of the executive board shall be signed
by the person chairing the meeting of the executive board, the
minute-taker of the meeting and all members of the executive
board who participate in the meeting.
Division
E
Joint-Stock Company of a Public Entity
Chapter
XVI
Capitals and Securities of a Joint-Stock Company
Section 84. Equity Capital of a
Joint-Stock Company
The equity capital defined in the articles of association when
founding a joint-stock company of a public entity (hereinafter in
this Division - the company) shall be paid in full amount before
submitting an application for registration to the Commercial
Register Office.
Section 85. Stocks
(1) All stocks of the company shall be stocks of one category,
except for:
1) the cases when the company issues employee stocks in
accordance with the provisions of Section 87 of this Law;
2) the cases when the company, according to a relevant
decision of the highest decision-making body of a public entity,
issues stocks of other category in order to use them as the
re-capitalisation instrument of the company.
(2) All stocks of the company shall be registered stocks,
except when the highest decision-making body of the relevant
public entity takes the decision to alienate stocks by listing
them on a stock exchange.
(3) All stocks of the company shall be dematerialised
stocks.
(4) The nominal value of each stock of the company may not be
less than 10 cents, and it can be divided by the smallest nominal
value of the stock of the company and 10 cents without a
remainder.
(5) If a company has stocks of different categories, all the
categories of stocks (indicating the rights arising from each
category of stocks) and the number and nominal value of each
category shall be indicated in the articles of association of the
company.
[6 May 2021]
Section 86. Register of
Stockholders
(1) The register of stockholders of the company shall be kept
in accordance with the provisions of the Commercial Law.
(2) Any person is entitled to become acquainted with the
register of stockholders of the company.
(3) The representative of the holder of stocks, the
responsible employee and the authorised representative of the
holder of stocks have the right to receive an extract, certified
by an authorised person of the executive board, from the register
of stockholders of the company on the stocks belonging to the
public entity in the company.
[6 May 2021]
Section 87. Employee Stocks
(1) The highest decision-making body of a public entity shall
determine which capital companies may have employee stocks.
(2) Employee stocks shall be without voting rights.
(3) Employee stocks may only belong to employees and members
of the executive board of the company.
(4) An owner of employee stocks may not alienate such stocks
from other persons, including other employees.
(5) If legal employment relationship between the company and
the employee expires or the member of the executive board is
revoked or has left his or her position, the employee or the
member of the executive board must sell his or her employee
stocks to the company and the company must repurchase them
according to their nominal value.
Section 88. Prohibition to Acquire
Own Stocks
A company may not acquire its own stocks. It is permitted only
if the company reduces the equity capital by withdrawing a part
of stocks from circulation and extinguishing them or obtaining
its employee stocks.
Section 89. Transfer and
Extinguishing of Own Stocks Belonging to a Company
(1) If the company has obtained its employee stocks, they
shall be handed over to employees or members of the executive
board within six month from the day of obtaining such stocks.
(2) If employee stocks are not handed over to employees or
members of the executive board of the company within the time
period provided for in Paragraph one of this Section, they shall
be extinguished, reducing the equity capital accordingly.
(3) If a company acquires stocks by reducing its equity
capital, such stocks shall be extinguished.
Section 90. Convertible
Debentures
A company is not entitled to issue convertible debentures.
Chapter
XVII
Increasing and Reducing the Equity Capital
Section 91. Conditions for
Increasing and Reducing the Equity Capital
(1) The equity capital shall be increased or reduced only on
the basis of the decision of a meeting of stockholders which
governs provisions for increasing or reducing the equity
capital.
(2) The equity capital of a company may be increased:
1) upon a stockholder making investments in the equity capital
of the company and receiving a corresponding number of new stocks
in return;
2) after approval of the annual statement by transferring
completely or partially the positive difference to the equity
capital between the own capital and the sum formed by the equity
capital and reserves that in accordance with the law may not be
transferred for increasing the equity capital, and receiving a
corresponding number of new stocks in return.
(3) If the equity capital of the company is increased in the
way referred to in Paragraph two, Clause 1 of this Section, the
stockholder - public entity - must pay the complete increase of
the equity capital within the time period determined in the
decision to increase the equity capital. The abovementioned time
period may not exceed three months from the day when the meeting
of shareholders took the decision to increase the equity
capital.
(4) The holder of stocks of a public entity need not sign on
stocks of new issue.
(5) The company shall enter the new stocks of the stockholder
in the register of stockholders on the basis of documents
certifying payment for such stocks.
(6) Only completely paid stocks provide the stockholder with
voting rights.
(7) The executive board shall submit an application to the
Commercial Register Office for increase in the equity capital
after payment for stocks is made and the new stocks are recorded
in the register of stockholders.
Section 92. Increasing the Equity
Capital with Special Purpose
(1) The equity capital shall be increased with a special
purpose in accordance with Section 254 of the Commercial Law,
unless otherwise provided by this Law.
(2) The equity capital may be increased only for the following
purposes:
1) exchange of new stocks for capital shares or stocks of the
capital company of a public entity to be merged in case of
reorganization;
2) for the issue of employee stocks.
(3) Increase of the equity capital, as a result of which the
company becomes a private stock company with capital share of a
public entity, may happen only in the cases and in accordance
with the procedures provided for in Division I of this Law.
Chapter
XVIII
Administration of a Joint-Stock Company
Section 93. Administrative Bodies of
a Joint-Stock Company
(1) The management of a company shall be implemented by a
stockholder, meeting of stockholders, executive board and
supervisory board (if such has been established).
(2) The decisions within the competence of the meeting of
stockholders shall be taken by the representative of the holder
of stocks.
Section 94. Competence of a Meeting
of Stockholders
(1) Only a meeting of stockholders has the right to take
decisions:
1) to approve the annual statement of the company;
2) to distribute the profit;
3) to elect and revoke members of the executive board and the
chairperson of the executive board (if a supervisory board has
not been established in the company);
4) to elect and revoke members of the supervisory board (if
such has been established);
5) to elect and revoke an auditor;
6) to bring a claim against a member of the executive board or
supervisory board (if such has been established) and the auditor
or to withdraw a claim against them, as well as to appoint a
representative of the company for the representation of the
company in court;
7) to approve and amend the articles of association of the
company;
8) on the amount of remuneration for the auditor, members of
the supervisory board (if such has been established) and members
of the executive board (except when a supervisory board has been
established);
9) to increase or decrease the equity capital;
10) to reorganise the company;
11) to elect and revoke a liquidator;
12) to approve the medium-term operational strategy, except
when a supervisory board has been established;
13) other issues referred to in this Law.
(2) Upon request of the executive board, a meeting of
stockholders shall examine and take decisions also on issues, for
the deciding on which the executive board needs a prior consent
of the meeting of stockholders (Section 118).
Section 95. Competence of
Stockholder
(1) In accordance with Sections 5, 7, and 9 of this Law, the
stockholder shall take decisions to obtain, continue and
terminate participation in the company.
(2) The decisions referred to in Paragraph one of this Section
in the name of the respective public entity shall be taken by the
highest decision-making body of the public entity.
Section 96. Convening a Meeting of
Stockholders
(1) Regular meetings of stockholders and extraordinary
meetings of stockholders shall be convened.
(2) Meetings of stockholders shall be convened by the
executive board, except in the cases provided for in this
Law.
Section 97. Convening a Regular
Meeting of Stockholders
(1) The executive board shall convene a regular meeting of
stockholders within a time period which provides a possibility
for approving the annual statement by the time limit provided for
in the law.
(2) If the executive board has not convened the regular
meeting of stockholders in the planned period, the supervisory
board (if such has been established) or the representative of the
holder of stocks shall convene it within not more than five
working days from the day when the executive board had to convene
the meeting of stockholders. Such action of the executive board
may be the basis for the decision of the supervisory board or
meeting of stockholders to revoke the executive board on the
basis of non-fulfilment of the duties.
(3) If the supervisory board (if such has been established)
has not convened the regular meeting of stockholders in the case
and within the time period referred to in Paragraph two of this
Section, the representative of the holder of stocks shall take
the decision to convene the meeting of stockholders within not
more than five days from the day when the supervisory board had
to convene the meeting of stockholders.
(4) If the supervisory board (if such has been established)
does not convene the meeting of stockholders in the case referred
to in Paragraph two of this Section without justified reason,
such action of the supervisory board may be the basis for the
decision of the meeting of stockholders to revoke members of the
supervisory board on the basis of non-fulfilment of the
duties.
(5) If a dispute arises whether the action of members of the
executive board or supervisory board had justified reason, the
burden of proof shall lie with members of the executive board and
supervisory board accordingly.
Section 98. Extraordinary Meeting of
Stockholders
(1) An extraordinary meeting of stockholders shall be convened
by the executive board upon its initiative or if it is requested
in writing by the supervisory board (if such has been
established), auditor or holder of stocks.
(2) In the request the initiator of an extraordinary meeting
of stockholders shall indicate the reasons for convening the
meeting and the agenda, and submit draft decisions on issues of
the agenda. The request to convene a meeting shall be submitted
to the executive board and supervisory board (if such has been
established), and the auditor and the holder of stocks shall be
notified thereof.
(3) The executive board shall convene an extraordinary meeting
of stockholders not later than within two weeks after receipt of
the request.
(4) If the executive board does not convene an extraordinary
meeting of stockholders within the time period referred to in
Paragraph three of this Section, it may be convened by the
initiator of convening an extraordinary meeting of stockholders
himself or herself.
(5) If a decision must be made urgently in the issue to be
examined, an extraordinary meeting of stockholders shall be
convened within a time period which provides a possibility for
timely receipt of a notification on convening a meeting of
stockholders, as well as draft decisions and other materials of
the meeting of stockholders. The time period for convening an
extraordinary meeting of stockholders may not be less than seven
days. The initiator of urgent summoning of the meeting of
stockholders shall justify the urgency in writing.
(6) If the executive board does not convene the extraordinary
meeting of stockholders without justified reason, the meeting of
stockholders may revoke it by itself or propose the supervisory
board (if such has been established) to revoke members of the
executive board on the basis of non-fulfilment of duties.
(7) If a dispute arises whether actions of members of the
executive board have a justified reason, the burden of proof
shall lie with the members of the executive board.
Section 99. Convening a Meeting of
Stockholders on Special Occasions
If losses of the company exceed half of the equity capital of
the company or the company has a limited solvency, indications of
insolvency are detected or are in danger of setting in, the
executive board shall notify the supervisory board (if such has
been established) thereof, convene a meeting of stockholders in
accordance with Section 98 of this Law and provide explanations
therein.
Section 100. Convening of a Meeting
of Stockholders if a Company is Being Liquidated
(1) If the decision to terminate the operation of the company
and to elect a liquidator is taken, the liquidator shall convene
a meeting of stockholders.
(2) The liquidator shall convene the regular meeting of
stockholders within a time period which provides a possibility
for approving the annual statement by the time limit provided for
in the law.
(3) An extraordinary meeting of stockholders shall be convened
by a liquidator upon its initiative or if so requested in writing
by an auditor or a holder of stocks.
(4) Initiators of convening an extraordinary meeting of
stockholders shall indicate the reasons for convening the meeting
and the agenda in the request. The request for convening a
meeting shall be submitted to the liquidator, and the auditor and
the holder of stocks shall be notified thereof.
(5) If the decision on the issue to be examined must be taken
urgently, an extraordinary meeting of stockholders shall be
convened in accordance with the procedures laid down in Section
98, Paragraph five of this Law.
(6) If the liquidator has not convened a regular or
extraordinary meeting of stockholders within the provided time
period, it shall be convened by the holder of stocks.
(7) If the liquidator does not convene the meeting of
stockholders without justified reason, the meeting of
stockholders may revoke the liquidator.
(8) If there is a dispute on whether the action of a
liquidator has a justified reason, the burden of proof shall lie
with the liquidator.
Section 101. Procedures for
Convening a Meeting of Stockholders
(1) The executive board shall send a notification on convening
a meeting of stockholders to the holder of stocks, all members of
the supervisory board (if a supervisory board has been
established in the company) and the auditor not later than two
weeks before the meeting.
(2) If there are employee stocks in the company, a
notification shall also be sent to owners of employee stocks.
(3) The place and time of the meeting of stockholders, the
type of the meeting, the body which requested to convene the
meeting, the agenda of the meeting of stockholders, draft
decisions, as well as other information related to convening and
course of the meeting shall be indicated in the notification.
(4) If the meeting of stockholders is convened in accordance
with the procedures referred to in Section 97, Paragraphs two and
three and Section 98, Paragraph five of this Law, the initiator
of convening the meeting shall ensure that the holder of stocks,
members of the supervisory board (if a supervisory board has been
established in the company) and the auditor receive draft
decisions of the meeting and other materials not later than two
working days before the meeting.
Section 102. Issues to be Examined
in a Meeting of Stockholders
(1) A meeting of stockholders may take decisions only on such
issues which are indicated in the notification determined in
Section 101 of this Law, except in the cases provided for in
Paragraph two of this Section.
(2) A meeting of stockholders may take decisions on the
following issues (also if they have not been indicated in the
notification determined in Section 101 of this Law):
1) revocation of members of the supervisory board (if a
supervisory board has been established in the company), members
of the executive board (in a company in which a supervisory board
has not been established), the liquidator or the auditor, and
election of new ones, as well as determination of remuneration
for members of the supervisory board, members of the executive
board, liquidator or auditor;
2) bringing of a claim against members of the executive board
and supervisory board (if a supervisory board has been
established in the company), the liquidator or auditor;
3) performance of an internal audit of the capital
company;
4) determination of a new time period or date of the meeting
of stockholders.
(3) A meeting of stockholders may take decisions only if the
time and means of convening a meeting of stockholders provided
for in this Law have been conformed to (this provision shall not
apply to the issues referred to in Paragraph two of this
Section).
Section 103. Course of a Meeting of
Stockholders
(1) A representative of the holder of stocks shall open and
chair a meeting of stockholders.
(2) The representative of the holder of stocks shall appoint a
secretary (minute-taker) of the meeting of stockholders.
(3) Members of the executive and supervisory boards, as well
as the liquidator have an obligation to participate in the
meeting of stockholders. The auditor has an obligation to
participate in the meeting of stakeholders when the issue of
approval of the annual statement is examined.
Section 104. Taking of Decisions of
a Meeting of Stockholders
(1) After an issue is examined the representative of the
holder of stocks shall announce his or her decision in relation
to the issue examined.
(2) If there are employee stocks in the company, owners of
employee stocks shall not participate in decision-making and
shall not vote on the draft decisions prepared.
Section 105. Minutes of a Meeting of
Stockholders
(1) The course of a meeting of stockholders shall be recorded
in minutes.
(2) The following shall be included in the minutes:
1) the firm name of the company;
2) the location, date and time of the meeting of
stockholders;
3) the given name, surname and position of the persons who
participate in examining the issue;
4) the size of the subscribed equity capital, paid-up equity
capital and equity capital with voting rights of the company;
5) the given name and surname of the chairperson and secretary
(minute-taker) of the meeting;
6) the agenda of the meeting;
7) the course of discussion and content of issues of the
agenda;
8) decisions of the meeting taken on all issues of the
agenda;
9) objections of members of the executive board and
supervisory board (if a supervisory board has been established in
the company), the auditor or liquidator.
(3) Minutes shall be signed by the chairperson and secretary
(minute-taker) of the meeting of stockholders.
Section 106. Conditions for
Establishment of a Supervisory Board, Number of Members of the
Supervisory Board
(1) In a company, if it is a joint-stock company, a
supervisory board shall be established.
(2) The number of members of the supervisory board shall be at
least three, but not more than seven. The Cabinet shall determine
the number of members of the supervisory board according to the
criteria characterising the size of the company.
[13 June 2019]
Section 107. Tasks of the
Supervisory Board
(1) The supervisory board is the supervisory body of the
company representing the interests of stockholders between
meetings and supervising activities of the executive board.
(2) The supervisory board shall have the following tasks:
1) to elect and revoke the chairperson of the executive board
and the members of the executive board;
2) to determine the remuneration for members of the executive
board;
3) to approve the medium-term operation strategy and to
supervise the implementation thereof;
4) to constantly supervise that the matters of the company are
conducted in accordance with the requirements of laws and
regulations, articles of association of the company, and
decisions of the meeting of stockholders;
5) to examine the annual statement of the company, the report
of the executive board and proposals of the executive board on
profit distribution, to prepare a report of the supervisory board
thereon, and to submit them to the meeting of stockholders;
6) to represent the company in all claims brought by the
company against members of the executive board and claims brought
by members of the executive board against the company;
7) to approve concluding of a transaction between the company
and a member of the executive board or an auditor;
8) to examine in advance all issues within the competence of
the stockholder or the meeting of stockholders or the issues
initiated by members of the executive board or members of the
supervisory board recommended for examination at the meeting of
stockholders, and to provide a statement on such issues;
9) to submit proposals on improvement of the operation of the
company to the stockholder;
10) to approve the annual budget and to supervise its
execution;
11) to supervise the operation of the internal control and
risk management systems, to review their conformity and
efficiency;
12) to approve the most significant policies in which the
principles of activities of the company in respect of risk
management, prevention of the conflicts of interest, corruption
combating, corporate management, and other issues are
defined;
13) to carry out the annual self-assessment of the work of the
supervisory board.
(3) It may be determined in the articles of association that
the executive board must receive an approval of the supervisory
board to decide on important issues. If the supervisory board
rejects a proposal of the executive board, the executive board
has the right to convene an extraordinary meeting of stockholders
which shall decide on the respective issue.
[15 March 2018; 13 June 2019]
Section 108. Requirements for a
Candidate of a Member of the Supervisory Board
(1) A natural person whose work experience, education and
qualification ensures professional carrying out of the tasks of a
member of the supervisory board and who has been selected in
accordance with Section 31 or 37 of this Law may be a member of
the supervisory board of the company.
(2) The articles of association of the company may provide for
other (not referred to in this Law) restrictions to a member of
the supervisory board.
Section 109. Election and Revocation
of a Member of the Supervisor Board
(1) A member of the supervisory board shall be elected to the
position for five years.
(2) Members of the supervisory board shall be elected and
revoked by the meeting of stockholders.
(3) The right to combine the position of a member of the
supervisory board with other positions is laid down in the law On
Prevention of Conflict of Interest in Activities of Public
Officials.
(4) A member of the supervisory board shall not receive a
revocation benefit or any other compensation if he or she is
revoked from the position before the end of the term of
office.
(5) An authorisation contract for the fulfilment of the duties
of a member of the supervisory board shall be concluded with the
member of the supervisory board of the company.
[15 March 2018]
Section 110. Convening Meetings of
Supervisory Board
(1) A meeting of the supervisory board shall be convened by
the chairperson of the supervisory board, during his or her
absence or upon his or her assignment - by the vice-chairperson
of the supervisory board. Each member of the supervisory board,
the executive board and the holder of shares (stocks) has the
right to demand convening of a meeting of the supervisory board,
justifying the necessity and purpose for convening the
meeting.
(2) If the agenda of the supervisory board includes the issues
referred to in Section 107, Paragraph two of this Law, but the
supervisory board has no right to decide as the necessary number
of members of the supervisory board is not participating in the
meeting, the non-examination of such issues in a meeting of the
supervisory board shall not be an obstacle for their examined by
the stockholder and the meeting of stockholders.
Section 111. Taking Decisions of the
Supervisory Board and Signing the Minutes of a Meeting of the
Supervisory Board
(1) A member of the supervisory board may vote only if he or
she is participating in a meeting of the supervisory board.
(2) The person who is chairing the meeting of the supervisory
board, the minute-taker of the meeting, as well as all members of
the supervisory board who participate in the meeting shall sign
minutes of the meeting of the supervisory board.
Section 112. Remuneration for
Members of the Supervisory Board
Monthly remuneration for members of the supervisory board
shall be determined in conformity with the maximum amount of
monthly remuneration provided for Cabinet regulations. The
Cabinet shall determine the maximum amount of monthly
remuneration for members of the supervisory board by taking into
account the average remuneration for management in similarly
sized (net turnover, total sum of balance, number of employees)
companies in the private sector or - in individual cases - in the
field in which the respective company is operating. The maximum
amount of the monthly remuneration of a member of the supervisory
board may not exceed the amount of the average monthly work
remuneration of the previous year for persons working in the
State published in the official statistics report of the Central
Statistical Bureau which has been rounded up to full euros and to
which the coefficient 10 has been applied. Bonuses are not
disbursed to the members of the supervisory board.
[13 June 2019]
Section 113. Right to Represent the
Executive Board of a Joint-Stock Company
The executive board is the executive body of the company which
jointly manages and represents the company.
Section 114. Number of Members of
the Executive Board and Restrictions for Members of the Executive
Board
(1) The Cabinet shall determine the number of members of the
executive board according to the indicators characterising the
size of the company.
(2) A natural person whose work experience, education and
qualification ensures professional fulfilment of the duties of a
member of the executive board and who is elected in conformity
with Section 31 or 37 of this Law is elected as a member of the
executive board of the company.
Section 115. Election of a Member of
the Executive Board
(1) A member of the executive board shall be elected for five
years.
(2) An authorisation contract for the fulfilment of the duties
of a member of the executive board shall be concluded with the
member of the executive board of the company.
Section 116. Revocation of Members
of the Executive Board
(1) A member of the executive board may be revoked if there is
an important reason for it, and also in the cases specified in
Section 31, Paragraph nine or Section 37, Paragraph five of this
Law.
(2) In any case, an important reason is violation of
authorisation, non-fulfilment or insufficient fulfilment of
duties, inability to manage the company, causing harm to the
interests of the company, as well as the decision of the meeting
of stockholders or the supervisory board (if a supervisory board
has been established in the company) on the loss of trust.
Section 117. Remuneration to Members
of the Executive Board
(1) Monthly remuneration of a member of the executive board
shall be determined in conformity with the maximum amount of
monthly remuneration provided for in Cabinet regulations. The
Cabinet shall determine the maximum amount of the monthly
remuneration of a member of the executive board, taking into
account the average remuneration for the management in similarly
sized (net turnover, total sum of the balance, number of
employees) capital companies in the private sector or - in
individual cases - in the field in which the respective capital
company is operating. The maximum amount of the monthly
remuneration of a member of the executive board may not exceed
the amount of the average monthly work remuneration of the
previous year for persons working in the State published in the
official statistics report of the Central Statistical Bureau,
which has been rounded up to full euros and to which the
coefficient 10 has been applied. The monthly remuneration of a
member of the executive board shall be determined for the whole
term of office of the member with the right to review it once a
year.
(2) A member of the executive board may be disbursed a premium
once a year after approval of the annual statement. The premium
may not exceed the amount of remuneration for two months of the
member of the executive board of the capital company. The
following criteria shall be taken into account when determining
the premium:
1) performance results of the capital company in the previous
reporting year;
2) implementation of the medium-term operational strategy and
performance results of the capital company in accordance with the
defined financial and non-financial objectives;
3) performance results of the member of the executive board in
the previous reporting year.
(3) The contract referred to in Section 115, Paragraph two of
this Law may provide for the insurance and revocation benefit for
a member of the executive board. The contract may include a
revocation benefit only if the member of the executive board is
revoked from the position before expiry of the term of office and
the revocation is not related to violation of authorisation,
non-fulfilment or insufficient fulfilment of obligations, as well
as causing harm to the interests of the company. A revocation
benefit may not be provided for if a member of the executive
board has been elected in accordance with the procedures laid
down in Section 31, Paragraph eight, Clause 2 or Section 37,
Paragraph four, Clause 2 of this Law. If the authorisation
contract does not provide for insurance and a revocation benefit,
they shall not be granted.
(4) The contract referred to in Section 115, Paragraph two of
this Law may provide for a revocation benefit in the amount not
exceeding three monthly remunerations, if the member of the
executive board loses the position due to reorganization or
liquidation of the capital company, as well as in the cases
specified in Paragraph three of this Section.
(5) The contract referred to in Section 115, Paragraph two of
this Law may, for a member of the executive board, provide for
civil legal liability insurance, life insurance without
accumulation of funds, accident insurance, health insurance for
which the amount of premium which is covered from the means of a
capital company does not exceed the amount specified in the laws
and regulations regarding personal income tax, and also insurance
related to sending on official travel. Before provision of
insurance in the contract, its financial justification and
usefulness shall be assessed.
[18 June 2015; 11 November 2021 / See Paragraph 34
of Transitional Provisions]
Section 118. Taking of Decisions by
the Executive Board of a Joint-Stock Company
(1) The executive board shall take decisions on all issues
related to the operation of the company, except for the issues
which, in accordance with this Law and articles of association of
the company, are decided by the stockholder or meeting of
stockholders and the supervisory board accordingly.
(2) The executive board shall need a prior consent of the
highest decision-making body of a public entity to obtain or
terminate participation, as well as to obtain or terminate
decisive influence in another company.
(3) The executive board shall need a prior consent of the
meeting of stockholders to decide on the following issues:
1) acquisition or alienation of an undertaking;
2) termination of specific kinds of operation and commencement
of new kinds of operation.
(4) The articles of association may also determine other
issues, in which the executive board must receive a prior written
consent of the meeting of stockholders.
(5) The executive board shall need a prior consent of the
supervisory board to decide on the following issues:
1) opening or closing of branches and representative
offices;
2) concluding such transactions which exceed the sum
stipulated in the articles of association or decisions of the
supervisory board;
3) issuing of such loans which are not associated with the
regular commercial activities of the company;
4) issuing of credits to employees of the company;
5) determining the general principles for commercial
activities.
(6) The executive board of a State joint-stock company shall
need a prior consent of the supervisory board for concluding the
transactions referred to in Section 26, Paragraph six of this
Law.
(7) The articles of association may also provide for other
issues for the deciding of which the executive board must receive
a prior consent of the supervisory board.
(8) If the supervisory board rejects a proposal of the
executive board in the issues referred to in Paragraphs five and
six of this Section, the executive board has the right to hand
over the examination of the abovementioned issue to the meeting
of stockholders which shall decide on the respective issue.
(9) If a supervisory board is not established in the company,
the meeting of stockholders shall decide on the issues referred
to in Paragraphs five and six of this Section.
Section 119. Minutes of a Meeting of
the Executive Board of a Join-Stock Company
(1) Minutes shall be taken at meetings of the executive board.
The following information shall be indicated in the minutes:
1) the firm name of the company;
2) the location, date and time of the meeting of the executive
board;
3) the members of the executive board and other persons who
participate in the meeting;
4) the issues on the agenda;
5) the decision taken on every issue;
6) the results of voting, indicating the vote of each member
of the executive board separately for each decision with an entry
"for" or "against";
7) other information which a member of the executive board
requests to be included in the minutes or which is necessary in
order to accurately record the course of the meeting of the
executive board.
(2) If a member of the executive board does not agree with a
decision of the executive board and votes against it, the
dissenting opinion of the member of the executive board shall be
recorded in the minutes of the meeting of the executive board
upon his or her request.
(3) Minutes of meetings of the executive board shall be signed
by the person chairing the meeting of the executive board, the
minute-taker of the meeting and all members of the executive
board who participate in the meeting.
Division F
Chapter
XIX
General Provisions for the Termination of Operation of a Capital
Company
Section 120. Grounds for the
Termination of Operation of a Capital Company
(1) The operation of a capital company shall be
terminated:
1) under a decision of a shareholder (stockholder);
2) under a court ruling;
3) under the decision on the cessation of insolvency
proceedings due to completion of insolvency proceedings of the
company;
4) upon expiration of the time period laid down in the
articles of association (if the capital company was established
for a specific time period);
5) upon reaching the objectives laid down in the articles of
association (if the capital company was established for achieving
specific objectives);
6) in other cases laid down in the law or the articles of
association.
(2) The insolvent capital company of a public entity shall
terminate its operation in accordance with the Insolvency
Law.
Section 121. Appointing a
Liquidator
(1) Members of the executive board shall perform liquidation
of the capital company if the body which took the decision to
terminate the operation of the capital company has not stipulated
otherwise in the decision.
(2) If the decision of the highest decision-making body of a
public entity person to terminate the operation of the capital
company of a public entity stipulates that liquidation of the
capital company shall not be performed by members of the
executive board, the meeting of shareholders (stockholders) shall
elect the liquidator.
(3) Remuneration for a liquidator and the procedures for its
disbursement shall be determined by the body which appoints the
liquidator.
(4) If liquidation is performed by members of the executive
board, the remuneration for a liquidator and the procedures for
its disbursement shall be determined by a meeting of shareholders
(stockholders).
(5) The restrictions provided for in this Law in relation to
remuneration of members of the executive board of the capital
company of a public entity shall be conformed to in determining
remuneration for liquidators.
Section 122. Application for the
Termination of the Operation of a Capital Company and Liquidation
Thereof
A capital company shall submit the decision to terminate the
operation of the capital company within three days after election
of the liquidator for entering in the Commercial Register. The
information referred to in Section 8 of the Commercial Law on the
liquidator shall be indicated in the application and the
following shall be appended accordingly:
1) the decision of the respective authority to terminate the
operation of the capital company;
2) a written consent of the liquidator to be a liquidator. The
written consent shall be signed with a secure electronic
signature, or the signature on the consent shall be notarized or
by an official of the Commercial Register Office.
Section 123. Removal of a
Liquidator
(1) A liquidator may be removed by a decision of the authority
which took the decision to appoint a liquidator.
(2) A liquidator appointed by a court may be removed only by a
court ruling on the basis of an application of the holder of
capital shares or a third party, if there is good cause
therefore, concurrently appointing a new liquidator.
Chapter
XX
Closing Financial Report of Liquidation, Property Division Plan
and Division of the Remaining Property or Continuation of
Operation
Section 124. Closing Financial
Statement and Property Division Plan
(1) After satisfying claims of creditors or transfer of the
money provided for them in storage to a sworn notary and covering
expenses of liquidation, the liquidator shall prepare the closing
financial report of liquidation and the plan for division of the
remaining property of the capital company in conformity with
Section 125 of this Law.
(2) A liquidation quota need not be calculated for owners of
employee stocks in joint-stock companies of a public entity.
Section 125. Division of the
Remaining Property of a Capital Company
(1) Property may be divided not earlier than four months from
the day when a notification on termination of the operation of a
capital company has been published and one month from the day
when a closing financial statement and a property division plan
for the remaining property of the capital company has been sent
to the holder of capital shares.
(2) The liquidator is not entitled to sell the property, which
is not necessary for satisfying the claims of creditors, but it
shall be transferred to the institution determined in the
decision to terminate the operation of the capital company,
unless this decision does not provide otherwise.
(3) The costs which in case of liquidation are due to the
shareholder (stockholder) are transferred into the budget of the
respective public entity.
(4) Property may be divided prior to the time period
determined in Paragraph one of this Section only if the meeting
of shareholders (stockholders) agrees thereto and such division
does not cause losses to creditors.
Section 126. Continuing the
Operation of a Capital Company
If a capital company is under liquidation on the basis of the
provisions referred to in the documents of incorporation for the
termination of operation or the decision of the highest
decision-making body of a public entity, the highest
decision-making body of the respective public entity may take the
decision to continue the operation of the capital company or to
reorganise the capital company before division of the property is
commenced.
Division
G
Reorganization of a Capital Company of a Public Entity
Chapter
XXI
General Provisions for Reorganisation
Section 127. Merging of Capital
Companies
(1) The highest decision-making body of a public entity shall
take the decision to commence merging of capital companies of a
public entity.
(2) The decision referred to in Paragraph one of this Section
shall determine the holder of capital shares of the acquiring
company.
(3) The procedures for merging capital companies of public
entities, if any of the companies involved in the merging process
is a capital company belonging to another public entity, a public
private or private capital company, are laid down in Division I
of this Law.
Section 128. Division of Capital
Companies
(1) The highest decision-making body of a public entity shall
take the decision to commence division of the capital company of
a public entity.
(2) The decision referred to in Paragraph one of this Section
shall determine the holder of capital shares of the acquiring
company.
(3) The method of divestiture (Section 336, Paragraphs four
and five of the Commercial Law) may not be applied to division of
the capital company of a public entity.
(4) The procedures for dividing a capital company of a public
entity if the acquiring company is a capital company already
belonging to another public entity, a public private or private
capital company, are laid down in Division I of this Law.
Section 129. Restructuring of
Capital Companies
(1) The meeting of shareholders (stockholders) of a capital
company shall take the decision to restructure the respective
capital company of a public entity into a different type of
capital company of a public entity.
(2) A capital company of a public entity may not be
restructured by means of reorganisation into a public private
capital company or private capital company in accordance with the
procedures laid down in this Division.
Section 130. Conditions of
Reorganisation
The highest decision-making body of a public entity may
provide conditions for reorganisation when taking the decision to
commence reorganisation (Sections 127 and 128 of this Law).
Chapter
XXII
Procedures for Reorganisation
Section 131. Reorganisation
Agreement
(1) In drawing up a reorganisation agreement, capital
companies of a public entity shall comply with the conditions
provided for in the decision of the highest decision-making body
of the public entity (Section 130 of this Law). The draft
reorganisation agreement shall be agreed upon by the meeting of
shareholders (stockholders).
(2) The following shall be indicated in the reorganisation
agreement:
1) the firm names, legal addresses and registration numbers of
all capital companies involved in reorganisation;
2) the date from which transactions of the capital company to
be acquired, divided or restructured will be deemed as
transactions of the acquiring capital company in the accounting
of the acquiring capital company;
3) the rights which the acquiring company grants to members of
supervisory and executive bodies of the company to be acquired,
divided or restructured, as well as to the auditor of the
company;
4) the consequences of reorganisation for employees of the
capital company to be acquired, divided or restructured;
5) the type, firm name and legal address of the acquiring
company;
6) the activities to be performed in the reorganisation
proceedings and the time periods for the performance thereof.
(3) The conditions precedent provided for in Section 338 of
the Commercial Law may not be determined in a draft
reorganisation agreement.
(4) If one capital company of a public entity participates in
the process of dividing the capital company of a public entity,
the meeting of shareholders (stockholders) shall adopt
regulations regarding division of the capital company in
conformity with Paragraphs one, two, and three of this Section.
Such regulations shall substitute the reorganisation agreement
referred to in Paragraphs two and three of this Section. The act
of property division shall be appended to the regulations
regarding division of a capital company as a separate
document.
(5) In order to reorganise a capital company of a public
entity by restructuring it, the meeting of shareholders
(stockholders) of such capital company shall adopt regulations
regarding restructuring of the capital company in conformity with
Paragraphs one, two, and three of this Section.
Section 132. Evaluation of Financial
Investment during Reorganisation Proceedings
(1) If the acquiring capital company must increase the equity
capital as a result of reorganisation or if it is a new capital
company, the property of each capital company to be merged or the
respective property share of each capital company to be divided
shall be evaluated in order to determine its sufficiency for
increasing the equity capital of the acquiring capital company or
for its founding.
(2) A person included in the list of the persons evaluating
financial investment shall perform the evaluation and provide a
written opinion.
(3) If as a result of reorganisation a new company is founded,
the conditions of Section 49 of this Law shall be conformed
to.
(4) The opinion shall be appended to the application to be
submitted to the Commercial Register Office for
reorganisation.
Section 133. Reorganisation
Prospectus
Capital companies of a public entity involved in the
reorganisation proceedings need not prepare a reorganisation
prospectus in performing reorganisation in accordance with the
procedures provided for in this Division.
Section 134. Examination by an
Auditor
When performing reorganisation in accordance with the
procedures provided for in this Division, the auditor need not
examine the decision to reorganise.
Section 135. Decision to
Reorganise
(1) The meeting of shareholders (stockholders) shall take the
decision to reorganise a capital company of a public entity.
(2) If due to reorganisation amendments to the articles of
association of a capital company must be made, the meeting of
shareholders (stockholders) shall take a decision thereon
immediately after taking the decision to reorganise.
Section 136. Contesting the Decision
to Reorganise
The persons referred to in Section 346, Paragraph one of the
Commercial Law may not contest the decision to reorganise a
capital company of a public entity to a court.
Section 137. Application to the
Commercial Register Office
(1) After claims of creditors applied within a specific time
period are secured or satisfied, each capital company involved in
the reorganisation proceedings shall submit an application to the
Commercial Register Office for making an entry on reorganisation
in the Commercial Register.
(2) The following shall be appended to the application:
1) the decision provided for in this Law and the
reorganisation agreement or regulations regarding
reorganisation;
2) in the cases laid down in the law - the reorganisation
permit;
3) the closing financial statement of the acquired capital
company or the capital company divided by way of splitting up (if
the application is being submitted by the acquired or the
dividing capital company);
4) the articles of association of the acquiring capital
company (if a new capital company is established as a result of
reorganisation, or if the capital company is being
restructured);
5) a list of such members of the executive board of the
acquiring capital company who have the right to represent the
company (if a new company is established as a result of
reorganisation);
6) a list of members of the supervisory board of the acquiring
capital company (if a new capital company is established as a
result of reorganisation or if the capital company being
restructured and a supervisory board is intended for the
acquiring capital company).
(3) The capital company shall confirm in the application that
claims of creditors applied within the specified time period are
secured or satisfied.
Division
H
Alienation of Capital Shares
Chapter
XXIII
Selling of Capital Shares Belonging to a Public Entity
Section 138. Decision to Sell
Capital Shares
(1) The highest decision-making body of the respective public
entity shall take the decision to sell capital shares.
(2) The holder of State capital shares or the authority which
has been appointed (delegated) by the Cabinet for carrying out
the task of selling State capital shares in accordance with the
conditions of this Chapter (hereinafter - the alienation
authority), shall submit a proposal for the sale of State capital
shares and a respective draft legal act to the Cabinet.
Section 139. Seller of Capital
Shares
(1) State capital shares shall be sold by the alienation
authority.
(2) Capital shares of a derived public entity shall be sold by
an institution (unit) determined by the highest decision-making
body of the derived public entity, or the alienation authority
shall be authorised to do it.
(3) The decision to sell capital shares shall be published at
least on the website by the holder of capital shares, seller and
capital company within one week after entering into effect
thereof.
Section 140. Initial Sales Value of
Capital Shares
(1) The initial sales value of capital shares of a public
entity (hereinafter - initial value) shall be determined as
follows:
1) if capital shares the value of which was determined using
the equity method (according to the last audited annual
statement) is less than EUR 15 000 are sold, the initial value
shall be determined by the seller of capital shares, using the
equity method or applying the condition referred to in Clause 3
of this Paragraph;
2) if publicly traded capital shares are sold, the highest
decision-making body of the public entity shall, in taking the
decision provided for in Section 9, Paragraph one of this Law,
determine the procedures for determining the initial value;
3) in other cases the initial value shall be determined by an
independent certified evaluator in accordance with evaluation
standards recognised in Latvia.
(2) The initial value may be reduced if capital shares are not
sold in accordance with the procedures laid down in Section 141
of this Law.
[18 June 2015]
Section 141. Procedures for Selling
Capital Shares in a Capital Company of a Public Entity, Public
Private Capital Company or Private Capital Company
(1) The seller of capital shares shall draw up and approve the
selling regulations, which shall include at least the following
information:
1) the firm name, legal address and addresses of location of
the capital company, capital shares of which are on sale;
2) the sales price of capital shares, which has been
determined in accordance with Section 140, Paragraph one of this
Law, as well as the procedures for correcting the price, if there
is no success in selling capital shares according to the initial
value;
3) the conditions for the sale of capital shares if such are
provided for in accordance with the procedures laid down in
Section 142 of this Law;
4) information on shareholders (stockholders), the pre-emption
right with regard to the capital shares to be sold and the
procedures for exercising it;
5) the amount of the security deposit and the fee for
participation at an auction and payment procedures, the
procedures and time periods for payment of the purchase fee;
6) the provisions of the auction;
7) the procedures and criteria for selecting candidates
(buyers) of capital shares, if such are provided for;
8) the time period, in which interest applications for buying
of capital shares shall be submitted, the procedures for
extending, renewing or determining a new period of
application;
9) the list of documents to be submitted by the buyer of
capital shares;
10) actions with unsold capital shares;
11) other conditions to be conformed to in the sales process
of capital shares, and guarantees.
(2) The seller of capital shares shall, within one week after
approval of the sales regulations, publish information on sales
regulations on its website, as well as post a notification in the
official gazette Latvijas Vēstnesis on where one may
become acquainted with sales regulations. The seller of capital
shares must, within the abovementioned time period, send the
regulations regarding selling capital shares to the executive
board of the respective capital company. The executive board of
the capital company of a public entity shall inform employees of
the conditions and procedures for selling capital shares.
(3) The seller of capital shares shall offer the shareholders
(stockholders) of a public private capital company or private
capital company with the pre-emptive right to buy capital shares
of a public entity in accordance with the procedures provided for
in the articles of association and according to the sales
regulations, determining that shareholders (stockholders) of the
company have to apply together or separately for all marketable
capital shares of the public entity, otherwise it shall be
considered that they have refused from exercising the pre-emptive
right.
(4) If persons with the pre-emptive right do not exercise
their right or if there is no person with the pre-emptive right,
the seller of capital shares shall sell them at an open auction,
unless other sales method is determined in the procedures
provided for in Section 142, Paragraphs one and two of this
Law.
(5) The regulations regarding selling of capital shares must
be available to the public at least one month before the time
period when a person must submit an application for the purchase
of capital shares.
[18 June 2015]
Section 142. Conditions for the Sale
of Capital Shares
(1) The highest decision-making body of a public entity may
determine the conditions for selling capital shares of a public
entity or to change them until approval of regulations regarding
the sale of such capital shares.
(2) The capital shares to be sold to employees of a capital
company shall not exceed 20 per cent of the equity capital of the
capital company.
(3) When selling capital shares of a public entity in
accordance with the procedures laid down in this Law, euros shall
be used as the means of payment.
(4) If capital shares are sold by instalments, sales
regulations shall provide for the establishment of a commercial
pledge in favour of the seller in order to ensure the claims of
the seller against the buyer which may arise due to
non-fulfilment, undue fulfilment or delayed fulfilment of
obligations of the buyer provided for in the sales regulations
and the purchase contract.
Section 143. Funds Obtained as a
Result of Selling Capital Shares of a Public Entity
(1) The funds obtained as a result of selling capital shares
of a public entity shall be transferred into the budget of the
respective public entity, except for the deductions specified in
Paragraph three of this Section.
(2) If an authority authorised by the derived public entity -
the alienation authority - is selling its capital shares, the
derived public entity shall compensate the actual expenses caused
to such institution, organising and selling its capital shares.
The derived public entity and the alienation authority shall
agree on expenses.
(3) The Cabinet shall determine the amount of deductions which
a State capital company shall receive from the income obtained by
selling State capital shares if the company is the alienation
institution of State capital shares.
[18 June 2015]
Chapter
XXIV
Other Cases of Selling Capital Shares of a Public Entity
Section 144. Selling of Capital
Shares Transferred to the State Special Budget for Pensions
(1) Capital shares transferred to the State special budget for
pensions shall be sold in accordance with the conditions of
Chapter XXIII of this Law.
(2) The alienation institution shall sell capital shares
transferred to the State special budget for pensions.
(3) The funds obtained as a result of selling the capital
shares transferred to the State special budget for pensions shall
be transferred into the State special budget for pensions.
Section 145. Selling of Capital
Shares Arisen as a Result of Capitalisation of Tax Payment
Debts
(1) The capital shares arisen as a result of capitalisation of
tax payment debts shall be sold in accordance with the provisions
of Chapter XXIII of this Law.
(2) Funds obtained as a result of selling the capital shares
owned by the State or local government shall be transferred
accordingly into the State budget or local government budget.
[16 June 2016]
Chapter
XXV
Investment of Capital Shares of a Public Entity
Section 146. Decision to Invest
Capital Shares
(1) The highest decision-making body of the respective public
entity shall take the decision to invest capital shares.
(2) The holder of State capital shares or the alienation
institution shall submit a proposal to the Cabinet for the
investment of State capital shares.
(3) A public entity may invest capital shares in a capital
company of a public entity or a capital company controlled by
public entities.
Section 147. Publishing and
Implementation of the Decision to Invest Capital Shares
(1) The holder of capital shares shall publish the decision to
invest capital shares on its website within a week after entering
into effect thereof.
(2) The holder of capital shares shall implement the decision
to invest capital shares.
Division
I
Turning a Capital Company of a Public Entity into a Public
Private Capital Company or Private Capital Company
Chapter
XXVI
General Provisions for Turning a Capital Company into a Public
Private Capital Company or Private Capital Company
Section 148. Types of Attraction
Without selling capital shares, a capital company of a public
entity may become a private capital company or a public private
capital company:
1) by increasing the equity capital of the capital company
(Section 149 of this Law);
2) by reorganising the capital company (Section 150 of this
Law);
3) by handing over capital shares of a public entity to other
public entity without consideration (Sections 159 and 160 of this
Law).
Section 149. Purposes for Increasing
the Equity Capital of a Capital Company
The equity capital of a capital company may be increased only
for the following purposes:
1) for substituting debts of the capital company with its
capital shares (hereinafter in this Division - capitalisation of
debts);
2) for the acquisition of specific property, paying for the
capital shares by a financial investment (hereinafter in this
Division - acquisition of property);
3) for the attracting of capital, paying for the capital
shares in cash (hereinafter in this Division - attracting of
capital).
[15 March 2018]
Section 150. Types of Reorganisation
of a Capital Company
A capital company may become a private capital company through
reorganisation:
1) by acquiring a capital company (hereinafter in this
Division - acquiring of a capital company);
2) by merging with a capital company (hereinafter in this
Division - merging with a capital company);
3) by consolidating with a capital company (hereinafter in
this Division - consolidation with a capital company);
4) by dividing a capital company if the acquiring capital
company is already a private capital company (hereinafter in this
Division - merging with a private capital company as a result of
division).
Chapter
XXVII
Increasing the Equity Capital of a Capital Company
Section 151. Decision to Increase
the Equity Capital
(1) On the basis of a proposal of the holder of capital
shares, the Cabinet shall issue an order regarding capitalisation
of specific debts (except for tax debts) in a State capital
company.
(2) The highest decision-making body of a derived public
entity shall take the decision on capitalisation of specific
debts (except for tax debts) in a capital company of a derived
public entity.
(3) On the basis of a proposal of the holder of capital
shares, the Cabinet shall issue an order to acquire property in
the ownership of a State capital company.
(4) The highest decision-making body of a derived public
entity shall take the decision to acquire property in the
ownership of a capital company of a derived public entity.
(5) On the basis of a proposal of the holder of capital
shares, the Cabinet shall issue an order to attract capital to a
State capital company.
(6) The highest decision-making body of a derived public
entity shall take the decision to attract capital to a capital
company of a derived public entity.
[15 March 2018]
Section 152. Conditions for
Increasing the Equity Capital
(1) The equity capital shall be increased to use the new
capital shares only for one of the purposes referred to in
Section 149 of this Law.
(2) The purpose of increasing the equity capital shall be
indicated in the provisions for increasing the equity capital of
a capital company.
(3) The increase in the equity capital shall not exceed the
sum necessary for the respective purpose.
(4) The highest decision-making body of a public entity may
determine additional conditions for increasing the equity
capital.
Section 153. Activities to be
Performed in Increasing the Equity Capital
Activities of a capital company to be performed in increasing
the equity capital shall be organised by the holder of capital
shares.
Section 154. Procedures for
Increasing the Equity Capital
(1) The equity capital is increased in accordance with the
provisions of the Commercial Law, in conformity with the
conditions of this Law.
(2) The meeting of shareholders (stockholders) shall approve
the provisions for increasing the equity capital.
(3) In addition to approving the provisions for increasing the
equity capital, the meeting of shareholders (stockholders) of a
capital company determines a time period for convening a meeting
of shareholders (stockholders) of such private capital company or
public private capital company which will be established as a
result of increasing the equity capital. In the meeting of
shareholders (stockholders), draft articles of association of the
private capital company or public private capital company, which
will be established as a result of increasing the equity capital,
shall be appended to the decision.
(4) The executive board of a capital company shall convene a
meeting of shareholders (stockholders) of such private capital
company or public private capital company which will be
established as a result of increasing the equity capital, within
the time period provided for in the provisions for increasing the
equity capital. The meeting shall approve the articles of
association of the private capital company or public private
capital company, re-elect or elect (if such was not established)
the supervisory body and perform other actions provided for in
this Law. The articles of association of the private capital
company or public private capital company shall be approved with
not less than three fourths of the number of votes of the members
present, and the provisions of this Law governing the convening
and course of a meeting of shareholders (stockholders) of a
capital company of the respective type shall be applicable to
such meeting.
(5) In addition to the documents referred to in the Commercial
Law (Sections 202 and 261), to be submitted to the Commercial
Register Office in case of increasing the equity capital, the
capital company shall also submit the decision of the highest
decision-making body of a public entity referred to in Section
151 of this Law.
[15 March 2018]
Chapter
XXVIII
Reorganisation of a Capital Company of a Public Entity into
Private Capital Company
Section 155. Capital Companies
Involved in Reorganisation of a Capital Company of a Public
Entity
(1) Only limited liability companies and joint-stock companies
may be involved in reorganisation proceedings.
(2) The company acquiring in the process of merging is a
capital company of a public entity while the company to be merged
is a capital company that is being merged.
(3) The company to be merged in the process of merging is a
capital company of a public entity while the acquiring company is
the capital company with which the company merges.
(4) Companies to be merged in the process of consolidation are
capital companies of a public entity and a private company
capital company while the acquiring company is the newly-founded
capital company.
(5) Merging with a private company as a result of division is
a process in which the capital company of a public entity is the
company to be divided and the divided company is the company to
be merged while the acquiring company is the private capital
company.
Section 156. Decision to Initiate
Reorganisation
(1) On the basis of a proposal of the holder of capital shares
the Cabinet shall issue an order regarding initiation of
reorganisation of a State capital company, determining which
capital company may be merged with the State capital company.
(2) The highest decision-making body of a derived public
entity shall take the decision to reorganise a capital company of
a derived public entity, determining the capital company with
which it may be merged.
(3) On the basis of a proposal of the holder of capital shares
the Cabinet shall issue an order regarding commencing of
reorganisation of a State capital company, determining with which
capital company the State capital company may be merged.
(4) The highest decision-making body of a derived public
entity shall take the decision to reorganise a capital company of
a derived public entity, determining the capital company with
which it may be merged.
(5) On the basis of a proposal of the holder of capital
shares, the Cabinet shall issue the order to commence
reorganisation of a State capital company, determining with which
capital company the State capital company will be
consolidated.
(6) The highest decision-making body of a derived public
entity shall take the decision to reorganise a capital company of
a derived public entity, determining the capital company with
which it will be consolidated.
(7) On the basis of a proposal of the holder of capital
shares, the Cabinet shall issue an order regarding commencing of
reorganisation of a State capital company, determining with which
capital company the State capital company may be merged as a
result of division thereof.
(8) The highest decision-making body of a derived public
entity shall take the decision to commence reorganisation of a
capital company of such public entity, determining with which
capital company a capital company of the derived public entity
may be merged as a result of its division.
Section 157. Conditions for
Reorganisation of a Capital Company of a Public Entity
The highest decision-making body of a public entity is
entitled to determine the conditions for reorganization. If
reorganisation of a capital company of a public entity results in
the creation of a private capital company in which capital shares
belong to several derived public entities or the State and one
derived public entity or several public entities, the public
entities shall agree on conditions for reorganisation before the
decision to commence reorganisation is taken.
Section 158. Procedures for
Reorganising a Capital Company of a Public Entity
(1) In addition the time period when a meeting of shareholders
(stockholders) of a private capital company must be convened
shall be indicated in the reorganisation agreement. If a capital
company of a public entity is being reorganised as a result of
merging or consolidation or by merging it with the capital
company as a result of division, the representatives of the
holder of capital shares of a public entity in the executive
board and supervisory board (if such has been established) of the
private capital company shall be additionally indicated in the
reorganisation agreement.
(2) Draft amendments to the articles of association of a
private capital company and complete text of the new wording of
articles of association shall be appended to the draft
reorganisation agreement.
(3) The meeting of shareholders (stockholders) shall take the
decision to reorganise a capital company of a public entity
provided for in Section 343 of the Commercial Law, and the
representative of the holder of capital shares shall sign the
reorganisation agreement.
(4) The persons referred to in Section 346, Paragraph one of
the Commercial Law may not contest the decision of the meeting of
shareholders (stockholders) of the capital company of a public
entity to reorganise before a court.
(5) The executive board of a capital company shall convene a
meeting of shareholders (stockholders) of such private capital
company which will be formed as a result of reorganisation within
the time period provided for in the reorganisation agreement. The
meeting shall approve the articles of association of the private
capital company, elect the supervisory body and the executive
body and perform other activities provided for in the law. The
articles of association of the private capital company shall be
approved with not less than three fourths of the number of votes
of the members present, and the provisions of this Law governing
the convening and course of a meeting of shareholders
(stockholders) of a capital company of the respective type shall
be applicable to such meeting. Those shareholders (stockholders)
who voted against approval of the articles of association shall
be indicated in the minutes of a meeting of shareholders
(stockholders).
(6) In addition to the documents referred to in the Commercial
Law to be submitted to the Commercial Register Office in order to
make an entry on reorganisation, a capital company shall also
submit the Cabinet order referred to in Section 156 of this Law
or the decision of the highest decision-making body of a derived
public entity.
Chapter
XXIX
Transfer of Capital Shares Owed by a Public Entity to Another
Public Entity without Consideration
Section 159. Transfer of State
Capital Shares to a Derived Public Entity
(1) The State may, in conformity with the provisions of the
Commercial Law and articles of association of the respective
capital company, transfer the capital shares belonging thereto in
the ownership of a derived public entity without consideration by
a Cabinet order issued each time.
(2) The State capital shares may be transferred in the
ownership of a derived public entity if the respective derived
public entity has made such a request and the highest
decision-making body of the derived public entity has taken the
respective decision.
(3) The provisions of Division H of this Law regarding
alienation, as well as the provisions of Sections 5 and 9 of this
Law regarding the obtaining or termination of participation or
the obtaining or termination of decisive influence shall not
apply to the transfer of State capital shares in the ownership of
a derived public entity.
Section 160. Transfer of Capital
Shares of a Derived Public Entity to State or Another Derived
Public Entity without Consideration
(1) A derived public entity may, in conformity with the
provisions of the Commercial Law and articles of association of
the respective capital company, transfer the capital shares owned
thereby in the ownership of the State or other derived public
entity without consideration by a decision of the highest
decision-making body of the respective derived public entity
issued each time.
(2) Capital shares of a derived public entity may be
transferred in the ownership of the State if the Cabinet has made
such a request and taken the respective decision.
(3) A derived public entity may transfer capital shares in the
ownership of another derived public entity if the respective
derived public entity has made such a request and taken the
respective decision.
(4) The provisions of Division H of this Law regarding
alienation, as well as the provisions of Sections 5 and 9 of this
Law regarding the obtaining or termination of participation or
the obtaining or termination of decisive influence shall not
apply to the transfer of capital shares of a derived public
entity in the ownership of the State or other derived public
entity.
Division J
Chapter
XXX
Commencing the Restructuring of a Capital Company of a Public
Entity into an Institution (Public Agency)
Section 161. Main Conditions for the
Restructuring of a Capital Company
(1) A capital company of a public entity which issues
administrative acts or administers the State fee and the income
of which is formed by grant (subsidy) or provision of a service
when performing the State administration tasks delegated thereto
shall be restructured into an institution or public agency,
unless the highest decision-making body of the public entity has
decided otherwise in accordance with Section 162, Paragraph two
of this Law.
(2) A capital company shall be restructured into an
institution, unless otherwise determined in the decision of the
highest decision-making body of a public entity to restructure
and the capital company to be restructured meets the
characteristics of a public agency determined in the Public
Agencies Law.
Section 162. Commencement of
Restructuring of a Capital Company
(1) The highest decision-making body of a public entity may
take the decision to commence restructuring of a capital company
of the public entity into an institution (public agency).
(2) When taking the decision referred to in Paragraph one of
this Section, the highest decision-making body of a public entity
may request an opinion of an auditor on the risks of
restructuring and also to assess all financial and legal risks
that may arise upon the capital company being restructured into
an institution or public agency.
(3) A proposal to take the decision referred to in Paragraph
one of this Section shall be submitted to the Cabinet by the
holder of State capital shares, but to a local government council
- by the representative of the holder of the capital shares of
local government. The proposal shall contain the following
information:
1) the status, function (administration tasks) and
subordination form of the newly-founded institution;
2) the material and financial status of the capital company,
as well as its ability to cover claims of known creditors;
3) the time periods in which the capital company would be
restructured into an institution (public agency);
4) other significant information related to the restructuring
of the capital company.
(4) The following shall be determined in the decision of the
highest decision-making body of a public entity to commence
restructuring:
1) the firm name and registration number of the capital
company to be restructured into an institution (public
agency);
2) the institution (public agency) to be established, its
name, subordination form and the member of the Cabinet or
institution of a derived public entity and the official under the
subordination of which it has bee transferred.
(5) The decision to commence restructuring of a capital
company shall be published in the official gazette Latvijas
Vēstnesis and notified in writing to all known creditors of
the capital company.
(6) The notification referred to in Paragraph five of this
Section shall include an invitation for the unknown creditors of
the company to apply their claims within two months after
publishing the notification. The content, grounds and extent of
the claim shall be indicated in the claim, and the documents
justifying the claim shall be appended thereto.
(7) The unknown creditors of the capital company of a public
entity which have not applied their claim in accordance with the
procedures laid down in Paragraph six of this Law shall lose
their right to request that the public entity fulfils its
obligations after the capital company is restructured into an
institution (public agency).
Chapter
XXXI
Completion of Restructuring of a Capital Company of a Public
Entity into an Institution (Public Agency)
Section 163. Restructuring of a
Capital Company into an Institution (Public Agency)
(1) After gathering information on creditors in accordance
with the procedures laid down in Section 162 of this Law, the
highest decision-making body of a public entity shall take the
decision to restructure a capital company of the public entity
into an institution (public agency), determining:
1) the firm name and registration number of the capital
company to be restructured into an institution (public
agency);
2) the institution (public agency) to be established, its
name, subordination form and the member of the Cabinet or
institution of a derived public entity and an official under
subordination of which the institution has been transferred;
3) the procedures for appointing the head of the established
institution (public agency);
4) the deadline by which the executive board shall submit an
application for the deletion of the capital company from the
Commercial Register;
5) the date from which the capital company shall be deleted
from the Commercial Register.
(2) A merchant shall be deleted from the Commercial Register
on the basis of the decision of the highest decision-making body
of a public entity referred to in Paragraph one of this Section.
A capital company shall be deleted from the date determined in
the decision of the highest decision-making body of the public
entity in accordance with Paragraph one, Clause 5 of this
Section.
(3) The executive board shall submit an application to the
Commercial Register Office for the deletion of the capital
company from the Commercial Register. The decision of the highest
decision-making body of the public entity shall be appended to
the application.
(4) When restructuring a capital company of a public entity
into an institution or public agency, the whole property of the
capital company shall be transferred to the established
institution (public agency), unless the decision on restructuring
provides otherwise. The established institution (public agency)
shall be the legal successor to the rights and obligations of the
restructured capital company of a public entity.
(5) An institution (public agency) shall commence its
operation as soon as the capital company is deleted from the
Commercial Register.
(6) Deletion of the capital company from the Commercial
Register shall terminate all powers of members of executive and
supervisory boards of the capital company.
(7) After deletion of the capital company from the Commercial
Register, members of executive and supervisory boards shall
retain the liability for the losses caused by public entities in
accordance with Section 51 of this Law.
Section 164. Employees of a
Newly-Founded Institution (Public Agency) or Civil Servants
(1) The head of an institution (public agency) shall, within
two months after beginning of operation of the institution
(agency), notify in writing the respective employee (official) of
amendments to the employment contract in conformity with the Law
on Remuneration of Officials and Employees of State and Local
Government Authorities.
(2) If after receipt of the notification referred to in
Paragraph one of this Section the employee does not agree to the
determined amendments to the employment contract or does not
provide an answer within one month, the head shall terminate
employment legal relationship with the employee.
(3) The head of a State administration institution (public
agency) shall, within two months after beginning of operation of
the institution (agency), determine positions of civil servants
in the institution (agency) in accordance with the procedures
laid down in the State Civil Service Law and notify in writing
the employee who holds the position determined as the position of
a civil servant in the institution (agency) of changes in the
status of the position and warn him or her of the termination of
employment legal relationship and commencement of State civil
service relationship.
(4) If after receipt of the notification referred to in
Paragraph three of this Section the employee does not agree to
take the position of a civil servant or does not provide an
answer within one month and the public agency cannot offer him or
her another position that is not the position of a civil servant,
or he or she does not agree to take other offered position, the
head shall terminate employment legal relationship with the
employee. The employee who agrees to take the position of a civil
servant after receipt of the notification and who meets the
mandatory requirements laid down in Section 7 of the State Civil
Service Law shall be appointed to the position of a civil servant
and shall be granted the status of a civil servant.
Transitional
Provisions
1. With the coming into force of this Law, the law On State
and Local Government Capital Shares and Capital Companies
(Latvijas Republikas Saeimas un Ministru Kabineta
Ziņotājs, 2002, No.21; 2003, No. 15; 2004, No. 23; 2005, No.
2, 15; 2006, No. 24; 2008, No. 1; 2009, No. 2, 6, 9, 12, 14;
Latvijas Vēstnesis, 2009, No. 136, 205; 2013, No. 119,
193, 194; 2014, No.75) is repealed.
2. The Cabinet shall:
1) by 1 March 2015, determine the State administration
institution which shall perform the tasks of the coordinating
authority (Section 22, Paragraph one of this Law);
2) by 1 October 2015, issue the regulations:
a) determining the procedures by which candidates shall be
nominated for positions of members of the executive and
supervisory boards in capital companies in which the State as the
shareholder (stakeholder) has the right to nominate members of
the executive or supervisory board, and members of the executive
board in State capital companies in which a supervisory board has
been established (Section 31, Paragraph ten of this Law);
b) determining the procedures by which the conditions of
Section 27 of this Law shall be fulfilled (Section 27, Paragraph
seven of this Law);
c) determining the procedures by which the conditions of
Section 28 of this Law shall be fulfilled (Section 28, Paragraph
six of this Law);
d) approving the standard articles of association of a capital
company of a public entity (Section 46, Paragraph two of this
Law);
e) determining the indicators which characterise the size of
the company necessary for the determination of the number of
members of the executive and supervisory boards of a capital
company (Section 79, Paragraph one, Section 106, Paragraph three,
Section 114, Paragraph one of this Law);
f) [16 June 2016];
g) determining the amount of deductions to be received by a
State capital company as the alienation authority from the
revenues obtained from selling State capital shares (Section 143,
Paragraph three of this Law);
3) by 1 September 2015, shall approve the by-laws and staff of
the supervisory board of the coordinating authority referred to
in Section 24, Paragraph three of this Law.
[18 June 2015; 16 June 2016]
3. The Cabinet shall, by 1 January 2016, issue the regulations
regarding the maximum amount of monthly remuneration to a member
of the executive board and supervisory board, taking into account
the average amount of remuneration to the management in similarly
sized (net turnover, sum total of the balance, number of
employees) capital companies in the private sector or - in
individual cases - in the field in which the respective capital
company is operating (Section 79, Paragraph four, Section 112,
Paragraph one, Section 117, Paragraph one of this Law).
[18 June 2015]
4. Until issuance of the regulations provided for in Paragraph
3 of these Transitional Provisions, the meeting of shareholders
(stockholders) of the capital company shall determine the monthly
remuneration of members of the executive and supervisory boards,
applying Cabinet Regulation No. 311 of 30 March 2010, Regulations
Regarding the Number of Members of the Executive Board of State
or Local Government Capital Companies, the Remuneration of a
Member of the Supervisory Board and Executive Board,
Representative of a Holder of Capital Shares of a Local
Government and the Responsible Employee.
5. The highest decision-making body of a derived public entity
shall, by 1 December 2015, determine:
1) the procedures by which candidates shall be nominated for
the positions of members of the executive and supervisory boards
in a capital company in which the derived public entity as a
shareholder (stockholder) has the right to nominate members of
the executive or supervisory board, and members of the executive
board in a capital company of a public entity in which a
supervisory board has been established (Section 37, Paragraph one
of this Law);
2) the procedures by which the profit share to be disbursed in
dividends in a capital company in which the derived public entity
has decisive influence shall be determined (Section 35, Paragraph
one of this Law).
[18 June 2015]
6. The coordinating authority shall, by 1 November 2015, draw
up and approve:
1) the guidelines for determining the general strategic
objectives of State participation (Section 25, Paragraph five of
this Law);
2) the methods (guidelines) for assessing the performance
results of a capital company in which the State has decisive
influence (Section 27, Paragraph one of this Law);
3) the guidelines for publishing information for State capital
companies and holders of capital shares (Section 29, Paragraph
one, Clause 2 of this Law);
4) the procedures by which information necessary for the
preparation of the annual public report on the capital companies
and capital shares belonging to the State shall be provided to
the coordinating authority (Section 30, Paragraph three of this
Law);
5) the guidelines for drawing up the medium-term operational
strategy (Section 57, Paragraph three of this Law).
7. Until drawing up of the documents referred to in Paragraph
6, Sub-paragraphs 1, 2, 3, and 5 of Transitional Provisions,
holders of capital shares, capital companies and their executive
bodies may perform the tasks specified in the Law without
guidelines drawn up by the coordinating authority.
8. A supervisory board may be established in a capital company
of a public entity and a public private capital company starting
from 1 January 2016 if it conforms to the criteria laid down in
Section 78 or 106 of this Law.
9. The coordinating authority shall, by 1 December 2015,
prepare and submit to the Cabinet and the Saeima the
centralised public report on State capital companies and State
capital shares in 2014.
[18 June 2015]
10. In determining the amount of summary revenues to be
obtained from dividends in 2016 in accordance with Section 28 of
this Law, the prognosis determined in the law on the medium-term
budget framework shall be taken into account.
11. The highest decision-making body of a public entity shall,
by 1 October 2016, take the decision on its direct participation
in capital companies in accordance with Section 7 of this
Law.
[16 June 2016]
12. Valsts akciju sabiedrība "Privatizācijas Aģentūra"
[State join-stock company Privatisation Agency] (hereinafter -
the Agency) shall perform the functions of the authority
alienating State capital shares provided for in this Law until
the moment when the Cabinet takes a decision on the authority
alienating State capital shares and the Agency has transferred
the capital shares held thereby.
13. The State Social Insurance Agency shall, by 1 July 2015,
transfer such State capital shares for holding to the Agency,
which have been transferred to the State special budget for
pensions until the day of coming into force of this Law and are
to be sold under a Cabinet decision. The State Social Insurance
Agency shall perform the tasks of the holder of State capital
shares and the alienation authority provided for in this Law
until the moment when the State capital shares are transferred to
the Agency. In the abovementioned time period, the State Social
Insurance Agency shall alienate capital shares in accordance with
Cabinet Regulation No. 366 of 9 May 2006, Regulations Regarding
Conditions and Procedures for Selling Capital Shares Transferred
to the State Special Budget for Pensions.
14. A public entity shall ensure that by 1 January 2016:
1) the number of members of the executive and supervisory
boards in capital companies of a public entity, as well as in
public private capital companies in which the capital company of
a public entity has obtained all capital shares or voting shares
conforms to that laid down in Cabinet regulations;
2) the articles of association of a capital company of a
public entity conform to the standard articles of association
drawn up and approved in accordance with Section 46, Paragraph
two of this Law.
[18 June 2015]
15. The State or local government capital companies the firm
name of which contained the word "State" or "local government"
until the day of coming into force of this Law may retain the
word also after the day of coming into force of this Law.
16. The holder of capital shares of a public entity shall
ensure that group of companies contracts concluded by capital
companies of a public entity are terminated by 1 March 2015.
17. The contracts concluded with members of the executive
board until the day of coming into force of this Law shall remain
valid until the end of the term of office of the member of the
executive board determined in the articles of association of the
capital company, which were effective at the time when the member
of the executive board was elected.
[18 June 2015]
18. Section 54 of this Law shall be applicable starting from
the report of year 2015.
19. A capital company of a public entity and a public private
capital company shall draw up the medium-term operational
strategy in accordance with Section 57 of this Law by 30 March
2016. The supervisory board of the coordinating authority shall
commence the provision of opinions on medium-term operational
strategies of the capital companies under decisive influence of
the State which have been drawn up starting from 1 January
2016.
[18 June 2015]
20. Until approval of the medium-term operational strategy,
the operation of a capital company shall be evaluated according
to pre-defined objectives, planned performance results and
financial indicators (Sections 27 and 34 of this Law).
[18 June 2015]
21. The coordinating authority shall publish the information
specified in Section 29, Paragraph one of this Law by 30 March
2016.
[18 June 2015]
22. The coordinating authority shall, in accordance with
Section 31, Paragraph five of this Law, nominate representatives
for participation in nomination committees starting from 1 August
2015.
[18 June 2015]
23. The coordinating authority shall, in accordance with
Section 32 of this Law, provide opinions starting from 1 January
2016.
[18 June 2015]
24. In a limited liability company of a public entity
established until 1 January 2020 in which a supervisory board has
not been established, but which conforms to the requirements of
Section 78, Paragraph two of this Law, the supervisory board
shall be established not later than by 1 June 2020.
[13 June 2019]
25. In a joint-stock company of a public entity established
until 1 January 2020 in which a supervisory board has not been
established, the supervisory board shall be established in
conformity with that specified in Section 106 of this Law not
later than by 1 June 2020 or the joint-stock company shall be
reorganised as a limited liability company by 1 December
2020.
[13 June 2019]
26. The coordinating authority shall, by 1 June 2020, develop
and approve guidelines for the performance of annual
self-assessment of the work of the supervisory board, the
preparation of the reports referred to in Section 36, Clause 11
of this Law, and the assessment of the performance results of the
members of the executive and supervisory boards.
[13 June 2019]
27. The coordinating authority shall apply the duty specified
in Section 22, Paragraph two, Clauses 7.2 and
7.3 of this Law starting from 1 March 2020.
[13 June 2019]
28. A derived public entity shall ensure the information
referred to in Section 36, Clause 11 of this Law starting from 1
March 2020.
[13 June 2019]
29. Counting of the time period referred to in Section 58,
Paragraph one, Clause 1, Sub-clauses "a", "b", and "c", Clause 2,
Clause 3, Sub-clauses "c" and "d", and also Paragraph
1.1, Clause 2, Sub-clause "a" of this Law for the
publication of information on at least previous five years shall
be applied starting from 1 March 2020.
[13 June 2019]
30. The local governments which are joined within the scope of
the administrative territorial reform and which are holders of
capital shares in a capital company shall not fulfil the duty
specified in Section 7 of this Law. Within the scope of the
administrative territorial reform, newly-established municipality
governments shall fulfil the duty specified in Section 7 of this
Law until 1 June 2022.
[10 December 2020]
31. Amendments to this Law regarding the new wording of
Paragraph four, Clause 2 of Section 31 and Paragraph four, Clause
2 of Section 37 shall come into force on 1 June 2021.
[6 May 2021]
32. A capital company of a public entity and a public private
capital company (joint-stock company or limited liability company
which conforms with the requirements of Section 78, Paragraph two
of this Law) has the obligation to prepare the notification of
corporate governance referred to in Section 58.1 of
this Law starting from 2022 for the financial year 2021 (the
reporting year which starts on 1 January 2021 or during the
calendar year 2021).
[11 November 2021]
33. A capital company of a public entity and a public private
capital company which, in accordance with the criteria of the Law
on the Annual Statements and Consolidated Statements, is a large
capital company and the number of employees of which is more than
250 has the obligation to prepare the non-financial statement
referred to in Section 58.2 of this Law and the
consolidated non-financial statement referred to in Section
58.3 of this Law starting from 2026 for the financial
year 2025 (the reporting year which starts on 1 January 2025 or
during the calendar year 2025), but a capital company of a public
entity and a public private capital company which, in accordance
with the criteria of the Law on the Annual Statements and
Consolidated Statements, is a large capital company and the
number of employees of which is more than 500 - starting from
2022 for the financial year 2021 (the reporting year which starts
on 1 January 2021 or during the calendar year 2021).
[11 November 2021]
34. A holder of capital shares of a public entity shall ensure
that a capital company of a public entity enters into insurance
contracts which conform to that laid down in Section 79,
Paragraph nine and Section 117, Paragraph five of this Law
accordingly, and those insurance contracts which do not conform
to the abovementioned requirements are terminated or amended not
later than by 1 March 2022.
[11 November 2021]
The Law shall come into force on 1 January 2015.
The Law has been adopted by the Saeima on 16 October
2014.
President A. Bērziņš
Rīga 31 October 2014
1 The Parliament of the Republic of
Latvia
Translation © 2022 Valsts valodas centrs (State
Language Centre)
