The translation of this document is outdated.
Translation validity: 01.08.2021.–31.05.2023.
Amendments not included:
16.06.2022.,
11.05.2023.
Text consolidated by Valsts valodas centrs (State
Language Centre) with amending laws of:
21 December 2000 [shall
come into force on 30 December 2000];
29 March 2001 [shall come into force on 31 March
2001];
26 June 2001 [shall come into force on 30 June
2000];
14 February 2002 [shall come into force on 15 March
2002];
22 April 2004 [shall come into force on 21 May
2004];
16 June 2005 [shall come into force on 20 July
2005];
16 March 2006 [shall come into force on 10 April
2006];
24 April 2008 [shall come into force on 28 May
2008];
18 December 2008 [shall come into force on 21 January
2008];
15 April 2010 [shall come into force on 1 May
2010];
16 June 2011 [shall come into force on 1 July
2011];
8 July 2011 [shall come into force on 13 July
2011];
14 June 2012 [shall come into force on 10 July
2012];
29 November 2012 [shall come into force on 1 January
2012];
2 May 2013 [shall come into force on 1 July 2013];
6 June 2013 [shall come into force on 1 July 2013];
19 September 2013 [shall come into force on 18 October
2013];
6 November 2013 [shall come into force on 1 January
2014];
16 January 2014 [shall come into force on 17 February
2014];
21 May 2015 [shall come into force on 4 June 2015];
23 March 2017 [shall come into force on 29 March
2017];
15 June 2017 [shall come into force on 13 July
2017];
20 March 2020 [shall come into force on 22 March
2020];
17 December 2020 [shall come into force on 12 January
2021];
6 July 2021 [shall come into force on 1 August 2021].
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.
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The Saeima1 has adopted and
the President has proclaimed the following law:
Commercial
Law
Part A
GENERAL PRINCIPLES OF COMMERCIAL ACTIVITIES
Division
I
MERCHANTS AND COMMERCIAL ACTIVITIES
Section 1. Merchants and Commercial
Activities
(1) A merchant is a natural person (sole proprietorship) or a
commercial company (partnership and capital company) registered
with the Commercial Register.
(2) Commercial activity is an open economic activity, which is
performed by merchants in their name for the purposes of gaining
a profit. Commercial activity is one of the types of
entrepreneurial activity.
(3) Economic activities are any systematic, independent
activities for remuneration.
(4) In this Law it may be specified that particular types of
economic activities may only be performed by a merchant. The
status of a merchant may be granted by law also to other
persons.
[14 February 2002]
Section 2. Legal Effect of
Registration
If a merchant is registered in the Commercial Register, an
objection that the economic activities, which are performed by
utilising the firm name registered in the Commercial Register are
not commercial activities shall not be allowed.
Section 3. Legal Regulation of
Commercial Activities
(1) Commercial activities shall be regulated by this Law, by
The Civil Law and other laws, as well as by the norms of
international law that are binding on Latvia.
(2) The provisions of The Civil Law shall apply to commercial
activities only insofar as this Law or other laws that regulate
commercial activities do not specify otherwise.
(3) The provisions of this Law shall apply to persons who are
not merchants, or to economic activities that are not commercial
activities if this Law or another law especially provides for
it.
(4) The provisions of this Law shall not apply to agricultural
production and other trade activities, which are performed by a
natural person and are regulated by other laws, if the person who
performs them has not been registered in the Commercial Register
as a sole proprietorship.
(5) In respect of a commercial companies significant for
national security the provisions of this Law shall be applied in
so far as it is not otherwise provided for in the National
Security Law.
[14 February 2002; 23 March 2017]
Section 4. Restrictions on
Commercial Activities
(1) Restrictions on commercial activities may only be
specified by law or on the basis of law.
(2) Merchants have the right to freely choose types of
commercial activities that are not prohibited by law.
(3) In this Law, separate types of commercial activities may
be specified, for the performance of which a permit (licence) is
necessary, or also that may be performed by merchants in
conformity with the requirements specified by this Law.
(4) Restrictions on commercial activities for a natural person
may be determined by:
1) a ruling made within criminal proceedings, by which the
person is deprived of the right to perform commercial activities
of all types or specific type;
2) a ruling made within criminal proceedings or administrative
violation proceedings, by which the person is deprived of the
right to hold certain positions.
[14 February 2002; 29 November 2012]
Section 4.1 Restriction
on Commercial Activity Specified for a Natural Person
(1) If a natural person, on the basis of a ruling made within
criminal proceedings, has been deprived of the right to perform
commercial activities of all types or specific type, the
following is prohibited during the period of prohibition
specified in the relevant ruling:
1) to apply himself or herself for entering in the Commercial
Register as a sole proprietorship and to perform commercial
activities as a sole proprietorship;
2) to be the founder of a commercial company;
3) to become a member, shareholder, stockholder of a
commercial company, except the case when shares, stocks or
investment (capital) of the equity capital are inherited;
4) to be the secretary of a partnership or a member of a
partnership with the right of representation;
5) to be a member of the board or council of a capital
company;
6) to participate in taking of a decision of the meeting of
shareholders in the case specified in Section 210, Paragraph two
of this Law;
7) to be a procurator, a person with a commercial power of
attorney or a person who is authorised to represent a foreign
merchant in activities related to a branch;
8) to be the liquidator of a commercial company;
9) to give instructions or advice to a sole proprietorship,
member, shareholder or stockholder of a commercial company, a
member of the board or council, a procurator or a person with a
commercial power of attorney, or otherwise influence them.
(2) The prohibitions specified in Paragraph one of this
Section shall be applicable to a natural person who has been
deprived of the right to perform commercial activities of
specific type only in relation to the type of commercial activity
specified in the relevant ruling. If the legal status of such
person allows taking of decisions in a commercial company, he or
she is prohibited to take decisions in issues which are related
to the type of commercial activity specified in the relevant
ruling.
(3) A sole proprietorship who has been deprived of the right
to perform commercial activities of all types or specific type
has an obligation to suspend his or her activity for the period
of prohibition specified in the relevant ruling to the relevant
extent or to terminate his or her status of sole proprietorship,
with or without alienating the undertaking.
(4) The sole shareholder of a limited liability company who
has been deprived of the right to perform commercial activities
of all types or specific type has an obligation to suspend the
activity of the company for the period of prohibition specified
in the relevant ruling to the relevant extent, to terminate the
activity of the company or to alienate the equity capital
shares.
(5) If a natural person has been deprived of the right to
perform commercial activities of all types or specific type, he
or she has an obligation to inform the merchant thereof
immediately after entering into effect of the relevant ruling,
but if the merchant is a commercial company - also members,
shareholders or stockholders thereof.
(6) Application of this Section is without prejudice to the
provisions of Section 5 of this Law.
[29 November 2012; 2 May 2013]
Section 4.2 Restrictions
on Holding Positions Specified for a Natural Person
(1) If a natural person, on the basis of a ruling made within
criminal proceedings or administrative violation proceedings, has
been deprived of the right to hold certain positions in a
commercial company and in administrative bodies thereof, the
relevant natural person is not entitled to be:
1) the secretary of a partnership;
2) a member entitled to represent a partnership;
3) a member of the board of a capital company;
4) a member of the council of a capital company;
5) a procurator;
6) a person with a commercial power of attorney;
7) a person who is authorised to represent a foreign merchant
in activities related to a branch;
8) a liquidator of a commercial company;
9) a company controller;
10) an auditor.
(11) If a court, on the basis of a ruling made
within the scope of civil proceedings, has restricted legal
capacity of a natural person of legal age (due to disorders of
mental nature or other health disorders or due to dissolute or
wasteful life of a person), the relevant natural person shall not
be entitled to hold the positions referred to in Paragraph one,
Clauses 3-10 of this Section.
(2) If a natural person has been deprived of the right to hold
certain positions or if a court has restricted his or her legal
capacity, such person has an obligation to inform the merchant
thereof immediately after entering into effect of the relevant
ruling, but if the merchant is a commercial company - also
members, shareholders or stockholders of the relevant commercial
company. If legal capacity has been restricted and trusteeship
has been established for a natural person, the obligation of
informing shall rely on his or her trustee who provides
information without delay as soon as he or she has learned or he
or she should have learned that the relevant person holds a
certain position.
(3) Application of this Section is without prejudice to the
provisions of Section 5 of this Law.
[29 November 2012; 2 May 2013; 16 January 2014]
Section 5. Merchant Status and
Public Law
The provisions of public law which prohibit the performance of
specified types of commercial activities or restrict the
performance thereof, or also provide for certain preconditions
for the performance of such type of commercial activities, shall
not influence the application of the provisions of private law,
which have arisen, have been amended or have ceased on the basis
of this Law.
[29 November 2012]
Division
II
COMMERCIAL REGISTER
Section 6. Keeping of the Commercial
Register
(1) Information as specified by law shall be entered and the
documents specified by law shall be stored in the Commercial
Register regarding merchant and commercial activities.
(2) The Commercial Register shall be kept by a State
institution authorised by law (hereinafter - the Commercial
Register Office).
[22 April 2004]
Section 7. Transparency of the
Commercial Register
(1) Everyone has a right to become acquainted with the records
of the Commercial Register and the documents submitted to the
Commercial Register Office.
(2) After submission of a written request, everyone has the
right to receive information on the records of the Commercial
Register and extracts and copies of documents present in the
registration file of the merchant in printed form or in
electronic form. The accuracy of the extract or copy of the
document shall be certified in accordance with the procedures
specified in laws and regulations, unless the recipient refuses
such certification. When issuing a copy of the document in
electronic form, the accuracy thereof shall be certified in
accordance with the procedures specified in the Electronic
Documents Law. A copy of the document in printed form shall be
certified in accordance with the procedures specified in laws and
regulations in such case, if the recipient thereof has clearly
requested such certification.
(3) Pursuant to a request of the recipient, an official of the
Commercial Register Office shall issue a notice that the
specified record in the Commercial Register has not been amended,
or also regarding the fact that a specific record has been
made.
(4) After submission of a written request, everyone has the
right to receive a notice from the Commercial Register Office
regarding each application received in the registration file of
the relevant merchant. The Commercial Register Office shall send
the notice on the day when the application was received. The
nature of the application and the date of receipt thereof shall
be indicated in the notice. The way and procedures for sending
the notice shall be determined by the Cabinet.
[24 April 2008; 2 May 2013; 6 November 2013]
Section 8. Contents of the Records
in the Commercial Register
(1) In respect of a sole proprietorship the following
information shall be entered in the Commercial Register:
1) firm name;
2) given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) of
the merchant;
3) legal address;
4) branch firm name, if it is different from the firm name of
the merchant, and its legal address.
(2) In respect of a partnership the following information
shall be entered in the Commercial Register:
1) firm name;
2) type of partnership;
3) amount of contribution by each limited partner and the
total amount of limited partner contributions;
4) given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) of
the members and limited partners personally liable for the
partnership, but for legal persons - name, registration number
and legal address;
5) the right of members of the partnership to represent the
partnership individually or jointly, indicating the given name,
surname, personal identity number (if the person does not have a
personal identity number - the date of birth, the number and date
of issue of a personal identification document, the state and
authority, which issued the document) of each member of the
partnership authorised for representation, but for legal persons
- firm name, registration number and legal address;
6) legal address;
7) if the partnership has been established for a specific time
period or for achievement of a specific objective - the time
period for which it was established or the objective;
8) branch firm name, if it is different from the firm name of
the partnership, and its legal address.
(3) In respect of a capital company the following information
shall be entered in the Commercial Register:
1) firm name;
2) type of capital company;
3) given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority which issued the document) and
position held of the members of the board, members of the council
(if the capital company has formed a council) of the capital
company;
4) the right of the members of the board to represent the
capital company individually or jointly;
5) amount of equity capital, separately indicating the
subscribed and paid-up amounts of equity capital;
51) amount of conditional equity capital of a joint
stock company;
6) [14 February 2002];
7) legal address;
8) if the capital company has been established for a specific
time period - the time period for which it was established;
9) branch firm name, if it is different from the firm name of
the capital company, and its legal address.
(4) In respect of a branch of a foreign merchant, except for
that referred to in Paragraph 4.1 of this Section, the
following information shall be entered in the Commercial
Register:
1) branch firm name, if it is different from the firm name of
the foreign merchant, and the firm name of the foreign
merchant;
2) legal address of the branch and the location of the foreign
merchant (legal address);
3) the register where the foreign merchant is registered, and
registration number, if the law of the state of the location of
the foreign merchant provides for the entering of a merchant in a
register;
4) the type of foreign merchant;
5) amount of equity capital of the foreign merchant,
separately indicating the subscribed and paid-up amounts of
equity capital, if the foreign merchant is a capital company and
this information is entered in the state register in which the
foreign merchant is entered.
(41) In respect of a branch of a capital company of
a European Union Member State, the Republic of Iceland, the
Kingdom of Norway and the Principality of Liechtenstein
(hereinafter in this Part - the Member State) the following
information shall be entered in the Commercial Register:
1) branch firm name if it is different from the firm name of
the capital company of the Member State, and the firm name of the
capital company of the Member State;
2) the legal address of the branch;
3) the given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority which issued the document) and
scope of authorisation of those persons who are authorised to
represent the capital company of the Member State in activities
related to a branch.
(5) In addition to the information referred to in this
Section, the following information shall be entered in the
Commercial Register:
1) given name, surname and personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority which issued the document) of
the procurator, as well as a reference to a total procuration or
branch procuration if such procuration has been issued, and a
reference to the granting of the rights referred to in Section
34, Paragraph two of this Law if such rights have been granted,
as well as the right of the procurator to represent a commercial
company individually or jointly with one or several members of
the board or members of the partnership;
2) the given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) and
scope of authorisation of those persons who are authorised to
represent a merchant (foreign merchant) in activities related to
a branch;
3) information on the re-organisation of the activities of a
merchant (foreign merchant);
4) information on the appointment of an administrator of
insolvency proceedings (hereinafter - the administrator),
indicating the given name, surname, personal identity number (if
the person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document),
information on the implementation and termination of legal
protection proceedings of a merchant (foreign merchant),
information on the declaration and termination of the insolvency
proceedings of the merchant (foreign merchant), information on
the completion of bankruptcy proceedings of the merchant (foreign
merchant);
41) information regarding suspension or renewal of
activities of a merchant, indicating the grounds for the
suspension or renewal of activities;
5) information on the termination and liquidation of
activities of a merchant (foreign merchant) by indicating the
grounds for termination of activities, as well as on the
appointment of a liquidator by indicating the given name,
surname, personal identity number (if the person does not have a
personal identity number - the date of birth, the number and date
of issue of a personal identification document, the state and
authority, which issued the document) thereof, but if the
liquidator of the foreign merchant is a legal person - the firm
name, registration number and legal address;
6) information on the entering into a group of companies
agreement, amending or termination thereof by indicating the
dominant and dependent company, registration number and date of
entering into agreement;
7) the given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority which issued the document) of
the guardian of a sole proprietorship or a member of partnership
with the right of representation;
71) information on the establishment of trusteeship
for a sole proprietorship or a member of partnership with the
right of representation, if a court has restricted legal capacity
of the relevant person;
8) date of the entry of each record.
(6) Other information shall be entered in the Commercial
Register, if such is explicitly provided for by law.
(7) Upon the registration of a merchant, a branch thereof in
Latvia or a branch of a foreign merchant and a capital company of
a Member State in Latvia in the Commercial Register, an
individual registration number shall be granted to them.
[14 February 2002; 22 April 2004; 16 March 2006; 24 April
2008; 15 April 2010; 16 June 2011; 29 November 2012; 2 May 2013;
16 January 2014; 15 June 2017; 6 July 2021 / See Paragraph
62 of Transitional Provisions]
Section 9. Documents to be Submitted
to the Commercial Register Office and their Preservation
(1) Documents which justify the making of an entry in the
Commercial Register, and other documents specified by law shall
be submitted to the Commercial Register Office. These documents
shall be submitted in printed form or in electronic form. The
relevant original document or an appropriately certified copy
thereof shall be submitted to the Commercial Register Office. If
it is specified in the law that the signature of a person on the
document (application, document to be appended to the application
or another document) must be notarised, such requirement shall be
deemed as complied with if the signature has been certified by a
sworn notary or, if the document has been drawn up in electronic
form, it has been signed with a secure electronic signature. If
it is specified in the law that the signature of a person on the
document (application, document to be appended to the application
or another document) must be notarised, an authorisation for
another person to sign such document shall be notarised. In
certifying the signature, the sworn notary shall examine the
legal capacity of the person and the amount of authorisation of
the authorised person or representative. If the document has been
drawn up in electronic form and signed with a secure electronic
signature, the official of the Commercial Register Office shall
examine the legal capacity of the person on the basis of the data
of the Population Register, as well as the amount of
authorisation of the authorised person or representative.
(11) Public documents issued in foreign states
shall be legalised in accordance with the procedures specified in
international agreements, and a notarised translation in the
Latvian language shall be appended thereto. A certified
translation in the Latvian language according to the laws and
regulations determining the procedures by which translations of
documents in the official language shall be certified, shall be
appended to private documents in a foreign language. Documents to
be submitted to the Commercial Register Office in the Latvian
language may be appended a translation in a foreign language. If
an inconsistency is determined between a document submitted in
the Latvian language and a translation thereof in a foreign
language, a merchant or a person in the interests of whom this
translation has been submitted may not use it against a third
party. The third party in respect of the merchant or the person
in the interests of whom this translation has been submitted may
refer to this translation, except in case when the third party
knew the content of the document in the Latvian language.
(2) Following amendments made in the documents of
incorporation of a capital company (memorandum of association,
articles of association), the text of the amendments, as well as
the full text of the document as amended, shall be submitted to
the Commercial Register.
(3) Documents submitted to the Commercial Register Office
shall be preserved in the relevant Commercial Register file of
the merchant. Annual accounts and documents to be appended
thereto shall be kept only in electronic form in the file.
(31) The Commercial Register Office shall be
submitted an extract from the notarial deed book of the minutes
or decision of the meeting of shareholders (stockholders) of a
capital company, if it has been specified in the articles of
association of the capital company that the progress of the
meeting of shareholders (stockholders) shall be certified by a
sworn notary.
(4) A person may indicate such address in an application to
the Commercial Register Office where he or she may be reached. If
the person, according to the data of the Population Register,
does not have a declared or registered place of residence or an
indicated address in a foreign country, the person shall indicate
such address in the application to the Commercial Register
Office, where he or she may be reached. The Commercial Register
Office shall provide information on the address of the person
indicated in the application upon a justified request of the
recipient.
[16 March 2006; 24 April2008; 15 April 2010; 16 June 2011;
2 May 2013; 15 June 2017; 17 December 2020]
Section 10. Making of an Entry in
the Commercial Register and Appending of Documents to the
Registration File
(1) Entries in the Commercial Register shall be made on the
basis of an application of an interested person or a court
ruling.
(11) The information referred to in Section 8 of
this Law shall be indicated in an application. When applying
changes to the information to be entered in the Commercial
Register, the changes made in conformity with Section 8 of this
Law shall be indicated in the application.
(2) The signature of a person shall be notarised:
1) on the application:
a) regarding entering of a merchant in the Commercial
Register;
b) regarding change of a member of a capital company with the
right of representation or changing of the right of
representation;
c) regarding issuance or suspension of procuration or changes
in the scope thereof;
d) regarding appointing or suspension of a liquidator of a
partnership;
e) or all applications submitted, if it has been provided for
in the articles of association of the capital company or in an
application previously submitted to the Commercial Register
Office and signed by all members;
2) on the following documents to be appended to the
application:
a) on the minutes of the meeting of shareholders of a limited
liability company or the council meeting of a joint stock company
or a derivative thereof, if a decision on election or suspension
of a member of the board of the relevant capital company has been
taken;
b) on the minutes of the meeting of stockholders of a joint
stock company or a derivative thereof, if a decision on election
or suspension of a council member of the relevant joint stock
company has been taken;
c) on the minutes of the meeting of shareholders
(stockholders) of a capital company or a derivative thereof and
in the revision of a complete text of the articles of association
of the capital company, if a decision on amendments to the
articles of association of the capital company has been
taken;
d) on the minutes of the meeting of shareholders
(stockholders) of a capital company or a derivative thereof, if a
decision on election of a liquidator of the capital company has
been taken;
e) on a division of the register of shareholders of a limited
liability company;
f) on a consent of the person to hold the position of a member
of the board of the capital company, except the case when the
consent of the member of the board has been included in the
application to the Commercial Register Office, and his or her
signature has been notarised on the application;
g) on a consent of the person to hold the position of a
liquidator of a commercial company;
h) on all the minutes of the council meeting of a joint stock
company or derivatives thereof, if it has been provided for in
the articles of association of the joint stock company;
i) on all the minutes of the meeting of shareholders
(stockholders) of a capital company, if it has been provided for
in the articles of association of the capital company.
(3) A decision on making of an entry in the Commercial
Register, a refusal to make an entry or the postponement of the
making of an entry shall be taken within three days (excluding
holidays and public holidays) from the day of receipt of the
application by an official of the Commercial Register Office.
Within the same time period, an official of the Commercial
Register Office shall take a decision on making of an entry in
the Commercial Register on the basis of a court ruling.
(4) A decision on refusal of making an entry in the Commercial
Register or postponement of making of an entry may only be taken
in such case if the application or the documents attached thereto
does not conform to the provisions of the law. The decision shall
be substantiated. The time period for rectifying the deficiencies
shall be indicated in the decision on the postponement of making
of an entry.
(5) An official of the Commercial Register shall send the
decision referred to in Paragraph three of this Section to the
submitter of the application within three days (excluding
holidays and public holidays) from the day when the decision was
taken.
(6) The submitter of the application has the right to appeal
the decision of an official of the Commercial Register Office in
accordance with the procedures specified by law.
(7) An entry in the Commercial Register shall be made and
documents shall be appended to the registration file on the same
day when the decision on making of the entry or appending of the
documents to the registration file was taken.
[22 April 2004; 16 March 2006; 24 April 2008; 2 May 2013;
15 June 2017]
Section 11. Promulgation of Records
in the Commercial Register
(1) All records of the Commercial Register shall be
promulgated, ensuring the initial public availability thereof
online by the Commercial Register Office. The documents attached
to the registration file shall be promulgated in the same
way.
(2) An entry shall be regarded as promulgated on the next day
after making thereof. Documents shall be regarded as promulgated
on the next day after attachment thereof to the registration
file.
(3) [Paragraph shall come into force on 1 July 2023 and
shall be included in the wording of the Law as of 1 July 2023
/ See Paragraph 61 of Transitional Provisions]
[6 July 2021]
Section 12. Public Access to the
Commercial Register
(1) Entries in the Commercial Register shall be in effect as
to third parties from the date of their publication. This
provision shall not apply to legal activities, which are
performed within 15 days following the promulgation of the entry,
insofar as the third party can prove that he or she did not know
or could not have known the relevant information.
(2) If the information to be entered in the Commercial
Register has not been entered or has been entered but not
promulgated, the person in whose interests such information
should have been entered cannot use it against a third party,
except in the case when the third party knew the referred to
information.
(3) If the promulgated information to be entered in the
Commercial Register has been entered incorrectly, a third party
may, in relation to the person in whose interests such
information should have been entered, refer to the information
which has been entered, except for the case when the third party
knew that the information entered in the Commercial Register does
not correspond to the actual legal status.
(4) If a merchant is sent information, documents or other
correspondence to their legal address as entered in the
Commercial Register, it shall be deemed that the merchant has
received such documents, information or other correspondence, if
the sender proves documentarily that such sending was
performed.
[14 February 2002; 6 July 2021]
Section 13. Registration
Certificate
[6 July 2021]
Section 14. Deletion of a Merchant
from the Commercial Register
A merchant may be deleted from the Commercial Register on the
basis of:
1) an application of a sole proprietorship;
2) an application of a liquidator of a commercial company;
3) an application of an administrator in a matter of
insolvency proceedings;
4) an application of a commercial company to make an entry of
re-organisation; or
5) a court ruling.
[24 April 2008]
Section 15. State Fee and Charge for
a Service Provided by the Commercial Register Office
(1) A State fee shall be paid for making of entries in the
Commercial Register and for the attaching of the documents to the
registration file. The amount of the State fee shall not exceed
the administrative expenses for making of the relevant entry and
for the attaching of the documents to the registration file. The
amount, payment procedures and relief of the State fee shall be
determined by the Cabinet.
(2) A charge for a service laid down in the pricelist of paid
services of the Commercial Register Office shall be paid for the
issuance of an extract from the Commercial Register and for an
extract or copy of the document existing in the Commercial
Register file, and also for the issuance of a statement and for
other services provided by the Commercial Register Office.
[6 November 2013; 17 December 2020; 6 July 2021 /
Amendment regarding the new wording of the second sentence of
Paragraph one shall be applicable from 1 September 2021.
See Paragraph 65 of Transitional Provisions]
Section 16. Term for Submission of
Information
Information, upon which basis new entries are to be made, as
well as the documents specified by law to be submitted, shall be
submitted to the Commercial Register Office within 14 days from
the day when the relevant decision was taken if it has not been
otherwise specified in this Law.
[14 February 2002]
Section 17. Particulars of a
Merchant
(1) The following particulars shall be included in the
business letters, invoices and other documents of a merchant in
printed form or in electronic form, as well as in the home page
of the merchant:
1) the firm name of the merchant;
2) the registration number of the merchant at the Commercial
Register;
3) the legal address of the merchant;
4) in relevant cases - information regarding whether the
merchant is in the process of liquidation or insolvency.
(2) If the merchant has opened a branch, then the following
shall be included in its documents in printed form or in
electronic form, in addition to the information referred to in
Paragraph one of this Section:
1) the firm name of the branch if it differs from the firm
name of the merchant;
2) the registration number of the branch with the Commercial
Register;
3) the legal address of the branch.
(3) If the size of the equity capital is referred to in the
particulars of a capital company, the size of the paid-up equity
capital shall also be indicated.
[24 April 2008]
Section 17.1 Disclosure
Obligation
[15 June 2017 / See Paragraph 57 of Transitional
Provisions]
Division
III
UNDERTAKINGS, BRANCHES, AND REPRESENTATIVE OFFICES
[6 July 2021]
Section 18. Definition of an
Undertaking
An undertaking is an organisational economic unit. The
undertaking includes both tangible and intangible things
belonging to a merchant, as well as other economic benefits
(value), which are used by the merchant to perform commercial
activities.
[14 February 2002]
Section 19. Commercial Secrets
[6 July 2021]
Section 20. Transfer of an
Undertaking
(1) If an undertaking or an independent part thereof is
transferred to the ownership or use of another person, the
acquirer of the undertaking shall be liable for all the
obligations of the undertaking or its independent part. However,
in respect of those obligations which arose prior to the transfer
of the undertaking or its independent part to the ownership or
use of another person, and the terms or conditions for the
fulfilment of which come into effect five years after the
transfer of the undertaking, the transferor of the undertaking
and the acquirer of the undertaking shall be solidarily
liable.
(2) In the case of the transfer of ownership or use of an
undertaking or an independent part thereof, claims and other
rights included in the undertaking or its part shall be
transferred to the acquirer of the undertaking.
(3) An agreement, which is in contradiction to the provisions
of this Section, shall be void as to third parties.
[14 February 2002; 22 April 2004]
Section 21. Transfer of an
Undertaking of a Sole Proprietorship to a Partnership
(1) If an undertaking of a sole proprietorship is transferred
to a partnership which is founded by this sole proprietorship and
another person, the partnership thus founded shall be liable for
all the obligations of the sole proprietorship included in the
undertaking.
(2) In the case of the transfer of an undertaking, claims and
other rights in relation to debtors included in the undertaking
shall be transferred to the partnership thus founded.
(3) An agreement, which is in contradiction to the provisions
of this Section, shall be void as to third parties.
Section 22. Definition of a
Branch
A branch is an organisationally independent part of an
undertaking, which is territorially or otherwise separated from
the principle undertaking and at the location of which commercial
activities are systematically performed in the name of the
merchant.
[14 February 2002]
Section 23. Entering of a Branch in
the Commercial Register
(1) The opening of a branch, based upon an application of a
merchant, shall be entered in the Commercial Register.
(2) [15 June 2017]
(3) The application shall specify the legal address of a
branch, including the cadastral designation of the immovable
property object (building, residential property or premises), and
confirm that the branch is reachable and there is a legal basis
for the location thereof in the specified legal address.
[16 June 2011; 15 June 2017; 6 July 2021]
Section 24. Deletion of a Branch
from the Commercial Register
A branch shall be deleted from the Commercial Register:
1) on the basis of an application by the merchant regarding
the closure of a branch; or
2) if the merchant is deleted from the Commercial
Register.
Section 24.1 Registration
of Information on a Branch of a Commercial Company in a Member
State
(1) Information on the registration of a branch of a
commercial company in a Member State, changes in the information
on the branch and exclusion of the branch from the register of
the Member State shall be registered by the Commercial Register
Office on the basis of the notice which has been received in the
system of interconnection of registers from the register
institution of the Member State.
(2) In respect of a branch of a commercial company in a Member
State, the Commercial Register Office shall register the
following information:
1) firm name, if different from the firm name of the merchant,
and additional firm name if there is more than one firm name of
the branch;
2) legal address;
3) registration number;
4) date of registration;
5) date of entry into force of the branch registration (if
any);
6) register where an entry on the branch of the merchant has
been made.
[6 July 2021]
Section 25. Branches of Foreign
Merchants
(1) The provisions of this Law shall be applied to branches of
foreign merchants, insofar as it is not otherwise specified in
this Section.
(2) Opening a branch of a foreign merchant shall be applied
for entering in the Commercial Register on the basis of the
application of the merchant.
(3) The following documents shall be appended to the
application for the entering of a branch of a foreign merchant in
the Commercial Register:
1) a document which certifies the registration of the merchant
in the relevant state, or a notarised copy of such document, if
the law of the state of the location of the foreign merchant
provides for the entering of the merchant in a register;
2) a permit to open a branch if such is provided for by
law;
3) a notarised copy of the articles of association, memorandum
of association or a document equivalent to such of the
merchant;
4) a document which certifies the authorisation of a person to
represent the foreign merchant in all activities associated with
the branch, and the scope of such powers;
5) [6 July 2021].
(31) The application shall specify the legal
address of a branch of a foreign merchant, including the
cadastral designation of the immovable property object (building,
residential property or premises), and confirm that the branch of
the foreign merchant is reachable and there is a legal basis for
the location thereof in the specified legal address.
(4) The person who is authorised to represent a foreign
merchant in activities related to a branch, the foreign merchant
or lawful representatives of such merchant shall submit an
application to the Commercial Register Office for:
1) the termination of activities of the merchant, the
initiation and completion of legal protection and insolvency
proceedings, invitation to tender or proceedings equivalent
thereto;
2) the liquidation of the merchant, as well as re-organisation
if the foreign merchant is a company;
3) the appointment of an administrator or liquidator
indicating the given name, surname, residential address and scope
of powers of the administrator (liquidator);
4) the deletion of the branch from the Commercial
Register.
(41) [6 July 2021]
(5) The persons referred to in Paragraph four of this Section
shall submit an application to the Commercial Register Office
regarding any changes in the composition of such persons and the
scope of their powers.
(6) The annual accounts of a foreign merchant shall be
submitted to the Commercial Register Office if the law of the
state of the location of the foreign merchant provides for the
submission of the annual accounts to the state register of the
location of the merchant.
(7) All documents to be submitted to the Commercial Register
shall have attached notarised translations in the Latvian
language.
(8) [6 July 2021]
[22 April 2004; 16 March 2006; 24 April 2008; 16 June 2011;
15 June 2017; 6 July 2021 / See Paragraph 62 of
Transitional Provisions]
Section 25.1 Branches of
Capital Companies of Member States
(1) The provisions of this Law shall be applied to branches of
capital companies of Member States, insofar as it is not
specified otherwise in this Section.
(2) Opening a branch of a capital company of a Member State,
changes in the information on the branch and exclusion of the
branch from the Commercial Register shall be applied for entry in
the Commercial Register on the basis of the application of the
capital company of the Member State.
(3) The documents referred to in Section 25, Paragraph three,
Clauses 2 and 4 of this Law shall be attached to the application
for the entry of a branch of a capital company of a Member State
in the Commercial Register. The application shall specify the
legal address of a branch of a merchant of a Member State,
including the cadastral designation of the immovable property
object (building, residential property or premises), and confirm
that the branch of the merchant of the Member State is reachable
and there is a legal basis for the location thereof in the
specified legal address.
(4) The annual accounts referred to in Section 25, Paragraph
six of this Law need not be submitted if they are available in
the register institution of the relevant Member State.
(5) If information on exclusion of a capital company from the
relevant register is received in the system of interconnection of
registers from the register institution of the Member State which
keeps the register where the capital company is entered, the
Commercial Register Office shall immediately make an entry in the
Commercial Register regarding exclusion of the branch of the
capital company.
[6 July 2021]
Section 25.2
Representative Offices of Foreign Merchants
A merchant of a foreign country, including a Member State, has
the right to open representative offices in Latvia. A
representative office is not a legal person, and it does not have
the right to conduct commercial activities in Latvia.
[6 July 2021]
Division
IV
FIRM NAMES
Section 26. Definition of a Firm
Name
(1) A firm name is the name of a merchant entered with the
Commercial Register, which a merchant uses in commercial
activities, in concluding transactions and in signing.
(2) In a narrower sense, the firm name shall be understood as
a designation without reference to the type of merchant.
[14 February 2002]
Section 27. Reference to the Type of
Merchant
(1) The firm name of a sole proprietorship shall contain the
reference "individuālais komersants" [sole proprietorship] or its
abbreviation "IK".
(2) The firm name of a general partnership shall contain a
reference "pilnsabiedrība" [general partnership] or its
abbreviation "PS". The firm name of a limited partnership shall
contain a reference "komandītsabiedrība" [limited partnership] or
its abbreviation "KS".
(3) The firm name of a limited liability company shall contain
a reference "sabiedrība ar ierobežotu atbildību" [limited
liability company] or its abbreviation "SIA". The firm name of a
stock company shall contain a reference "akciju sabiedrība"
[stock company] or its abbreviation "AS".
(4) The references to the type of merchant shall be placed at
the beginning or end of the firm name.
[14 February 2002]
Section 28. Firm Name
Distinctiveness
The firm name of a merchant (Section 26, Paragraph two) shall
clearly and specifically differ from firm names or names which
have already been entered in or as to which entering has been
applied for with the Commercial Register or other registers
maintained by the Commercial Register Office.
[14 February 2002; 15 April 2010 / Amendment in respect of
firm names or names which have already been entered in or as to
which entering has been applied for with other registers
maintained by the Commercial Register Office shall come into
force on 1 December 2010. See Paragraph 18 of Transitional
Provisions]
Section 29. Restrictions on the
Choice of the Firm Name
(1) A firm name may not contain misleading information on
important circumstances within the scope of commercial rights,
especially on the type of merchant or commercial activities or
also on the scope of commercial activities.
(2) A firm name may not be in contradiction with good
morals.
(3) A firm name may not include the words "Latvijas Republika"
[the Republic of Latvia] and their translation into a foreign
language.
(4) If a firm name contains the name of an administrative
territory or populated area, the firm name may not coincide with
the relevant administrative territory or populated area, except
for the name of a homestead.
(5) A firm name may not include names of the state and local
government authorities (institutions), and also words "valsts"
[state] or "pašvaldība" [local government].
(6) The use of trademarks or parts thereof in a firm name
shall be regulated by the laws and regulations regulating
trademarks.
(7) Only letters of the Latvian or Latin alphabet may be
included in the writing of a firm name.
[22 April 2004]
Section 30. Inclusion of Personal
Names in Firm Names and the Continued Use of Firm Names
(1) The firm name of a sole proprietorship may contain the
given name or surname of the merchant. If the given name or
surname of the sole proprietorship changes, he or she may also
continue to use the previous firm name.
(2) The firm name of a general partnership may not contain the
given name, surname or name of such persons who are not its
members. The firm name of a limited partnership may not contain
the given name, surname or name of such persons who are not its
general partners. If the given name or surname (name) of its
personally liable member changes, the given name or surname
(name) of which is contained in the firm name of the partnership,
the partnership may also continue to use the previous firm
name.
(3) If a new personally liable member joins an existing
partnership or one of the personally liable members leaves the
partnership, the partnership may also continue to use the
previous firm name. If the member whose given name, surname
(name) is contained in the firm name leaves, the continued use of
the previous firm name shall require the written consent of such
member, or in the case of his or her death - of the heirs.
(4) Upon the acquisition of an existing undertaking, the
acquirer may also continue to use the previous firm name, in
which the given name or surname of the previous owner is
included, if the previous owner or - in the case of the death of
the owner - his or her heirs have consented in writing to the
continued use of the firm name.
(5) The provisions of Paragraph four of this Section shall be
applied in cases, when an undertaking is acquired on the basis of
usufructuary rights, a lease or similar legal relationship.
[14 February 2002; 22 April 2004]
Section 31. Alienation of Firm
Names
A firm name may only be alienated together with the relevant
undertaking.
Section 32. Firm Names of
Branches
A branch of a merchant may have its own firm name, which shall
contain the firm name of the merchant, the name of the branch or
a reference to its location and the word "filiāle" [branch].
Section 33. Protection of Firm
Names
A merchant whose rights are infringed in relation to the use
of its firm name, may request from the infringer to terminate the
use of the firm name, as well as to compensate the merchant for
the losses incurred by the illegal use of the firm name.
Division
V
PROCURATION AND ORDINARY COMMERCIAL POWER OF ATTORNEY
Section 34. Procuration
(1) Procuration is a commercial power of attorney which grants
to the procurator the right to conclude transactions and to
perform other legal activities associated with commercial
activities on behalf of a merchant, including all procedural
activities in the course of legal proceedings (bringing an
action, settlement, appeal of a court ruling, etc.).
(2) A procurator may alienate, pledge or encumber immovable
property with rights pertaining to property only if such rights
have been specially granted to him or her.
(3) It may be determined in the articles of association of a
capital company that the procurator shall represent the capital
company together with one or several members of the board. It may
be determined in a partnership agreement that the procurator
shall represent the partnership together with one or several
members of the partnership.
[22 April 2004]
Section 35. Issuance of a
Procuration and Restrictions on a Procurator
(1) Only a merchant or a legal representative of such merchant
may issue a procuration, moreover with a specific expression of
intent.
(2) A procuration may be issued simultaneously to several
persons. On the basis of such a procuration (joint procuration),
the joint procurators have the right to represent the merchant
only jointly.
(3) A procurator does not have the right to transfer the
procuration to another person.
(4) A person who in accordance with the restrictions specified
in the first sentence of Section 221, Paragraph four and Section
304, Paragraph three of this Law may not be a member of the board
of a capital company, may not be a procurator.
[29 November 2012]
Section 36. Restrictions on the
Scope of a Procuration
(1) Restrictions on the scope of a procuration shall be void
as to third parties.
(2) The provisions of Paragraph one of this Section shall
especially apply to such restrictions of the scope of a
procuration, as a result of which the procuration may be used
only:
1) in relation to specified transactions, specified types of
transactions or their scope;
2) when certain circumstances exist;
3) for a specified time or in a specified area.
(3) The restriction of the scope of a procuration in relation
to one of several branches of a merchant's undertaking (a branch
procuration) shall be in effect as to third parties only if such
branches have different firm names entered in the Commercial
Register.
Section 37. Signature of a
Procurator
A procurator shall sign adding to the firm name of the
merchant his or her signature and an indication of the existence
of a procuration (procurator, p.p., per procura).
Section 38. Application for Entering
in the Commercial Register the Issuance of a Procuration, Changes
in the Representation Rights of a Procurator and Termination of a
Procuration
(1) A merchant shall apply the issuance of a procuration for
entering in the Commercial Register.
(2) If a joint procuration is issued or if in the procuration
the procurator has been granted the right to alienate, pledge or
encumber immovable property with rights pertaining to property,
the merchant shall especially indicate this in the application
regarding entering of the procuration in the Commercial
Register.
(3) Changes in the representation rights of a procurator and
the termination of a procuration shall be notified by the
merchant for entering in the Commercial Register.
[14 February 2002; 16 March 2006; 15 April 2010; 15 June
2017]
Section 39. Termination of a
Procuration
(1) A merchant has the right to unilaterally revoke a
procuration at any time irrespective of the legal relationship
upon which the procuration was issued. The revocation of a
procuration shall not influence the rights of a procurator to
receive the contracted remuneration.
(2) After the death of a sole proprietorship, the procuration
shall remain in effect.
(3) A procuration shall terminate upon the death of the
procurator.
[14 February 2002]
Section 40. Ordinary Commercial
Power of Attorney
(1) If a merchant authorises some other person to conduct in
his or her name commercial activities, to conclude specific types
of transactions related to the commercial activities performed by
the merchant or also to conclude separate transactions related to
the commercial activities performed by the merchant without
issuing a procuration, such a power of attorney (an ordinary
commercial power of attorney) shall relate to all lawful
activities which are usually directed to the performance of such
commercial activities or the concluding of such transactions.
(2) A person with a commercial power of attorney may alienate,
pledge or encumber immovable property with rights pertaining to
property, undertake obligations under bills of exchange, take
loans or represent the merchant in court only if such rights have
been especially granted to them.
(3) Any other restrictions on the authorisation granted to a
person with a commercial power of attorney shall be in effect as
to third parties only if they knew or should have known of such
restrictions.
Section 41. Representatives
Authorised to Conclude Transactions
(1) The provisions of Section 40 of this Law shall also be
applied to those persons with a commercial power of attorney who
are commercial agents or who, as employees of a merchant, have
been entrusted to conclude transactions in the name of the
principal outside his or her undertaking.
(2) The authorisation issued to the persons with a commercial
power of attorney referred to in Paragraph one of this Section,
does not give them the right to change concluded
transactions.
(3) The persons with a commercial power of attorney referred
to in Paragraph one of this Section:
1) may receive payments if they are authorised to do it;
2) shall be considered as authorised to accept notices
regarding deficiencies in goods, regarding the supply of goods
and other similar notices, with the assistance of which a third
party uses or keeps their rights in relation to the improper
fulfilment of obligations, as well as using the rights to the
securing of evidence belonging to the principal.
Section 42. Employees of a Merchant
at the Place of the Selling of Goods or Provision of Services
Employees of a merchant who work in a place where goods are
sold or services are provided, shall be considered to be
authorised to sell such goods or provide such services, and to
perform other legal activities associated with such, which are
usually performed at such places.
Section 43. Signature of a Person
with a Commercial Power of Attorney
A person with a commercial power of attorney shall sign,
adding to the firm name of the merchant an addition which
indicates of the existence of a power of attorney. A person with
a commercial power of attorney may not add to his or her
signature additions which may create a misleading impression
regarding the existence of a procuration.
Section 44. Further Transfer of a
Commercial Power of Attorney
A person with a commercial power of attorney may transfer the
power of attorney granted to him or her further to another person
only if such rights have been specially granted to him or
her.
Division
VI
COMMERCIAL AGENT
Section 45. Definition of a
Commercial Agent
A commercial agent is a merchant who has been authorised to
permanently conclude transactions with third parties in the name
and to the benefit of another person (principal) or also to
prepare transactions for concluding.
Section 46. Form of Commercial Agent
Contract
A commercial agency contract shall be concluded in
writing.
Section 47. Obligations of a
Commercial Agent
(1) A commercial agent shall, by taking into account the
interests of the principal, take care of the concluding of
transactions or their preparation for concluding.
(2) A commercial agent shall transfer to the principal all the
necessary information and documents. A commercial agent has a
special obligation to inform the principal without delay about
each concluding of a transaction or its preparation for
concluding.
(3) A commercial agent shall perform his or her obligations
with the due care of a diligent merchant and comply with the
reasonable instructions of the principal.
(4) An agreement which is in contradiction with the provisions
of this Section shall be void.
Section 48. Obligations of a
Principal
(1) A principal shall transfer to the commercial agent
documents (samples, drawings, price lists, advertising brochures,
transaction regulations and others) which are necessary for the
commercial agent to perform his or her obligations.
(2) A principal has a special obligation to notify a
commercial agent without delay about:
1) his or her consent of such transactions which the
commercial agent has prepared for concluding, or regarding
refusal to conclude such a transaction;
2) the non-performance of such transactions which the
commercial agent has concluded or has prepared for
concluding;
3) a significant decrease in the volume of transactions if the
principal anticipates such a decrease in comparison with the
volume upon which the commercial agent could usually rely.
(3) An agreement which is in contradiction with the provisions
of this Section shall be void.
Section 49. Remuneration of a
Commercial Agent
(1) If remuneration has not been contracted for, a commercial
agent has the right to receive such remuneration as is normally
paid in the relevant area for the concluding of the same or
similar transactions. If there is no such a standard, a
commercial agent has a right to a reasonable remuneration, which
shall be determined by taking into account all the circumstances
associated with the relevant transaction.
(2) A remuneration or its part payable to a commercial agent,
which fluctuates according to the number or value of the relevant
transactions, is a commission.
(3) The provisions of Sections 50 -52 of this Law in relation
to commercial agent remuneration shall be applied insofar as the
remuneration in full or in part is paid in the form of a
commission.
Section 50. Rights of a Commercial
Agent to Commission
(1) A commercial agent has a right to commission on a
transaction, which is concluded during the period that the
commercial agency contract is in effect, if such transaction has
been concluded as a result of his or her action, or also with a
person whom the commercial agent has previously acquired as a
client for transactions of the same kind.
(2) If a commercial agent has been entrusted to work within a
specific geographical territory or with a specific group of
clients, he or she has a right to commission also on such
transactions, which during the period that the commercial agency
contract is in effect, without his or her participation, are
concluded with a client who belongs to such geographical
territory or group of clients.
(3) In relation to transactions, which are concluded after the
commercial agency contract has expired, a commercial agent has a
right to commission only if:
1) the transaction has been concluded primarily because of his
or her activities which were performed during the period that the
commercial agency contract was in effect, and such transaction
was concluded within a reasonable period of time after the
commercial agency contract expired;
2) prior to the expiration of the commercial agency contract,
the commercial agent or the principal had received an offer from
a third party regarding the concluding of such a transaction, in
respect of which the commercial agent has a right to commission
in accordance with the provisions of Paragraph one or two of this
Section.
(4) A commercial agent does not have a right to a commission
in accordance with the provisions of Paragraph one or two of this
Section, if it in accordance with the provisions of Paragraph
three of this Section, is due the previous commercial agent,
except in the case, when special circumstances justify the
equitable sharing of the commission between these commercial
agents.
Section 51. Coming into Effect of a
Term for the Payment of a Commission
(1) A commercial agent has a right to commission as soon as
and to the extent the principal has performed the transaction.
The persons may also agree regarding different provisions,
however, at the moment when the principal has performed the
transaction, the commercial agent has a right to an appropriate
advance payment, which shall be paid not later than on the last
day of the next month. Irrespective of such an agreement, the
commercial agent has a right to commission as soon as and to the
extent the third party has performed the transaction.
(2) If a principal has performed a transaction, but it is
clear that the third party will not perform the transaction, the
right of the commercial agent to commission is terminated. In
such case, the commercial agent has an obligation to return the
amounts already received.
(3) A commercial agent has the right to commission also when
it is clear that the principal has not fully or in part performed
the transaction, or also has not performed the transaction in
such a way as it was concluded. The right of a commercial agent
to commission in the case of non-performance of the transaction
shall terminate only then if the cause of such non-performance
was circumstances independent of the principal.
(4) A commission shall be paid not later than on the last day
of the month in which, in accordance with the provisions of
Section 52, Paragraph one of this Law, the principal has an
obligation to calculate the commission due to the commercial
agent.
(5) Agreements which are in contradiction to the first
sentence of Paragraph two of this Section, as well as the
provisions of Paragraphs three and four, if it worsens the
situation of the commercial agent, shall be void.
Section 52. Calculation of
Commission
(1) A principal has an obligation to calculate the amount of
commission due a commercial agent each month. The calculation
period may be extended not longer than up to three months. The
calculation shall be performed without delay, but not later than
within a period of one month following the end of the calculation
period.
(2) A commercial agent receiving the calculation may request
an extract from the accounts regarding all transactions, for
which he or she has a right to commission. A commercial agent
also has a right to request information which is of significant
importance in respect of the right to receive a commission, the
coming into effect of its payment terms and the calculation of
the commission.
(3) If a commercial agent is refused an extract from the
accounts, or also if there have arisen justified doubts regarding
whether the calculation or the extract from the accounts is
correct or complete, the commercial agent may request that the
principal allow, pursuant to his or her choice, the commercial
agent or a sworn auditor selected by them to become acquainted
with the accounting and other documents insofar as is necessary
to determine the correctness or completeness of the calculation
or the extract from the accounts.
(4) Agreements, which revoke or restrict the rights of a
commercial agent referred to in this Section, shall be void.
Section 53. Del credere
(1) A commercial agent who undertakes to guarantee the
performance of the obligations of a third party (the other party
to a transaction) has the right to special remuneration (del
credere). An agreement that revokes these rights in the future
shall be void.
(2) The guarantee referred to in Paragraph one of this Section
may only pertain to specific transactions, or also to such
transactions with specific third parties which the commercial
agent has concluded or the concluding of which he or she
prepared. A guarantee contract shall be concluded in writing.
(3) The right of a commercial agent to del credere arises at
the moment of concluding the relevant transaction.
[14 February 2002; 22 April 2004]
Section 54. Reimbursement of
Costs
A commercial agent may request the reimbursement of costs,
which have occurred in the course of his or her commercial
activity, only if it is normally so accepted within the scope of
commercial rights.
Section 55. Limitation Period
The statute of limitations for claims arising from a
commercial agency contract shall be four years, counting from the
end of that calendar year in which they arose.
Section 56. Right to Retainer
(1) An agreement in which a commercial agent relinquishes in
the future a lawful right to retainer shall be void.
(2) After the expiration of a commercial agency contract, a
commercial agent may retain documents transferred for their use
only in relation to the commission (remuneration) payable to him
or her, or the reimbursement of costs associated with his or her
commercial activities.
Section 57. Notice of Cancellation
of a Commercial Agency Contract
(1) If a commercial agency contract is entered into for an
indefinite time, each of the parties to the contract may cancel
the commercial agency contract, observing the following terms for
notice of cancellation:
1) one month, if the commercial agency contract is cancelled
in its first year of activities;
2) two months, if the commercial agency contract is cancelled
in its second year of activities;
3) three months, if the commercial agency contract is
cancelled in its third year of activities;
4) four months, if the commercial agency contract is cancelled
in its fourth or subsequent years of activities.
(2) Agreements for shorter terms of notice of cancellation
shall be void. If longer terms of notice of cancellation are
contracted for, the term of notice of cancellation specified for
the principal may not be shorter than the term of notice of
cancellation specified for the commercial agent.
(3) If it has not been contracted for otherwise, the
commercial agency contract shall be noticed at the end of the
calendar month.
(4) A commercial agency contract, which is entered into for a
specified time period, and which both parties continue after the
expiration of the contracted for time period, shall be considered
to be have been entered into for an indefinite time period. In
determining the length of the term of notice of cancellation in
accordance with Paragraphs one and two of this Section, the total
length of the contractual relations shall be taken into
account.
[22 April 2004]
Section 58. Immediate Notice of
Cancellation
(1) Both parties may, at any time, cancel a commercial agency
contract, not observing the specified terms for notice of
cancellation if there is an important reason for it. An agreement
which revokes or restricts such notice of termination rights,
shall be void.
(2) If the immediate notice of termination of the commercial
agency contract has given rise to such actions for which the
other party is liable, then they shall have an obligation to
compensate the losses, which have occurred in relation to the
cancellation of the contract.
Section 59. Right to an Indemnity or
Compensation for Losses
(1) A commercial agent after the cancellation of a commercial
agency contract may request relevant indemnity from the
principal, if and insofar as:
1) the principal even after the cancellation of the commercial
agency contract gains substantial benefits from transaction
relations with new clients which were attracted by the commercial
agent;
2) the commercial agent in connection with the cancellation of
the commercial agency contract loses the right to a commission or
remuneration, which he or she would have had in respect of
transactions already concluded or to be concluded in the future
with clients attracted by him or her if the commercial agency
contract relations were continued;
3) the payment of indemnity, taking into account all the
circumstances, shall be expected from the principal on the basis
of fairness.
(2) Within the meaning of Paragraph one, Clauses 1 and 2 of
this Section, the attraction of new clients shall mean such
significant increase in volume in relation to transactions with
the present clients of a principal, which in economic terms is
equivalent to the attraction of new clients.
(3) The amount of indemnity may not exceed the average annual
commission or other average annual remuneration, which is
calculated for the last five of the years of activities of the
commercial agent. If the commercial agency contract relations
have existed for a shorter period of time, the average annual
commission or other average annual remuneration shall be
calculated for this shorter time period.
(31) A commercial agent has the right to
compensation for losses caused due to the termination of a
commercial agency contract, especially to compensation for
unearned expenses and investments which the commercial agent has
performed upon the proposal of a principal in fulfilling the
commercial agency contract.
(4) A commercial agent shall not have the right to claim
indemnity or compensation for losses if:
1) he or she has cancelled the commercial agency contract,
except for cases when the actions of the principal have given a
substantiated cause for a notice of termination, or also the
commercial agent is unable to continue his or her activities due
to old age or illness;
2) the principal has cancelled the commercial agency contract
for such a significant cause, the basis of which is an action of
the commercial agent who is at fault;
3) on the basis of an agreement between the principal and the
commercial agent a third party has replaced the commercial agent
in the commercial agency contract relations. Such an agreement
may not be concluded prior to the cancellation of the commercial
agency contract.
(5) The parties may not agree regarding waiver of the rights
specified in this Section to request the indemnity or
compensation for losses prior to the expiry of the commercial
agency contract. The claim for indemnity or compensation for
losses is subject to a limitation period of one year after the
expiry of the commercial agency contract.
[22 April 2004]
Section 60. Obligation of a
Commercial Agent to Keep Commercial Secrets
Even after the cancellation of the commercial agency contract
a commercial agent is prohibited to use or to disclose to third
parties commercial secrets which are entrusted to him or her or
of which he or she has become aware in relation to his or her
activities for the benefit of the principal.
Section 61. Restriction on
Competition
(1) An agreement by which the professional activities of a
commercial agent are restricted after the cancellation of the
commercial agency contract (restrictions on competition) shall be
entered into in writing.
(2) Restrictions on competition may relate only to the
geographical territory or the group of clients entrusted to the
commercial agent, and is restricted to the field of activities in
which he or she cared for concluding of transactions or preparing
them for concluding. The time period of the restrictions on
competition may not exceed two years after the commercial agency
contract was cancelled.
(3) It shall be the obligation of a principal to pay a
relevant remuneration to a commercial agent for the time of the
competition restrictions.
(4) Prior to the cancellation of a commercial agency contract,
a principal may at any time in writing waive the restrictions on
competition. In such case the obligation of a principal to pay
the remuneration referred to in Paragraph three of this Section
shall cease after six months from the date of notification of the
waiver. If the principal has cancelled the commercial agency
contract due to such a significant cause, the basis of which is
an action of the commercial agent who is at fault, the commercial
agent shall lose the right to receive remuneration.
(5) If a commercial agent has cancelled the commercial agency
contract due to such a significant cause, the basis of which is
an action of the principal who is at fault, the commercial agent
may in writing waive the restrictions on competition within one
month after the notice of cancellation of the commercial agency
contract.
(6) An agreement, which is in contradiction to the provisions
of this Section, if it worsens the situation of the commercial
agent, shall be void.
Section 62. Restrictions on
Authorisations of a Commercial Agent
(1) The provisions of Section 41 of this Law shall be applied
also to such commercial agents who have been authorised by a
principal who is not a merchant.
(2) A commercial agent, also if he or she is not authorised to
conclude transactions, shall be considered as authorised to
accept notices regarding any deficiencies of goods, regarding the
delivery of goods and other similar notices, with the assistance
of which third parties use or reserve their rights in relation to
the unsatisfactory performance of obligations, as well as using
the rights of securing evidence belonging to the principal.
(3) The restrictions of the rights referred to in Paragraph
one of this Section shall be binding on third parties only if
they knew or should have known of such restrictions.
Section 63. Insufficiency of
Authorisation
(1) If a commercial agent, who has been authorised only to
prepare transactions for concluding, concludes a transaction in
the name of the principal and the third party did not know that
the commercial agent was not authorised for this, it shall be
considered that the principal has approved the transaction if the
principal, after the commercial agent or the third party has
notified him or her regarding the concluding of the transaction
and its contents, has not without delay repudiated such
transaction.
(2) The provisions of Paragraph one of this Section shall also
apply in cases when a commercial agent who is authorised to
conclude transactions has concluded such a transaction in the
name of the principal as he or she was not authorised to
conclude.
Division
VII
BROKER
Section 64. Definition of a
Broker
(1) A broker is a merchant who engages in intermediation for
concluding transactions for the benefit of another person, not
being permanently associated with such person through contractual
relations.
(2) The provisions of this Chapter shall not apply to persons
who perform stock exchange transactions.
Section 65. Final Text of a
Transaction Document
(1) A broker has an obligation to submit to each of the
parties to the transaction without delay, after the concluding of
a transaction, a final text of a transaction document certified
by the broker to each of the parties to the transaction, in which
shall be indicated the parties to the transaction, the subject
matter of the transaction and the provisions of the transaction,
unless the parties to the transaction have released the broker
from this obligation.
(2) In transactions which are not to be immediately performed
the final text of a transaction document shall be submitted to
the parties to the transaction for signature, and each of the
parties shall submit to the other party a signed transaction
document.
(3) If one party to the transaction refuses to accept or sign
the final text of a transaction document, the broker has an
obligation to inform, without delay, the other party about
it.
Section 66. Reserved Tasks
(1) If one party to a transaction accepts the final text of a
transaction document, in respect of which a broker reserves the
right to later indicate the other party, they have binding
transaction relations with the other party to the transaction
indicated later by the broker, unless objections are raised
against the latter.
(2) The broker has an obligation to indicate to the other
party to the transaction within the time period specified, but if
such is not specified - within a time period appropriate for the
relevant circumstances.
(3) If the broker, within the time period referred to in
Paragraph two of this Section, does not indicate the other party
to the transaction or also if justified objections may be raised
against the other party to the transaction, then the first party
to the transaction has the right to request the performance of
the transaction from the broker. Such rights shall lapse if,
pursuant to a request from the broker, the first party to the
transaction fails to notify without delay, regarding whether it
shall request that the broker perform the transaction.
Section 67. Preservation of
Samples
(1) If goods have been sold through the intermediation of a
broker pursuant to a sample which was transferred to the broker,
he or she has an obligation to preserve such sample until the
goods are accepted without objections regarding their
characteristics, or also the transaction is performed in some
other way. Samples shall be labelled with a relevant label.
(2) A broker does not have an obligation to preserve samples,
if the course of dealing, taking into account the relevant type
of goods, or the parties to the transaction release him or her
from this obligation.
Section 68. Receipt of
Performance
A broker is not considered authorised to receive payments or
any other specified performance of a transaction concluded with
his or her intermediation.
Section 69. Liability of a
Broker
A broker shall be liable to each of the parties to the
transaction for losses which have been incurred due to his or her
fault.
Section 70. Remuneration of a
Broker
(1) The right to remuneration of a broker shall arise at the
moment of the concluding of a transaction.
(2) If the parties to a transaction have not agreed between
themselves which of them has the obligation to pay remuneration
to the broker, they shall pay the remuneration in equal
parts.
Section 71. Reimbursement of
Costs
A broker may claim reimbursement of costs incurred by him or
her only if such rights have been specifically contracted
for.
Section 72. Journal of
Transactions
(1) A broker has an obligation to maintain a journal of
transactions, and each day shall record in it all the
transactions concluded that day indicating the information
referred to in Section 65, Paragraph one of this Law. The broker
shall enter the records in chronological order and sign them
every day.
(2) Records in the journal of transactions shall be full,
precise, timely entered, understandable and systematically
arranged.
(3) If the records in the journal of transactions are
corrected, the original content of them shall be visible, and
every correction shall be specially indicated and certified with
a signature. A correction may not be made in such a way that when
and why it was done is not understandable.
(4) A journal of transactions may be maintained in electronic
form, if such a registration procedure complies with the
regulations of properly conducted maintaining of accounts and the
provisions of Paragraphs one, two and three of this Section. In
such case, the data image shall be in such a form as ensures that
a third party can read it and, if necessary, ensure its
extract.
(5) Transactions in the journal of transactions shall be
preserved in the archives of the broker for five years after the
end of that calendar year in which the last record was made.
These provisions shall be accordingly applied if the journal of
transactions is maintained in electronic form.
Section 73. Extracts from a Journal
of Transactions
(1) A broker has an obligation to, at any time upon request of
any of the parties to the transaction, issue extracts certified
with his or her signature from the journal of transactions, in
which shall be indicated all the information entered in the
journal of transactions regarding the transaction which was
concluded for the benefit of such persons through the
intermediation of the broker.
(2) A court may request the production of a journal of
transactions.
Part B
MERCHANTS
Division
VIII
SOLE PROPRIETORSHIP
Section 74. Sole Proprietorship
A sole proprietorship is a natural person who is registered as
a merchant with the Commercial Register.
Section 75. Registration of a Sole
Proprietorship
(1) A natural person who performs economic activities has a
duty to apply himself or herself for entering in the Commercial
Register as a sole proprietorship, if the annual turnover from
economic activities performed by him or her exceeds 284 600 euro,
or the economic activities performed by him or her conforms to
the activities of a commercial agent (Section 45 of this Law) or
activities of a broker (Section 64, Paragraph one of this Law) or
also the economic activities performed by him or her conform to
the following features:
1) the yearly turnover from these activities exceeds 28 500
euro;
2) for the performance of economic activities he or she
provides employment simultaneously to more than five
employees.
(2) A natural person may apply himself or herself for entering
in the Commercial Register as a merchant also in the absence of
circumstances referred to in Paragraph one of this Section.
(3) The basis for the registration of a sole proprietorship in
a Commercial Register is an application of a natural person to
the Commercial Register Office.
(4) The application shall specify the legal address of an
individual merchant, including the cadastral designation of the
immovable property object (building, residential property or
premises), and confirm that the individual merchant is reachable
and there is a legal basis for the location thereof in the
specified legal address.
[14 February 2002; 16 March 2006; 24 April 2008; 15 April
2010; 16 June 2011; 19 September 2013; 15 June 2017 ;6 July
2021]
Section 76. Right of a Sole
Proprietorship to Use a Firm Name and Liability
(1) A sole proprietorship may conclude transactions which are
associated with commercial activities by using his or her firm
name, as well as be a plaintiff and a defendant in a court.
(2) A sole proprietorship shall be liable for his or her
obligations with the whole of his or her property.
(3) Claims against a sole proprietorship which arise from the
performance of his or her commercial activities has a statute of
limitations period of three years after his or her deletion from
the Commercial Register if the claim is not subject to a shorter
statute of limitations period.
(4) If the term or the conditions of the performance of an
obligation by a sole proprietorship comes into effect after the
sole proprietorship has been deleted from the Commercial
Register, the statute of limitation period for the claims of
creditors shall commence with the time of the coming into effect
of the term for or the conditions of the performance of an
obligation.
Division
IX
GENERAL PARTNERSHIP
Chapter 1
General Provisions
Section 77. Definition of a General
Partnership
(1) A general partnership is a partnership, the purpose of
which is the performance of commercial activities through the use
of a joint firm name, and in which two or more persons (members)
have united, on the basis of a partnership agreement, without
limiting their liability against creditors of the general
partnership.
(2) The provisions of The Civil Law regarding partnership
contracts shall be applied to a general partnership (hereinafter
in this Division - the partnership) insofar as this Chapter does
not specify otherwise.
Section 78. Application for Entering
in the Commercial Register
(1) The foundation of the partnership shall be applied for
entering in the Commercial Register.
(2) The address entered in the Commercial Register shall be
regarded as the legal address of the partnership.
(21) The application shall specify the legal
address of the partnership, including the cadastral designation
of the immovable property object (building, residential property
or premises), and confirm that the partnership is reachable and
there is a legal basis for the location thereof in the specified
legal address.
(3) Changes in the firm name of the partnership shall be
notified to the Commercial Register for registration, as well as
new members joining the partnership.
(4) All members of the partnership have an obligation to sign
the applications referred to in Paragraphs one, two and three of
this Section.
(5) [15 April 2010]
[22 April 2004; 16 March 2006; 15 April 2010; 16 June 2011;
15 June 2017; 6 July 2021]
Chapter 2
Interrelationships between Members
Section 79. Partnership
Agreement
The interrelationships between the members of a partnership
shall be considered in accordance with the provisions of the
partnership agreement. If there are no such provisions, the
provisions of Sections 80 -88 of this Law shall be
applicable.
Section 80. Reimbursement of
Expenditures and Losses
(1) If a member of a partnership, when handling partnership
matters, covers necessary expenditures on his or her own account
or suffers losses which directly arise from the record-keeping of
the partnership or with the risk associated with it, the
partnership has an obligation to reimburse such expenditures and
losses.
(2) In reimbursing expenditures and losses, a partnership has
an obligation also to pay interest at the legal rate, which shall
be calculated from the time the expenditures and losses referred
to in Paragraph one of this Section were incurred.
Section 81. Obligation of the
Members of a Partnership to Pay Interest
(1) If a member of a partnership has failed to pay his or her
money contribution within a specified period of time, or has not,
in a specified period of time, transferred money collected to the
cashier's office of the partnership, or also has taken money from
the cashier's office of the partnership without authorisation, he
or she has the obligation to pay interest at the legal rate from
the day when the payment of the contribution had to be made or
when the money was to be transferred, or also when the money was
taken without authorisation.
(2) The payment of interest does not release the member of a
partnership from the obligation to reimburse losses.
Section 82. Prohibition of
Competition
(1) A member of a partnership may not, without the consent of
the rest of the members, conclude transactions in the sector of
commercial activities of the partnership or be a member with full
liability in another partnership which performs the same
commercial activities.
(2) Consent to participation in the other partnership referred
to in Paragraph one of this Section, shall be deemed to have been
given if, when the partnership was founded, the rest of the
members had known of such participation in another partnership
and they did not specifically object to it.
(3) If a member of the partnership violates the provisions in
Paragraph one of this Section, the partnership has the right to
request reimbursement of losses or the recognition of the
relevant transactions as concluded in the name of the
partnership, and the income gained or the right to claim such be
transferred to the partnership. The rest of the members of the
partnership shall decide in respect of bringing such actions.
(4) The statute of limitation period for claims referred to in
Paragraph three of this Law shall be three months from the day
when the rest of the members of the partnership discovered about
the violation against the prohibition of competition, but not
later than within five years from the day of the commission of
the violation.
Section 83. Management of a
Partnership
(1) All members of a partnership have a right and an
obligation to participate in the management of the
partnership.
(2) If, in accordance with the partnership agreement, the
management of the partnership is entrusted to one member of the
partnership or to several members of the partnership (managers),
the rest of the members shall not participate in the management
of the partnership.
(3) If the management of the partnership is entrusted to all
or several members, then each of them has the right to act
individually. Individual action shall not be allowed if another
manager objects to it.
(4) If it is specified in the partnership agreement that
members, to whom the management of the partnership has been
entrusted, may act only jointly, for each transaction the consent
of all the managers shall be necessary, unless a risk of delay
exists.
Section 84. Scope of Management
Powers
(1) The scope of partnership management powers shall include
any actions, which are associated with the usual commercial
activities performed by the partnership.
(2) The consent of all the members of a partnership shall be
necessary for actions, which exceed the usual commercial
activities performed by the partnership.
(3) A procuration may be issued only with the consent of all
the managers of a partnership, unless a risk of delay exists. The
procuration may be revoked by any manager of a partnership.
Section 85. Revocation of Management
Powers
(1) The partnership management powers of a member may be
revoked by a court ruling on the basis of an action by the rest
of the members, if there is good cause for it.
(2) A gross violation in the performance of obligations as
well as an inability to properly conduct the management of the
partnership shall be especially considered to be good cause.
Section 86. Control Rights of
Members
(1) All members of a partnership at any time may ascertain the
course of partnership matters, become acquainted with the
accounting and other documents of the partnership, as well as
prepare for themselves a report regarding the state of
partnership property, balance sheets and annual accounts.
(2) Agreements, which are in contradiction to Paragraph one of
this Section shall be void.
Section 87. Taking of a Decision
(1) To take a decision, the consent of all the members of the
partnership who have the right to take the relevant decision
shall be necessary.
(2) If a partnership agreement specifies that a decision shall
be taken by a majority of votes, then, in case of doubt, a
majority shall be determined according to the number of members
in the partnership.
[14 February 2002]
Section 88. Profits and Losses
(1) The profits and losses of a partnership shall be specified
at the end of every accounting year, based upon the annual
accounts of the partnership, which has been approved by the
members of the partnership.
(2) The profits and losses of a partnership shall be divided
between members in proportion to their contribution (capital
shares) in the partnership. The calculated profit for each member
of the partnership shall be added to his or her contribution
(capital shares), on the other hand, in the case of losses, his
or her contributions (capital shares) shall be reduced by the
amount of calculated loss.
(3) If a member of a partnership, up to the division of
profits, has not paid in his or her contribution, which he or she
should have paid in accordance with the partnership agreement,
the contribution together with interest shall be withheld from
the share of the profit, which would be due to the member.
(4) A member of a partnership may request the payment of his
or her share of the profit if it does not harm the partnership
and his or her contribution (capital share) have not reduced.
[14 February 2002]
Chapter 3
Relations of Members of a Partnership with Third Parties
Section 89. Existence of a
Partnership in Relation to Third Parties
(1) A partnership has an on-going relationship with third
parties from the time it is entered in the Commercial
Register.
(2) If a partnership has concluded its transactions already
prior to its being entered in the Commercial Register, the
partnership shall be deemed to have existed from the time of the
conclusion of the transaction.
(3) An agreement regarding the fact that a partnership shall
be deemed to exist at a later time shall be void as to third
parties.
Section 90. Legal Status of a
Partnership
(1) A partnership through the use of its firm name may acquire
rights and assume obligations, acquire property and other rights
pertaining to property, as well as be a plaintiff and defendant
in a court.
(2) Collection on the property of a partnership may be
commenced only after a court ruling in a matter in which the
defendant is the partnership.
Section 91. Representation of a
Partnership
(1) All members of a partnership have the right to represent
the partnership in relations with third parties, unless they have
been excluded from representation by the partnership
agreement.
(2) A partnership agreement may specify that all or several
members of the partnership are entitled to represent the
partnership only jointly (joint representation). These members
may authorise one member or several members from among themselves
to conclude specific transactions or specific types of
transactions. The intent of a third party shall be deemed to be a
relation expressed as to the partnership if it is expressed to at
least one of its members who is entitled to represent the
partnership.
(3) [22 April 2004]
(4) Application for entering in the Commercial Register of the
exclusion of a member of a partnership from representation, the
specification of joint representation in accordance with the
provisions of Paragraphs two and three of this Section, as well
as any other changes in the representation authorisations of the
members of the partnership shall be notified for entering in the
Commercial Register. It is the obligation of all members of the
partnership to sign these applications.
[22 April 2004]
Section 92. Scope of
Representations
(1) The representation by members of a partnership shall apply
to all transactions and other lawful activities, including the
alienation and encumbering of immovable property with rights
pertaining to property, as well as the issuing and revocation of
a procuration.
(2) Restrictions on the scope of representations shall not be
binding on third parties.
(3) The provisions of Paragraph two of this Section shall
specially apply to such restrictions on the scope of
representation as in conformity with representation shall be
conducted:
1) in relation to specific transactions or specific types of
transactions;
2) when certain circumstances exist;
3) for a specific period or in a specific geographical
territory.
(4) Joint representation, if it is registered with the
Commercial Register, shall not be deemed to be a restriction of
the scope of representation.
(5) Restrictions on the scope of representation in relation to
one of several branches of a partnership undertaking (branch
representation) shall be in effect in relation to third parties
only if these branches have a different firm name entered in the
Commercial Register.
Section 93. Revocation of
Representation
(1) The representation of a member of a partnership, on the
basis of a relevant action by the rest of the members, may be
revoked by a court ruling, if there is good cause for it.
(2) A gross violation in the performance of obligations as
well as an inability to properly perform representation of the
partnership shall be especially considered to be good cause.
Section 94. Personal Liability of
Members of a Partnership
(1) Members of a partnership shall be personally liable for
the obligations of the partnership with all of their property as
joint debtors.
(2) Agreements which are in contrary to the provisions of
Paragraph one of this Section shall be void as to third
parties.
Section 95. Objections of Members of
a Partnership
(1) If an action is brought against a member of a partnership
regarding fulfilment of the obligations of the partnership, he or
she has a right to raise objections not associated with himself
or herself only to such an extent as the partnership could raise
them.
(2) A member of a partnership may refuse to satisfy a claim by
a creditor, while:
1) the partnership has a right to contest the transaction
which is the basis of the obligation of the partnership;
2) the creditor may satisfy their claim by an offset in
respect of the fulfilment of the obligation of the
partnership.
(3) On the basis of a court ruling which has come into legal
effect in a matter in which the defendant is only the
partnership, collection may not be made against the property of a
member of the partnership.
Section 96. Liability of a New
Member of a Partnership
(1) A member of a partnership, who joins an already existing
partnership, shall be solidarily liable with rest of the members
of the partnership in accordance with the provisions of Sections
94 and 95 of this Law also regarding those obligations of the
partnership which were incurred before he or she joined the
partnership.
(2) Agreements which are in contrary to the provisions of
Paragraph one of this Section shall be void as to third
parties.
Chapter 4
Termination of a Partnership and the Withdrawal of a Member of a
Partnership
Section 97. Basis for the
Termination of a Partnership and the Withdrawal of a Member of a
Partnership
(1) A partnership shall be terminated:
1) when the time for which it was founded has ended;
2) by a decision of the members of the partnership;
3) with the commencement of bankruptcy procedures;
4) by a court ruling.
(2) If it is not specified otherwise in the partnership
agreement, the basis of a withdrawal of a member of a partnership
shall be:
1) the death of the member of the partnership;
2) the declaration of the member of the partnership as
insolvent;
3) a notice of termination from the member of the
partnership;
4) the expulsion of the member from the partnership;
5) other reasons referred to in the partnership agreement.
Section 98. Termination of a
Partnership by a Court Ruling
(1) A partnership founded for a specific time may be
terminated by a court ruling before the end of the specific time,
as well as a partnership founded for a specific time on the basis
of a relevant cause of action by a member of the partnership if
there is good cause therefor.
(2) Good cause shall exist especially when another member of
the partnership in bad faith or by allowing gross negligence
violates significant obligations imposed upon him or her by the
partnership agreement or such obligation have become impossible
to fulfil.
(3) Agreements which revoke or restrict rights to request the
termination of a partnership shall be void.
Section 99. Notice of Termination by
a Member of a Partnership
(1) If a partnership is founded for an indefinite time, a
member of the partnership has a right to withdraw from the
partnership, providing a notice of termination of the partnership
agreement not later than six months prior to the end of the
accounting year.
(2) In the final accounting between the partnership and the
member who is withdrawing the financial status of the partnership
at the end of the accounting year referred to in Paragraph one of
this Section shall be taken into account.
Section 100. Partnerships Founded
for an Indefinite Time
Within the meaning of Sections 98 and 99 of this Law,
partnerships which are founded for an indefinite time shall also
be partnerships which:
1) were founded until the death of a member of the
partnership;
2) upon the expiration of the time for which it was founded,
it tacitly is continued.
Section 101. Expulsion of a Member
of a Partnership Pursuant to a Request of His or Her Creditor
If a creditor of a member of a partnership, within six months,
is unable to satisfy his or her claim for collection against the
property of the member of a partnership, he or she has the right
to bring an action in court for the expulsion of the member of
the partnership from the partnership and the satisfaction of his
or her claim from the sum which would have been paid out to the
member of the partnership, if at the time of the bringing of an
action the partnership had been terminated.
Section 102. Expulsion of a Member
of a Partnership Pursuant to a Request of the Other Members of
the Partnership
(1) In cases, when the rights which, in accordance with the
provisions of Section 98 of this Law, allow an action to be
brought before court regarding the termination of the partnership
have arisen for the members of a partnership, they may instead
request the court to expel the member at fault from the
partnership.
(2) In the final accounting between the partnership and the
member who has been expelled, the financial status of the
partnership at the time of the bringing of the action referred to
in Paragraph one of this Section shall be taken into account.
Section 103. Transfer of an
Undertaking of a Partnership to Another Member of the
Partnership
If there are two members in a partnership, and one of them
withdraws from the partnership in accordance with the provisions
of Sections 99, 101 and 102 of this Law, the partnership shall be
terminated without liquidation and the undertaking of the
partnership shall be transferred to the other member of the
partnership, who has an obligation to apply himself or herself
for entering in the Commercial Register as a sole proprietorship,
accordingly applying for the deletion of the partnership from the
Commercial Register.
Section 104. Heirs Joining a
Partnership
(1) In case of the death of a member of a partnership, his or
her heir has the right to become a member of the partnership, if
this is specified in the partnership agreement or if all members
of the partnership agree to it.
(2) If it is specified in a partnership agreement that only
one of the heirs may become a member of the partnership, but the
way in which this person shall be selected is not specified, the
member of the partnership may appoint this person by a will.
(3) If with the consent of the rest of the members of a
partnership, the heir or the heirs are granted the status of a
limited partner, it shall be deemed that the partnership has been
transformed into a limited partnership, and shall be applied for
entering in the Commercial Register. An heir shall acquire the
right to such share of the profits as had the deceased member.
The partnership agreement may specify the reduction of the profit
share due to the heir, if the profit share due the deceased
member had been increased in accordance with the partnership
agreement, taking into account his or her activities or greater
responsibility.
(4) If an heir does not wish to become a member of the
partnership or cannot, or the other members do not agree to it,
the heir has a right to receive that which in conformity with his
or her part of the estate would have been due to the deceased
member of the partnership (estate-leaver) upon final accounting
if the partnership were liquidated at the time of the opening of
the succession.
(5) An heir may submit an application to a partnership
regarding joining the partnership within three months after the
time of the opening of the succession.
(6) In the case when an heir who has joined a partnership
withdraws or the partnership is terminated, or also in the case
when he or she has been granted the status of a limited partner
within the term specified in Paragraph five of this Section, the
heir shall be liable according to general procedures for the
obligations of the partnership which have been incurred prior to
his or her withdrawal, the termination of the partnership or the
granting of the status of a limited partner.
[14 February 2002]
Section 105. Application for the
Termination of a Partnership and Entering of the Withdrawal of a
Member of a Partnership in the Commercial Register
(1) The termination of a partnership shall be applied for
entering in the Commercial Register by indicating the reason for
the termination of the partnership in the application. It is the
obligation of all members of the partnership to sign such an
application.
(2) If the partnership is terminated with the commencement of
bankruptcy procedures, the termination of the partnership shall
be entered in the Commercial Register on the basis of a court
ruling.
(3) The provisions of Paragraph one of this Section shall be
accordingly applied for the application regarding entering in the
Commercial Register of the withdrawal of a member of a
partnership. The expulsion of a member of a partnership from the
partnership shall be entered in the Commercial Register on the
basis of a court ruling.
(4) If the basis for the termination of a partnership or the
withdrawal of a member of a partnership is the death of a member
of the partnership, it is the obligation of all the other members
of the partnership to sign the application for entering in the
Commercial Register of the termination of the partnership or the
withdrawal of a member of a partnership.
[15 June 2017]
Chapter 5
Liquidation of a Partnership
Section 106. Necessity for the
Liquidation of a Partnership
Liquidation of a partnership occurs after the termination of
the partnership, except in cases, when a different way of final
accounting is specified in the partnership agreement, or also the
partnership has been applied insolvent.
Section 107. Entering of a
Liquidator in the Commercial Register
(1) Liquidators shall be applied for entering in the
Commercial Register. It is the obligation of all members of the
partnership to sign such an application. Similarly, any changes
in the composition of liquidators or in the scope of their
representations shall be applied for entering in the Commercial
Register. A written consent of each liquidator to be a liquidator
shall be appended to the application. The liquidator shall
indicate the firm name and the registration number of the
company, in which he or she agrees to become a liquidator.
(2) In the case of the death of a member of a partnership, the
applications referred to in Paragraph one of this Section shall
be signed by the other members of the partnership.
(3) [15 April 2010]
(4) [2 May 2013]
[16 March 2006; 15 April 2010; 2 May 2013]
Section 108. Several Liquidators
(1) If a liquidation is conducted by several liquidators, they
have the right to perform the activities associated with the
liquidation only jointly, if it is not specified that the
liquidators may perform these activities separately. Such a
provision shall be applied for entering in the Commercial
Register.
(2) Liquidators may authorise one or more liquidators from
among themselves to conclude transactions or specific types of
transactions. The intent of a third party shall be deemed to be
expressed in relation to the partnership if it has been expressed
to at least one liquidator.
Section 109. Void Restrictions on
Powers of a Liquidator
Restrictions on the powers of a liquidator shall not be void
as to third parties.
Section 110. Instructions from
Members of a Partnership
A liquidator has an obligation to comply with such
instructions which, in relation to the management of the
partnership, have been adopted unanimously by the members of the
partnership.
Section 111. Signature of a
Liquidator
A liquidator shall sign by adding his or her signature and an
indication regarding the liquidation of the partnership to the
firm name of the partnership.
Section 112. Division of Partnership
Property
(1) After the settlement of debts, the liquidator shall divide
the remainder of the property of a partnership among the members
of the partnership in conformity with the amount of their
invested (capital) shares as specified in the closing balance
sheet of the partnership.
(2) Money, which is not necessary in the course of the
liquidation, shall be divided conditionally among the members of
the partnership. The funds necessary to cover its obligations,
the terms of fulfilment or conditions of which have not come into
effect, and to cover disputed obligations, as well as the
securing of such sums as are due to the members of the
partnership at the final accounting shall be retained.
(3) If a dispute should arise among the members of a
partnership regarding the division of the property of the
partnership, the liquidator has an obligation to postpone the
division until the dispute is resolved.
Section 113. Other Types of
Accounting
If the members of a partnership have agreed to another type of
final accounting, in relation to third parties, insofar as
undivided partnership property still exists, the relevant
provisions of this Chapter shall be applicable.
Section 114. Legal Relations of
Members of a Partnership
Up to the end of the liquidation, the provisions of Chapters 2
and 3 of this Division shall be applicable to the existing mutual
relations of the members of a partnership and the relations of
the partnership to third parties, insofar as it is not specified
otherwise in this Chapter or does not derive otherwise from the
purposes of the liquidation.
Section 115. Application regarding
the Deletion of the Partnership from the Commercial Register
(1) After the end of liquidation, it is the obligation of all
the liquidators of the partnership to declare the deletion of the
partnership from the Commercial Register.
(2) The documents of the company shall be given for
preservation in Latvia to one of the members of the company or to
a third party, co-ordinating the place of preservation thereof
with the National Archives of Latvia. The documents of archival
value of the company, shall be given for preservation to the
National Archives of Latvia in conformity with the provisions of
the Law on Archives.
(3) The members of the partnership and their heirs retain the
right to examine the accounting records and other documents of
the partnership, as well as to use them. The right of use of the
documents given to the National Archives of Latvia shall be
determined by the Law on Archives.
[14 February 2002; 29 November 2012]
Chapter 6
Statute of Limitations and Restrictions on Liability
Section 116. Claims against a Member
of a Partnership
(1) Claims arising from the obligations of a partnership
against a member of the partnership shall have a statute of
limitations period of three years after the termination of the
partnership, if the claim against the partnership is not subject
to a shorter statute of limitations period.
(2) The statute of limitations period shall commence from the
day that the termination of a partnership is entered in the
Commercial Register.
(3) If the terms of fulfilment or conditions of the
obligations of a partnership have come into effect after the
termination of a partnership has been entered in the Commercial
Register, the statute of limitations period of a claim of a
creditor shall commence at the time of the coming into effect of
the terms of fulfilment or conditions of the obligations.
(4) Interruption of the statute of limitations period in
relation to a terminated partnership shall be in effect also in
relation to those members of the partnership who participated in
it at the time of the termination.
Section 117. Liability of Such a
Member of a Partnership as Who Withdraws from the Partnership
If a member of a partnership withdraws from the partnership,
he or she shall be liable only for such obligations of the
partnership as were incurred prior to his or her joining and the
terms of fulfilment or conditions of which came into effect prior
to his or her withdrawal, or within five years after withdrawal,
counting from the day when the withdrawal of the member of the
partnership was entered in the Commercial Register.
Division
X
LIMITED PARTNERSHIP
[14 February 2002]
Section 118. Definition of a Limited
Partnership
(1) A limited partnership is a partnership (hereinafter in
this Division - the partnership), the purpose of which is the
performance of commercial activities through the use of a joint
firm name, and in which two or more persons (members) have agreed
on the basis of a partnership agreement, if the liability of at
least one of the members of the partnership (limited partner) in
relation to the creditors of the partnership is limited to the
amount of their contribution, but the liability of the other
personal liability members of the partnership (general partners)
is not limited.
(2) The provisions of this Law regarding general partnerships
shall be applied to a limited partnership, if it is not specified
otherwise in this Division.
[14 February 2002]
Section 119. Application for
Entering in the Commercial Register
[15 June 2017]
Section 120. Relationships between
Members of the Partnership
If the partnership agreement does not specify otherwise, the
provisions of Sections 121 -125 of this Law shall be applied to
the relationships between members of the partnership.
Section 121. Management of a
Partnership
(1) Limited partners do not have the right to participate in
the management of the partnership.
(2) Limited partners do not have the right to object to the
actions of a general partner, except in the case when these
actions exceed the scope of the usual commercial activities of
the partnership.
[14 February 2002]
Section 122. Prohibition of
Competition
The provisions of Section 82 of this Law shall not be applied
to limited partners, except in the case when pursuant to the
partnership agreement rights to manage the partnership have been
granted to them or also they have some other significant
influence on the management of the partnership.
[14 February 2002]
Section 123. Rights of Control
(1) Limited partners have the right to request at any time a
written report on the status of the property of the partnership
and to verify its accuracy and to examine the accounting and
other documents of the partnership.
(2) On the basis of a relevant action brought by a limited
partner, a court may request from the partnership a written
report on the status of the property of the partnership (copies
of the balance sheet and annual accounts), as well as the
accounting and other documents of the partnership, if there is an
important reason for such.
[14 February 2002]
Section 124. Profits and Losses
(1) In relation to limited partners, the provisions of Section
88, Paragraphs one, two and three of this Law shall be
applied.
(2) The profit share of the partnership, which is due to
limited partners, shall be included in their capital share until
it reaches the specified amount of contribution.
(3) Limited partners shall participate in losses only to the
amount of their capital shares and their still unpaid
contribution.
[14 February 2002]
Section 125. Payment of Profit
Share
(1) Limited partners may request the payment of the profit
share due them, except in the case when their capital share in
relation to the specified amount of contribution has been reduced
as a result of losses, or also would be reduced as a result of
the payment of the profit share due them.
(2) Limited partners do not have an obligation to return the
profit share paid to them in relation to further losses of the
partnership.
[14 February 2002]
Section 126. Representation of a
Partnership
Limited partners do not have the right to represent the
partnership in relation to third parties.
[14 February 2002]
Section 127. Liability of Limited
Partners
Limited partners shall be liable, to the creditors of the
partnership, in the amount of their contribution up to the making
of the contribution. Such liability shall be excluded as soon as
the contribution has been made.
[14 February 2002]
Section 128. Amount of Liability of
Limited Partners
(1) After entering of the partnership in the Commercial
Register, the amount of the liability of limited partners in
relation to the creditors of the partnership shall be determined
in conformity with the amount of their contribution entered in
the Commercial Register.
(2) An agreement of members of a partnership, according to
which a limited partner is released from the making of a
contribution, or the making of a contribution is postponed shall
be void as to creditors.
(3) Insofar as the contribution of a limited partner has been
repaid to them, such in relation to the creditors of a
partnership shall be deemed to have not been made. This provision
is in force also if a profit share has been paid to the limited
partner at a time when their contribution (capital share) in
relation to the amount of contribution made has been reduced as a
result of losses, or also insofar as their contribution (capital
share) in relation to the specified amount of contribution has
been reduced as a result of the payment of a profit share.
[14 February 2002]
Section 129. Liability of a Limited
Partner, When Joining a Partnership
(1) If a limited partner joins an existing partnership, they
shall be liable for those obligations of the partnership pursuant
to the provisions of Sections 127 and 128 of this Law which were
created before they joined.
(2) Agreements which are in contrary to the provisions of
Paragraph one of this Section shall be void as to third
parties.
[14 February 2002]
Section 130. Reduction of
Contributions
The reduction of the contribution of a limited partner, while
it has not been entered in the Commercial Register, shall be void
as to creditors. A reduction in the contribution of the limited
partner does not apply to creditors the claims of which have
arisen prior to the reduction of contribution being entered in
the Commercial Register.
[14 February 2002]
Section 131. Application for
Entering Change of Contribution in the Commercial Register
An increase or decrease of a contribution shall be applied for
entering in the Commercial Register. It is the obligation of all
members of the partnership to sign such an application.
Section 132. Liability of Limited
Partners Prior to the Entering of the Partnership in the
Commercial Register
(1) If a partnership has commenced its transactions prior to
its entering in the Commercial Register, each limited partner who
has consented to the commencement of transactions, shall be
liable as a general partner in respect of the obligations of the
partnership which were incurred prior to the entering of the
partnership in the Commercial Register, except in cases when the
creditor knew of their participation in the partnership as a
limited partner.
(2) If a limited partner joins an existing partnership, the
provisions of Paragraph one of this Section shall be
correspondingly applied to those obligations of the partnership
which were incurred in the period between their joining and their
entering in the Commercial Register as a limited partner.
[14 February 2002]
Section 133. Death of a Limited
Partner
In the case of the death of a limited partner, his or her
heirs continue to participate in the partnership if the
partnership agreement does not specify otherwise.
[14 February 2002]
Division
XI
CAPITAL COMPANY
Chapter 1
General Provisions
Section 134. Definition of a Capital
Company
(1) A capital company (hereinafter in this Division - the
company) is a commercial company, the equity capital of which
consists of the total sum of the nominal value of equity capital
shares or stock (hereinafter in this Division - the shares).
(2) A capital company is a limited liability company or a
stock company.
(3) A limited liability company is a private company, the
shares of which are not publicly tradable objects.
(4) A stock company is a public company, the shares (stock) of
which may be publicly tradable objects.
Section 135. Legal Status of the
Company
(1) The company is a legal person.
(2) The company shall be deemed to be founded and shall
acquire the status of a legal person from the date when it is
entered in the Commercial Register.
Section 136. Shareholders
(1) The shareholder is a person who has been entered in the
register of shareholders (stockholders), if it has not been
otherwise specified in the law.
(2) Founders shall acquire the status of a shareholder from
the date when the company is entered in the Commercial
Register.
(3) Within the scope of this Division, the concept of
"shareholder" shall mean the shareholder of a limited liability
company and a stockholder of a stock company.
[2 May 2013]
Section 137. Limitations of
Liability of the Company
(1) The company shall be liable for its obligations with the
whole of its property.
(2) The company shall not be liable for the obligations of its
shareholders.
(3) Shareholders shall not be liable for the obligations of
the company.
Section 138. The Company with
Supplemental Liability
(1) The company may be founded as the company with
supplemental liability, in which at least one of the shareholders
is liable personally with the whole of their property for the
obligations of the company.
(2) In the documents of incorporation of the company with
supplemental liability, shall be indicated all the persons who
are liable personally for the obligations of the company with the
whole of their property. These persons shall be entered in the
Commercial Register.
Section 139. Legal Address of the
Company
(1) The address entered in the Commercial Register shall be
the legal address of the company. The board shall submit an
application to the Commercial Register Office in case of change
of the legal address for making the relevant record.
(2) The board shall specify in the application the legal
address of the company, including the cadastral designation of
the immovable property object (building, residential property or
premises), and confirm that the company is reachable and there is
a legal basis for the location thereof in the specified legal
address.
[16 March 2006; 16 June 2011; 6 July 2021]
Chapter
1.1
Restrictions for Conclusion of a Transaction
with the Founder of the Company, Shareholder, Member of the Board
or Council and Related Person
[15 June 2017]
Section 139.1 Person
Related to the Founder of the Company, Shareholder, Member of the
Board or Council
[15 June 2017]
Section 139.2 Conclusion
of a Transaction with the Founder, Shareholder or Related
Person
[15 June 2017]
Section 139.3 Conclusion
of a Transaction with a Member of the Board or Council or a
Related Person
[15 June 2017]
Chapter 2
Founding of Companies
Section 140. Founders of the
Company
(1) The founder of the company shall be a natural person or a
legal person or a partnership, which has performed the activities
related to the founding of the company or on whose behalf these
activities of founding have been performed.
(2) The company may be founded by one or several founders.
[22 April 2004]
Section 141. Procedures for the
Founding of the Company
(1) In founding the company, the founders shall perform the
following activities:
1) prepare and sign the documents of incorporation of the
company in accordance with Section 142 of this Law;
2) set up the administrative institutions of the company and,
if it is intended in the company, appoint an auditor;
3) pay up the equity capital in the specified amount and
organise the deposit of the monetary payments of the founders
into a bank or confirm payment of the equity capital in the case
referred to in Section 147, Paragraph 2.1 of this
Law;
4) organise the valuation of material contributions (if
material contributions are made);
5) pay the State fee for entry in the Commercial Register;
6) submit an application to the Commercial Register
Office.
(2) The founders may request an examination of the founding of
the company in the cases and according to the procedures referred
to in Section 150 of this Law.
(3) If it not otherwise provided for in the memorandum of
association, the founders shall jointly perform the activities
that are associated with the founding of the company.
[16 March 2006; 15 April 2010; 6 July 2021]
Section 142. Documents of
Incorporation of the Company
(1) The memorandum of association and the articles of
association are the documents of incorporation of the
company.
(2) The conditions in the documents of incorporation may vary
from the provisions of the law only when the law explicitly
permits such variance.
Section 143. Memorandum of
Association
(1) In the memorandum of association shall be indicated:
1) information on the founders:
a) for a natural person - given name, surname, personal
identity number (if the person does not have a personal identity
number - the date of birth, the number and date of issue of a
personal identification document, the state and authority, which
issued the document) and residential address;
b) for legal persons - name, registration number, legal
address, the given name, surname, personal identity number (if
the person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority which issued the document),
position and residential address of the representative who signs
the memorandum of association in the name of the legal
persons;
2) the firm name of the company;
3) the amount of the equity capital of the company, the number
of shares and nominal value;
4) the amount of the equity capital each founder has
subscribed to and the amount of equity capital to be paid-up
before registration, the procedures and time periods for
payment;
5) the number of shares due to each founder according to the
part of the equity capital such founder has subscribed to;
6) the number of and the nominal value total of those shares
which, when founding the company, are to be paid-up with material
contributions, indicating each item of the material contribution,
and the given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) and
residential address of those persons who have assumed obligations
to make property contributions;
7) the allowed amount of founding costs and the procedures for
covering these costs;
8) any special obligations, rights or advantages which are
granted during the period of the founding of the company to a
person who has taken part in the founding of the company;
9) the given names, surnames, personal identity numbers (if
the person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) and
residential addresses of the members of the board of the
company;
10) the given names, surnames, personal identity numbers (if
the person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) and
residential addresses of members of the company council (if the
company has a council);
11) the given name, surname, personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) and
residential address of the auditor, if an auditor is intended in
the company;
12) other provisions which the founders consider to be
significant and which are not in contradiction to law.
(2) The memorandum of association shall be signed by all the
founders.
(3) The memorandum of association shall be in effect until the
obligations specified therein are appropriately implemented and
until the expiration of the time period of the authorisations of
the council and the board of the company, in accordance with the
provisions of Section 145, Paragraph two of this Law.
(4) [14 February 2002]
(5) If the company is established by one founder, in the place
of a memorandum of association a decision on founding of the
company shall be prepared and signed. The provisions of this Law
which regulate memoranda of association shall also apply to the
decision on founding of the company.
[14 February 2002; 22 April 2004; 16 March 2006; 15 April
2010]
Section 144. Articles of
Association
(1) In the articles of association of the company shall be
indicated:
1) the firm name of the company;
2) [22 April 2004];
3) the time period or goals of the activities of the company
(if the company is founded for a specific period of time or to
reach a specific goal);
4) the amount of the equity capital, the number of shares and
nominal value;
41) if the company has different categories of
shares - the categories of shares (indicating the rights which
arise from each category of shares) and the number and nominal
value of each category of shares;
5) [14 February 2002];
6) the right of the members of the board of the company to
individually or jointly represent the company;
61) numerical composition of the board (if any
intended);
7) the number of council members of the company (if the
company has provided for a council);
8) special provisions for the alienation of shares (if such
are provided for);
9) other provisions which the founders consider to be
significant and which are not in contradiction to law.
(2) In addition to information referred to in Paragraph one of
this Section, the following shall be indicated in the articles of
association of stock companies:
1) [17 December 2020];
2) whether the stock is registered stock or bearer stock and
if the articles of association provide that registered stock can
be converted into bearer stock or vice versa - the provisions for
such conversions;
3) whether the stock is in printed form or dematerialised and,
if the articles of association provide for the conversion of
printed form stock into dematerialised stock and vice versa - the
provisions for such conversions;
4) the main types of commercial activities of the company.
(3) When founding the company, the articles of association
shall be signed by all founders, indicating the date of
signing.
[14 February 2002; 22 April 2004; 24 April 2008; 15 June
2017; 17 December 2020]
Section 145. Establishment of
Administrative Institutions of the Company and the Appointment of
an Auditor
(1) The restrictions specified by law shall be applicable also
to the members of the board and council and the auditor, who is
appointed in the memorandum of association.
(2) The time period of authorisation of the board, the council
and the auditor which were formed until the registration of the
company shall expire accordingly when the new board and council
are formed and a new auditor appointed at the meeting of
shareholders.
[22 April 2004; 16 March 2006]
Section 146. Equity Capital
Subscribed to and Paid-up until the Submission of the Application
for Registration
(1) Until the submission of the application for registration
to the Commercial Register Office, the founders shall perform
their obligations as provided for in the memorandum of
association in relation to the equity capital as subscribed to
and payable until registration, if the memorandum of association
does not provide for an earlier time period for the payment of
the equity capital.
(2) The equity capital of a limited liability company shall be
signed fully and paid-up at least in amount of 50 per cent by the
submission of the application for registration. The remaining
part shall be paid within one year from the date when the company
was entered in the Commercial Register.
(21) The equity capital of the limited liability
company referred to in Section 185.1, Paragraph one of
this Law shall be signed and paid in full prior to submitting the
application for registration.
(3) Up to the submission of the application for registration,
all of the equity capital of a stock company specified in the
memorandum of association shall be subscribed. Up to the
submission of the application for registration the amount of
paid-up equity capital may not be less than the minimum equity
capital specified in Section 225 of this Law, or less than 25 per
cent of the subscribed equity capital.
(4) Up to the submission of the application for registration,
the equity capital of a stock company and the limited liability
company referred to in Section 185.1, Paragraph one of
this Law shall be paid-up only in money.
[14 February 2002; 22 April 2004; 15 April 2010]
Section 147. Procedures for the
Payment of Equity Capital when Founding the Company
(1) Within the time period specified by the memorandum of
association, the founders shall pay up all the amount of the
equity capital specified in the memorandum of association as
payable up to the submission of the application for
registration.
(2) The founders shall open a bank account in the name of the
company to be founded, organise the deposit of money into it and
receive a notice from the bank, addressed to the Commercial
Register Office, or another document issued by the bank, which
confirms the amount of equity capital paid-up to founding.
(21) Paragraph two of this Section need not be
applied if such limited liability company is being founded, which
conforms to the signs referred to in Section 185.1,
Paragraph one of this Law. In such case the founders shall
confirm the payment of the equity capital.
(3) [22 April 2004]
(4) The costs of founding the company shall be covered in
proportion to the amount of subscribed equity capital of each
founder, if the memorandum of association does not provide for
different procedures to cover the costs of founding the
company.
(5) [22 April 2004]
[14 February 2002; 22 April 2004; 15 April 2010]
Section 148. Valuation of Material
Contributions
If, when founding the company, the equity capital or part of
it is paid-up by a property contribution, the founders shall
organise its valuation in accordance with the provisions of
Section 154 of this Law.
Section 149. Application for
Entering in the Commercial Register
(1) The foundation of the partnership shall be applied for
entering in the Commercial Register.
(2) All the founders shall sign the application.
(3) The following shall be attached to an application:
1) the documents of incorporation;
2) a notice from a bank or another document regarding the
payment the equity capital (if the equity capital or part of it
is paid-up in money);
3) a document which certifies the value of each property
contribution (if property contributions are made);
4) a written consent of each council member to be a council
member (if the company has a council);
5) a written consent of each member of the board to be a
member of the board. If, until entering of the company in the
Commercial Register, the firm name thereof changes, a written
consent need not be resubmitted;
6) [15 April 2010];
7) the notice of the board regarding the legal address of the
company, including the cadastral designation of the immovable
property object (building, residential property or premises), and
confirmation that the company is reachable and there is a legal
basis for the location thereof in the specified legal
address;
8) [16 March 2006];
9) the first division of the register of shareholders.
[14 February 2002; 22 April 2004; 16 March 2006; 15 April
2010; 16 June 2011; 2 May 2013; 15 June 2017; 6 July
2021]
Section 150. Examination of the
Founding of the Company
(1) Shareholders who represent not less than twentieth of the
equity capital with voting rights have the right, within one year
from the date of registration of the company, to request that the
Commercial Register Office approves one or several experts
selected by shareholders to perform an examination of the
founding of the company.
(2) The experts shall complete a report, in three copies,
regarding the examination performed, of which one copy shall be
submitted to the Commercial Register Office, the second - to the
company, but the third - to the shareholders who requested the
examination.
(3) The shareholders who requested the examination shall cover
the costs of the examination.
(4) If it is determined in the examination of the founding of
the company that the founders have not performed their
obligations in good faith, the founders shall compensate the
costs of the examination of the founding of the company to the
shareholders referred to in Paragraph three of this Section.
Disputes regarding expenditures which are associated with the
examination of the founding of the company shall be decided by a
court.
[14 February 2002; 16 March 2006]
Chapter 3
Equity Capital of the Company
Section 151. Payment of Equity
Capital and Types of Payments
(1) Equity capital shall be paid-up with money or property
contributions.
(2) Equity capital shall be expressed in euros.
(3) The type of payment shall be determined by the memorandum
of association or in the regulations for the increase of the
equity capital.
(4) Contributed property shall become the property of the
company.
[19 September 2013 / Amendments to Paragraph two shall come
into force on 1 January 2014. See Paragraph 35 of Transitional
Provisions]
Section 152. Payment of Equity
Capital with Money
(1) If property contributions are not provided for in the
memorandum of association or in the regulations for the increase
of the equity capital, the equity capital shall be paid-up only
with money.
(2) The contribution specified in Paragraph one of this
Section may not be substituted with a property contribution.
Section 153. Property
Contributions
(1) Items of property contributions may be tangible or
intangible property valued in terms of money, which may be used
in the commercial activities of the company, except for property
which in accordance with law may not be the subject of
collection.
(2) Obligations to provide services or to perform work,
unanticipated profits or anticipated activities for the company,
or also expected salary, honoraria, dividends and similar
payments, which a founder or shareholder may receive from the
company, may not be property contributions.
(3) Property contributions may not be made in parts.
(4) A person, who makes a property contribution, shall inform
of any rights to the item of property contribution by third
parties. If the person fails to fulfil this requirement, they
shall pay up their shares in cash.
(5) If the value of an item of a property contribution has
decreased up to the submission of the application to the
Commercial Register Office, the person who has contributed it
shall cover this decrease in cash.
(6) [22 April 2004]
[22 April 2004]
Section 154. Procedures for the
Valuation of Property Contributions
(1) Property contributions shall be evaluated and an opinion
shall be provided by a person who is included in the list of
valuators of property contributions. A valuator may not be a
relative of the owner of the property to be valuated up to the
third degree of kinship, a spouse and brother-in-law or
sister-on-law up to the second degree of affinity, as well as a
person otherwise interested in the evaluation of the
property.
(11) The procedures by which the list of valuators
of property contributions shall be maintained, and the
requirements to be brought forward for valuators, shall be
determined by the Cabinet.
(2) If, when founding a limited liability company, the total
value of property contributions does not exceed 5700 euro, and
the property contributions together are less than one-half of the
equity capital of the company, the valuation of the property
contributions and the submission of an opinion may be made by the
founders. In this case, all founders shall sign the opinion.
(21) If the equity capital is paid by transferable
securities and money market instruments which have been included
in the regulated market registered (licensed) in a European Union
Member State or a Member State of the European Economic Area at
least two years prior to signing of memorandum of association or
taking of a decision on increase of the equity capital, an
opinion regarding valuation of property contribution may be
provided by those founders or shareholders, who have made the
relevant property contribution.
(3) The property contributions shall be valued according to
the usual value of the relevant property or rights.
(31) If the equity capital is valued in accordance
with the procedures specified in Paragraph 2.1 of this
Section, the value of transferable securities and money market
instruments shall be determined pursuant to the weighted average
price in the regulated market within six months before the
valuation.
(32) An opinion regarding the valuation of a
property contribution shall be in effect for six months from the
date of drawing up thereof. The opinion regarding the valuation
of a property contribution shall also be in effect on the day,
when a memorandum of association is signed or a decision on
increase of equity capital is taken.
(33) The board has a duty to ensure a re-valuation
of a property contribution in accordance with the provisions of
Paragraph one of this Section, if the conditions, which could
decrease the value of the property contribution until the time
when an application regarding entering of the company in the
Commercial Register or an application for increase of the equity
capital is submitted to the Commercial Register Office, have been
discovered.
(34) If the board fails to provide a re-valuation
of the property contribution in the case referred to in Paragraph
3.3 of this Section, shareholders who on the day of
taking of a decision on increase of the equity capital represent
at least one twelfth of the equity capital until the day when an
application for increase of the equity capital will be submitted
to the Commercial Register Office, have the right to request
re-valuation of the property contribution in accordance with the
provisions of Paragraph one of this Section.
(4) An opinion regarding the valuation of a property
contribution shall include a description and value of each
contribution item, indicate the ownership of the property, and
the method used for the valuation of each contribution, and
include an opinion regarding the conformity of the items of
property contribution with the types of commercial activities of
the company. If the valuation is made by the founders or
shareholders, the valuation methods for property contributions
need not be indicated. The information used as the basis for
determination of the value of property contribution shall be
indicated additionally in the opinion regarding the valuation of
the property contribution referred to in Paragraph 2.1
of this Section which is drawn up by founders or
shareholders.
(5) [6 July 2021]
(6) The persons, who performed the valuation, shall be
solidarily liable for any losses, which have been incurred with
an incorrect valuation of a property contribution.
[14 February 2002; 22 April 2004; 24 April 2008; 15 April
2010; 29 November 2012; 19 September 2013; 6 July 2021]
Section 155. Payment of Share
(1) It shall be the obligation of the founders or shareholders
to pay for the shares according to its nominal value.
(2) It may be provided for in the regulations for the increase
of the equity capital that, in the case of the equity capital of
the company being increased, the shareholders shall have to, in
addition to the nominal value, also pay a share premium. The
share premium shall be indicated in the regulations for the
increase of the equity capital, and it shall not be included in
the equity capital.
Section 156. Consequences of the
Failure to Pay up Shares within the Time Period
(1) If a person fails to pay up the full subscribed price of
the shares within the time period for full payment of shares as
specified in the memorandum of association or in the regulations
for the increase of equity capital, the board shall send him or
her a written notice by appropriate means of this. The notice
shall indicate the repeated time period for the full payment of
shares specified by the board, which may not be shorter than 15
days or longer than 30 days from the date when the notice is
sent.
(2) If the person fails to pay up part of the shares within
the time period specified by the board referred to in Paragraph
one of this Section, he or she shall forfeit the right to these
shares, which shall devolve to the company. When the new owner of
the shares has paid-up their sales price, the company shall
withhold one-fifth of the sales price and the remainder of the
amount shall be paid out to the relevant shareholder.
(3) It may be provided for in the regulations for the increase
of equity capital that, in the case of the non-payment of the
full price of the shares, a shareholder shall retain the number
of shares which is proportional to his or her paid-up amount, if
this is provided for in the articles of association.
(4) If the amount, which the company gains by selling the
shares according to the procedures referred to in Paragraph two
of this Section, is less than the amount which has already been
paid by the first owner of the shares, the company may request
the difference from the first owner of the shares.
(5) The memorandum of association, as well as the articles of
association may specify a penalty for failure to observe the time
period for the payment of shares. The amount withheld referred to
in Paragraph two of this Section, shall not be deemed to be a
penalty within the meaning of this Paragraph.
[14 February 2002]
Section 157. Rights of Several
Persons to a Share
(1) In the company, one share may be owned by several persons
jointly. These persons may use the rights arising from this share
only by appointing a joint representative.
(2) [2 May 2013]
(3) Persons who jointly own one share in the company shall be
solidarily liable for the obligations arising from this
share.
[14 February 2002; 2 May 2013]
Section 158. Mandatory Reserves
[14 February 2002]
Section 159. Use of the Mandatory
Reserves
[14 February 2002]
Section 160. Other Reserves
[14 February 2002]
Section 161. Dividends
(1) [14 February 2002]
(11) Dividends shall be determined by a decision of
shareholders.
(2) Dividends shall be paid to the shareholders in proportion
to the total of the nominal value of the shares owned by
them.
(3) Dividends shall be calculated and paid out for fully
paid-up shares.
(4) Dividends may not be determined, calculated and paid out
if it arises from the annual accounts or from the report of
economic activity referred to in Section 161.1 of this
Law that the own funds of the company are less than the total
amount of the equity capital.
(5) Dividends shall be paid out only in money, based upon a
decision on the division of profit.
(6) Dividends which have not been taken out within 10 years
shall devolve to the ownership of the company, except in cases
when, pursuant to law, the statute of limitations is deemed to be
discontinued or suspended. Interest shall not be paid on
dividends, which have not been taken out in time, if this is due
to the fault of the shareholder.
(7) A decision of the shareholders of the company that the
dividends, even temporarily, are left at the disposal of the
company is void.
(8) The company may not request a shareholder to return
dividends received, except in cases referred to in Section 162 of
this Law.
[14 February 2002; 22 April 2004; 2 May 2013; 16 January
2014 / Amendments to Paragraph four shall come into force on 1
July 2014. See Paragraph 50 of Transitional Provisions]
Section 161.1
Extraordinary Dividends
(1) It may be stipulated in the articles of association that
dividends may be determined and calculated also from the profit
acquired during the time period after the end of the previous
accounting year (within the meaning of this Section -
extraordinary dividends). In this case the provisions of this Law
regarding determination, calculation and paying out of dividends
shall be applied, insofar as it is not otherwise provided for in
this Section.
(2) A condition or time period shall be stipulated in the
articles of association upon setting of which a deadline is to be
determined by which the board shall convene a meeting of
shareholders in order to take a decision to determine
extraordinary dividends. The board shall not convene a meeting of
shareholders if in accordance with a report of economic activity,
which is drawn up regarding the period of paying out of
extraordinary dividends, the company has no profit. Other cases
may be laid down in the articles of association when the board
shall not convene a meeting of shareholders in order to take a
decision to determine extraordinary dividends.
(3) The company may pay out in extraordinary dividends not
more than 85 per cent of the profit gained within the time period
regarding which extraordinary dividends are determined.
(4) The board shall draw up and submit to the meeting of
shareholders a report of economic activity of the company
regarding the period for which extraordinary dividends are
determined, and a proposal for the part of the profit to be paid
out in extraordinary dividends. The meeting of shareholders
cannot determine a greater part of profit to be paid out in
extraordinary dividends than that determined in the proposal of
the board for the part of the profit to be paid out in
extraordinary dividends.
(5) The report of economic activity of the company shall be
drawn up in accordance with the requirements of the law on
drawing up of annual accounts. The report of economic activity of
the company and proposal of the board for the part of the profit
to be paid out in extraordinary dividends shall be sent to
shareholders together with a notice regarding convening of the
meeting of shareholders or announced in accordance with the
provisions of Section 273 of this Law.
(6) A meeting of shareholders shall take a decision to
determine extraordinary dividends:
1) not earlier than three months after the previous decision
of the meeting of shareholders to determine dividends has been
taken;
2) not later than three months after the end of the reporting
period regarding which the report of economic activity of the
company has been drawn up.
(7) In the meeting of shareholders the board shall attest
that:
1) the financial situation of the company has not
significantly deteriorated until the day of the meeting of
shareholders;
2) paying out of extraordinary dividends does not cause any
risk to the fulfilment of the obligations of the company during
the remaining months of the accounting year.
(8) According to the provisions of this Section dividends may
be determined and paid out, if on the day of taking a decision of
the meeting of shareholders:
1) the company has no tax debts;
2) the company has no tax payments deferred or divided in time
periods, and the tax advance payments to be made by the company
have not been reduced.
(9) A limited liability company, which conforms to the
provisions of Section 185.1, Paragraph one of this
Law, may not determine and pay out extraordinary dividends.
[16 January 2014 / Section shall come into force from 1
July 2014. See Paragraph 50 of Transitional Provisions]
Section 162. Return of Unjustified
Paid Out Amounts
(1) If a dividend has been paid out to a person to which or
part of which he or she had no right, and this person, at the
time of receipt of the dividend, knew or should have known that
the payment was unjustified, it is his or her obligation to
return the amount acquired without justification to the
company.
(2) Other unjustified paid out amounts, which a shareholder
has acquired in good faith, he or she has an obligation to repay
when it became known to him or her that the payments were not
justified. Unjustified paid out amounts, which a shareholder has
acquired in bad faith or by gross negligence, he or she has an
obligation to repay the company. In such case, the shareholder
shall compensate the losses, which were incurred by the company
as a result of this unjustified payment.
Chapter 4
Liability
Section 163. Liability for
Obligations which have Arisen before Entering the Company in the
Commercial Register
(1) A founder who has acted in the name of the company to be
founded before entering the company in the Commercial Register,
shall be liable for obligations which arise from such actions. In
the case of actions by several founders, these founders shall be
liable solidarily.
(2) Agreements which are in contrary to the provisions of
Paragraph one of this Section shall be void as to third
parties.
(3) The obligations referred to in Paragraph one of this
Section shall devolve to the company, if the board of the company
or shareholders who represent not less than one twentieth of the
equity capital do not object to the obligation devolving to the
company within three months after entering the company in the
Commercial Register. If such objections are raised, the issue of
the devolvement of the obligations shall be decided by a meeting
of shareholders. The devolvement of the obligations to the
company shall not restrict its rights to request the fulfilment
of the obligations by the founder.
(4) If the property of the company is not sufficient to
satisfy the claims of creditors of the company, the founders
shall be personally solidarily liable to the creditors for
obligations of the company, to the extent of that reduction in
the property of the company which has occurred because of the
obligations which were undertaken by the company to be founded.
The statute of limitations time period for such claims is three
years from the date when the company was entered in the
Commercial Register.
[14 February 2002]
Section 164. Acquisition of Property
from Founders and Shareholders
[16 June 2005]
Section 165. Liability for
Submitting False Information
(1) The founders of the company shall be solidarily liable for
such losses caused as a result of false information, which is
submitted up to the entering of the company in the Commercial
Register.
(2) The members of the board shall be solidarily liable for
such losses caused as a result of false information, which is
submitted after entering the company in the Commercial
Register.
(3) For the submission of false information to the Commercial
Register, persons shall be held to administrative liability or
criminal liability.
Section 166. Liability of
Founders
(1) Founders shall be solidarily liable for losses, incurred
by the company and third parties, which occurred during the
founding of the company as a result of the founders having acted
maliciously or negligently.
(2) Actions which are in contradiction to law or the
memorandum of association shall be in any case deemed to be
malicious.
(3) The founders shall be solidarily liable to the company for
any shortages which have been caused if a person is unable to
fulfil their share payment obligations, in cases when these
founders, in accepting the participation of such person, knew or
should have known of the inability of this person to fulfil such
obligations.
(4) The provisions referred to in this Section shall in no way
limit the liability which is specified in Section 163 of this
Law.
(5) For the claims referred to in this Section, the statute of
limitation period shall be five years from the date of the
entering of the company in the Commercial Register.
Section 167. Liability of Third
Parties for Founding Process Violations
(1) A person, who has facilitated the malicious or negligent
actions of the founders or has collaborated in them, shall be
solidarily liable together with the guilty founders if he or she
knew or should have known about the malicious or negligent
character of such actions.
(2) A person on whose account a founder has undertaken an
obligation to pay up the shares also shall be solidarily liable
with the founders. Such person may not rely on not having known
of such circumstances, of which the founder knew or should have
known.
(3) For the claims referred to in this Section, the statute of
limitation period shall be five years from the date of the
entering of the company in the Commercial Register.
Section 168. Liability for
Influencing Members of the Company Institution, Procurators and
Persons with a Commercial Power of Attorney
(1) A person who in bad faith persuades a member of the board
or the council, a procurator or a person with a commercial power
of attorney to act against the interests of the company or its
shareholders shall be liable for any losses incurred as a result
of such activities to the company.
(2) If, in the case referred to in Paragraph one of this
Section, there is a basis for members of the board or the council
to be held liable in accordance with Section 169 of this Law,
they shall be solidarily liable with the person who has used his
or her influence. If there is a basis for holding a procurator or
a person with a commercial power of attorney liable, they shall
be solidarily liable with the person who has used his or her
influence.
(3) Members of the board and the council, a procurator or a
person with a commercial power of attorney shall not be liable in
accordance with Paragraph two of this Section if they prove that
they were acting as honest and careful managers.
(4) The provisions referred to in Paragraphs one and two of
this Section shall not be applicable if the influence was
exerted:
1) by using one's voting rights at a meeting of
shareholders;
2) by lawfully using one's decisive influence in accordance
with the Groups of Companies Law.
[14 February 2002; 22 April 2004]
Section 169. Liability of Members of
the Board and of the Council
(1) Members of the board and of the council shall perform
their obligations as would an honest and careful manager.
(2) Members of the board and of the council shall be
solidarily liable for losses that they have caused to the
company.
(3) A member of the board and of the council shall not be
liable in accordance with Paragraph two of this Section if they
prove that they have acted as an honest and careful manager.
(4) A member of the board and of the council shall not be
liable for losses caused to the company if he or she has acted in
good faith within the framework of a lawful decision of the
meeting of shareholders. The fact that the council has approved
the actions of the board shall not release the members of the
board from liability to the company.
(5) Claims against a member of the board and of the council
shall expire within five years form the day of causing
losses.
[14 February 2002; 22 April 2004; 15 June 2017]
Section 169.1 Liability
of Members of the Board for the Violation of Provisions for
Keeping the Register of Shareholders
(1) A member of the board shall be liable for the losses
caused to a shareholder, alienor of the share or acquirer of the
share, which have arisen upon the member of the board violating
the provisions of Section 187 and 187.1 of this
Law.
(2) If in the case referred to in Section 187.1,
Paragraph three of this Law the board fails to make an entry in
the register of shareholders within the time period and in
accordance with the procedures laid down in the law, or fails to
submit a division of the register of new shareholders to the
Commercial Register Office, the relevant persons shall be held to
administrative liability.
[2 May 2013; 15 June 2017 / Amendments to the
Section regarding the administrative liability of the members of
the board for the violations of the provisions for keeping the
register of shareholders shall come into force on 6 December
2017. See Paragraph 56 of Transitional Provisions]
Section 170. Creditor Claims for the
Benefit of the Company
(1) A creditor of the company who cannot gain satisfaction for
their claim against the company may, within a year from the day
of coming into effect of the judgment, bring an action for the
benefit of the company against the persons referred to in
Paragraphs 166-169 of this Law who have caused losses for the
company, but have not compensated them.
(2) Creditors of the company have the right to bring an
action, and this right shall not be restricted also in the
following cases if:
1) the company has withdrawn its action against the person at
fault;
2) a settlement has been entered into;
3) the losses have been caused in the fulfilment of a decision
of the meeting of shareholders or the council.
(3) [15 June 2017]
[16 June 2011; 15 June 2017]
Section 171. Prohibition of
Competition in Relation to Members of the Board of the
Company
(1) A member of the board, without the consent of the council
or, if such has not been formed - without the consent of the
meeting of shareholders, may not:
1) be a general partner in a partnership, or a shareholder
with supplemental liability in a capital company which is engaged
in the field of commercial activities of the company;
2) conclude transactions in the field of commercial activities
of the company in his or her own name or in the name of a third
party;
3) be a member of the board of another company which is
engaged in the field of commercial activities of the company,
except in cases when the company and the other company are part
of the same group of companies.
(2) If a member of the board violates the provisions of
Paragraph one of this Section, the company is entitled to request
compensation for losses or the recognition of the relevant
transactions as such that are concluded in the name of the
company and the transfer the income acquired or the right of
claim to such to the company.
(3) The statute of limitation period for claims referred to in
Paragraph two of this Section shall be three months from the date
when the other members of the board or members of the council (if
such has been formed) had found out about the violation against
the prohibition of competition, but no more than five years from
the day of the committing of the violation.
[14 February 2002]
Section 172. Bringing an Action by
the Company
(1) The company may bring an action against the founders,
members of the board or council or the auditor, on the basis of a
decision taken by a meeting of shareholders, which has been taken
by a simple majority of votes of those present. The articles of
association may not specify a larger majority for the bringing of
an action.
(2) The company has the obligation to bring an action against
the persons referred to in Paragraph one of this Section, also if
that is requested by a minority of shareholders who jointly
represent not less than one twentieth of the equity capital. Such
request by a minority of shareholders shall be submitted to that
institution of the company which, in accordance with this Law,
has the right to bring an action, but if such institution does
not bring the action in a court within one month, the minority of
shareholders may bring an action in a court without the
intermediation of this institution within the time period
specified in Paragraph six of this Section.
(3) Actions by the company against the board shall be brought
and maintained by the council. If the company has no council,
then the meeting of shareholders, which took the decision on
bringing of an action against the members of the board, shall
elect one or several representatives of the company to bring and
maintain the action.
(4) Action by the company against the founders, the council
and the auditor shall be brought and maintained by the board if a
meeting of shareholders does not decide otherwise.
(5) If the bringing of an action is requested by a minority of
shareholders, a court shall allow the persons selected by them as
representatives of the company in the examination of the matter,
if there is an important reason for this. In any event the case
referred to in Paragraph two of this Section, when the relevant
institution, despite the request by the minority of shareholders,
does not bring an action to a court, shall be deemed to be an
important reason.
(6) An action shall be brought in a court within three months
from the date when a meeting of shareholders has taken the
decision on bringing of an action or when a request by the
minority of shareholders was received. An appropriately certified
excerpt of the minutes of the meeting shall be appended to the
statement of the cause of action. When bringing an action in
court, a minority of shareholders has an obligation to attach
evidence that these shareholders represent not less than one
twentieth of the equity capital of the company, as well as a
power of attorney from the relevant minority of shareholders.
(7) In respect of losses which the company incurs due to an
unjustified action, those shareholders who voted for the bringing
of the action or the minority of shareholders in the actions of
which has been determined maliciousness or gross carelessness
shall be solidarily liable.
(8) [14 February 2002]
[14 February 2002; 19 September 2013; 15 June 2017]
Section 173. Release from
Liability
(1) A meeting of shareholders may release members of the board
or council from liability or take a decision to enter into an
amicable settlement only for specific actions which were actually
performed by them and were revealed at the meeting of
shareholders, and as a result of which the company has incurred
losses.
(2) A decision of a meeting of shareholders regarding the
release from liability or to enter into an amicable settlement
with the members of the board or council shall not restrict the
right of a minority of shareholders to bring an action in
accordance with the provisions of Section 172, Paragraph two of
this Law.
(3) A decision of a meeting of shareholders to approve the
annual accounts shall not of itself release members of the board
and council from liability for their actions during the relevant
accounting period.
[14 February 2002]
Chapter 5
Annual Accounts of the Company and Distribution of Profits
Section 174. Company Accounts
(1) After the end of the accounting year, the board shall
compile and sign the annual accounts of the company and submit
them without delay to the auditor and the council (if such has
been formed).
(2) Following receipt of the auditor's opinion and the report
of the council, the board shall convene a meeting of
shareholders.
(3) If the company does not have a council, the board shall
convene a meeting of shareholders following the receipt of the
auditor's opinion.
(4) The annual accounts, the auditor's opinion and the report
of the council, together with a notice regarding convening of the
meeting of shareholders, shall be sent to all shareholders or
promulgated in accordance with Sections 214 and 273 of this
Law.
[22 April 2004]
Section 175. Council Report to the
Meeting of Shareholders
(1) If the company has a council, it shall examine the annual
accounts and proposals for use of profit submitted by the board
and shall complete a written report regarding it, which shall be
attached to the annual accounts.
(2) The report shall also include:
1) an evaluation of the activities and financial condition of
the company;
2) an evaluation of the work of the board;
3) a report regarding the work of the council in the
accounting period;
4) proposals for improvement of the activities of the company,
if it is necessary.
[22 April 2004]
Section 176. Auditor
(1) The annual accounts of the company shall be audited and an
opinion thereof shall be submitted by a sworn auditor elected in
the meeting of shareholders, if it is provided for by the law. In
other cases the annual accounts shall be audited and an opinion
thereon shall be submitted by an auditor, if it is provided for
in the articles of association or in the decision of the meeting
of shareholders.
(2) The provisions of this Law regarding an opinion as regards
the annual accounts shall be applicable, if in accordance with
Paragraph one of this Section an auditor is intended in the
company.
(3) [16 March 2006]
(4) An auditor may not be a shareholder, a member of the board
or council of the company itself, as well as a person who is
otherwise interested in the commercial activities of the company.
If the company is part of a group of companies, the auditor may
not be also a person who is a member of the board or council of a
dependent company or the dominant undertaking.
(5) The board, the council or shareholders, who jointly
represent not less than one tenth of the equity capital, may,
during a meeting of shareholders or not later than two months
after the meeting of shareholders, raise substantiated objections
to the elected auditor. Objections raised at a meeting of
shareholders shall be immediately decided by the meeting itself,
but if such objections are raised later, the disputed issue shall
be decided by a meeting of shareholders to be convened not later
than within two months after the objections have been received by
the board. If the objections are rejected, the shareholders who
have raised them, who jointly represent not less than one tenth
of the equity capital, have the right, at their own expense, to
invite another auditor. If such other auditor is invited, the
status and scope of the rights of the elected auditor shall not
change.
(6) The auditor invited in accordance with the procedures
specified in Paragraph five of this Section has the same rights
as the elected auditor, and the same provisions of the law shall
be applicable to him or her.
[14 February 2002; 16 March 2006]
Section 177. Obligations and Rights
of an Auditor
The obligations and rights of an auditor shall be determined
by the relevant laws.
Section 178. Liability of the
Auditor
(1) An auditor shall be liable to the company and third
parties regarding any losses caused due to his or her fault.
(2) An auditor shall not be liable for any losses caused as a
result of violations committed by the administrative institutions
of the company, except in cases when he or she knew or should
have known about such violations but failed to indicate them in
the opinion.
(3) If an auditor becomes liable in accordance with the
provisions of Paragraph two of this Section, he or she shall be
solidarily liable together with the members of the relevant
administrative institutions.
Section 179. Approval of the Annual
Accounts of the Company
(1) The annual accounts of the company shall be approved by a
meeting of shareholders which has been convened by the board
after receipt of the auditor's opinion, but if the company has a
council, also after the council's report has been received.
(2) The approval of the annual accounts of the company at a
meeting of shareholders shall be postponed if the opinion of the
auditor invited according to the procedures specified in Section
176, Paragraph five of this Law differs from the opinion of the
elected auditor.
(3) The approval of the annual accounts of the company at a
meeting of shareholders shall be postponed if, disputing the
correctness of separate positions in the annual accounts, the
postponement is requested by shareholders who represent at least
one tenth of the equity capital.
(4) If the approval of the annual accounts is postponed in the
case referred to in Paragraph three of this Section, then at the
next meeting of shareholders, the agenda of which shall include
the approval of the annual accounts of the same year, a minority
of shareholders may again request the postponement of the
approval of the annual accounts only if new circumstances have
been determined which are a barrier to the approval of the annual
accounts.
Section 180. Use of Company
Profit
(1) The board shall prepare and submit to a regular meeting of
shareholders its proposal for the use of profit.
(2) The proposal for the use of profit shall be sent to
shareholders together with a notice regarding convening of the
meeting of shareholders and annual accounts, or it shall
promulgated in accordance with the provisions of Section 273 of
this Law.
(3) The following shall be indicated in the proposal:
1) the amount of the profit of the accounting year of the
company;
2) [14 February 2002];
3) [14 February 2002];
4) the part of the profit to be paid out as dividends;
5) the use of profit for other purposes.
(4) The meeting of shareholders shall decide on the use of
profit after the annual accounts of the company have been
approved.
(5) [14 February 2002]
(6) If the company has undistributed profits, shareholders
may, in accordance with the procedures specified in this Law,
request that the board convenes a meeting of shareholders in
order to take a decision on the use of profit. The board shall
append a proposal for the use of the profit, in which the
information referred to in Paragraph three of this Section shall
be indicated, to the notice regarding convening of the
meeting.
[14 February 2002; 2 May 2013; 16 January 2014]
Section 181. Submission of the
Annual Accounts to the Commercial Register Office
[24 April 2008 / See Paragraph 10 of Transitional
Provisions]
Section 182. Payment of Cash Funds
of the Company to Shareholders
(1) The company may make payments to its shareholders only if
they are paid out as dividends or the equity capital is reduced,
or if the company is liquidated and its property is divided among
shareholders.
(2) Payments made to shareholders which are not referred to in
Paragraph one of this Section shall be deemed as unjustified. As
unjustified payments of company funds shall also be deemed cases
when a shareholder uses the property of the company
free-of-charge, when a shareholder is paid a higher remuneration
than is specified in a contract for services provided, or when
the company buys property from a shareholder at a higher than
usual price.
(3) Payments may not be made to shareholders if the net value
of the own funds of the company at the time of the closure of the
accounting year or, if a decision to determine extraordinary
dividends is taken - in the end of the relevant accounting year,
are less or as a result of this payment shall become less than
the total amount of the equity capital of the company. This
condition shall not be applied in cases when the company is
liquidated.
(4) The obligations referred to in Paragraphs one and three of
this Section shall not apply to payments to shareholders against
which obligations have arisen otherwise than from participation
in the company.
[14 February 2002; 22 April 2004; 16 January 2014 /
Amendments to Paragraph three shall come into force on 1 July
2014. See Paragraph 50 of Transitional Provisions]
Section 183. Internal Audit of the
Company
(1) A decision on the conduct of an internal audit of the
activities of the company on issues, which are related to the
activities of the company and the economic condition thereof,
conclusion of a transaction with a member of the board or
council, or a related person, shall be taken by shareholders or
the board, but if the company has a council, such a decision may
be also taken by the council.
(2) Shareholders, who represent not less than one twentieth of
the equity capital of the company, may request the conduct of an
internal audit if there is a substantiated reason for it.
(3) If the board does not agree to the conduct of an internal
audit, it shall convene a meeting of the shareholders without
delay, including in the agenda the issue of the conduct of an
internal audit. If the meeting of shareholders rejects the
request, the minority of shareholders who represent not less than
one twentieth of the equity capital may elect a sworn auditor for
conducting of the internal audit.
(4) The internal audit shall be conducted at the expense of
the company. If the auditor has been invited by the shareholders
themselves, such internal audit shall be conducted at the expense
of these shareholders.
(5) The auditor shall prepare an opinion regarding the results
of an internal audit, which shall be submitted to the institution
of the company which had taken the decision to conduct the
internal audit, or the minority of shareholders and the
board.
[14 February 2002; 16 March 2006; 15 April 2010; 14 June
2012]
Section 184. Company Controller
(1) Shareholders may elect one or more company controllers to
perform internal audits and control of the company.
(2) The company controller shall be elected for a period,
which does not exceed three years.
(3) The company controller shall examine the activities of the
company, as well as in cases, when it is requested by the
shareholders who represent not less than one tenth of the equity
capital of the company, conduct an examination of the annual
accounts of the company if he or she has been invited by a
minority of shareholders in accordance with the provisions of
Section 176, Paragraph five of this Law.
(4) The company controller has a right to request that the
board invite experts, if there is an important reason for it.
(5) The provisions of Sections 177 and 178 of this Law shall
apply to the company controller.
Chapter 6
Transactions with Related Persons
[15 June 2017]
Section 184.1 Persons
Related to the Company:
Within the framework of this Law the following is meant by the
concept "a person related to the company":
1) a shareholder of the company who has a direct decisive
influence in the company;
2) a member of the board or council;
3) a shareholder of the company who has a direct decisive
influence in the company, member of the board or council;
4) a person who is a relative of the person referred to in
Clause 1 or 2 of this Section up to the second degree of kinship,
the spouse or brother-in-law or sister-in-law up to the first
degree of affinity, or a person with whom he or she has a shared
household;
5) a legal person in which the person referred to in Clause 1,
2 or 4 of this Section has a decisive influence.
[15 June 2017]
Section 184.2 Entering
into Transaction with a Related Person
(1) Provisions of this Section apply to transactions which are
not entered into within the framework of commercial activity
usually carried out or fail to comply with market conditions.
Provisions of this Section shall not apply to the cases when a
transaction is entered into in accordance with a court
ruling.
(2) If the company concludes a transaction with a related
person, the council or, if none, the meeting of shareholders
shall give a consent to the conclusion of the transaction.
(3) Before entering into a transaction the board shall provide
the following information on the transaction to the council or
meeting of shareholders:
1) the information on the related person with whom the
transaction is entered into;
2) the justification for the necessity of the transaction;
3) the provisions of the transaction;
4) the assessment of the impact of the transaction on the
commercial activity of the company and financial standing of the
company;
5) the assessment of the impact of the transaction on the
shareholders of the company who are not regarded to be related
persons in respect of the abovementioned transaction.
(4) If in the case referred to in Paragraph two of this
Section there is a conflict of interests between the company and
any member of the council or a person related to him or her, the
interested member of the council shall not have the voting
rights, and it shall be entered in the minutes of the council
meeting.
(5) In the case referred to in Paragraph two of this Section
also such member of the council who is a relative of the
interested member of the council up to the second degree of
kinship, the spouse or brother-in-law or sister-in-law up to the
first degree of affinity, or a person with whom he or she has a
shared household shall not have the voting right.
(6) If no member of the council has the voting rights, a
consent for conclusion of the transaction shall be given by the
meeting of shareholders.
(7) A transaction between the company and related person is
not in effect if the procedures for entering into a transaction
laid down in this Section are not complied with and the related
person knew or should have known that a consent of the council or
meeting of shareholders is required and it has not been
provided.
(8) In addition to the provisions of this Section a
transaction of one shareholder in the company between the company
and its shareholder shall be entered into in writing.
[15 June 2017]
Division
XII
LIMITED LIABILITY COMPANY
Chapter 1
Equity Capital and Shares
Section 185. Amount of Equity
Capital
The minimum amount of equity capital of a limited liability
company (hereinafter in this Division - company) shall be 2800
euro.
[19 September 2013 / Amendments to the Section shall come
into force on 1 January 2014. See Paragraph 35 of Transitional
Provisions]
Section 185.1 Special
Provisions in Relation to the Amount of the Equity Capital
(1) The equity capital of the company may be less than the
minimum amount of the equity capital specified in Section 185 of
this Law, if the company conforms to all of the following
signs:
1) the founders of the company are natural persons, and there
are not more than five of them;
2) the shareholders of the company are natural persons, and
there are not more than five of them;
3) the board of the company consists of one or several
members, and they all are shareholders of the company;
4) each shareholder of the company is a shareholder of only
one such company, the equity capital of which is less than the
equity capital specified in Section 185 of this Law.
(2) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law, it shall,
each year, establish a mandatory reserve, making a deduction in
the amount of at least 25 per cent from the profit of the
accounting year.
(3) The mandatory reserve, on the basis of a decision of the
meeting of shareholders, may be used:
1) for increasing the equity capital;
2) for covering the losses of the accounting year, if they
have not been covered from the profit of the preceding accounting
year;
3) for covering the losses of the preceding accounting year,
if they have not been covered from the profit of the accounting
year.
(4) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law, the board
thereof shall indicate in a proposal for the use of the profit of
the company, in addition to the information referred to in
Section 180, Paragraph three of this Law, the amount of
deductions to be performed for the establishment of the mandatory
reserve.
(5) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law, the company
may disburse in dividends the part from the profit of the
accounting year, which remains after deductions in the mandatory
reserve.
(6) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law and the
company does not conform to any sign referred to in Paragraph
one, Clause 2, 3 or 4 of this Section, the company has an
obligation to increase the equity capital up to the amount
specified in Section 185 of this Law within three months from the
time when the non-conformity with the relevant sign occurs.
(7) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law and the
insolvency procedure of the company has been declared, the
shareholders thereof shall be solidarily liable for the
obligations of the company, the total amount of which does not
exceed the difference between the amount of the equity capital
specified in Section 185 of this Law and the amount of the equity
capital paid up by the founders.
[15 April 2010; 16 January 2014]
Section 186. Shares
(1) The nominal value of a share shall be determined by the
articles of association of the company. The nominal value of a
share may not be less than one cent. All shares of one category
shall have the same nominal value.
(2) Shares shall be indivisible.
(3) A share gives a shareholder rights to take part in the
administration of the company, in the distribution of profit and
in the division of property in the case of the liquidation of the
company, as well as to other rights provided for by law and the
articles of association.
(4) Each share shall be assigned an individual, fixed sequence
number. The sequence number shall be assigned in the order of
emission of shares.
[14 February 2002; 22 April 2004; 2 May 2013; 19 September
2013; 17 December 2020]
Section 186.1 Categories
of Shares
(1) Various rights arising from shares may be fixed in the
articles of association, including the right to receive
dividends, the right to receive liquidation quota and voting
rights at the meeting of shareholders.
(2) Shares in which an equal amount of rights are fixed are
shares of one category. If the company has several categories of
shares, each category of shares shall be given a different
designation.
(3) If the company has several categories of shares, the
decision on amendments to the articles of association which
provide for making amendments to, restriction or revocation of
the rights granted to the relevant category of shares shall be
taken if all of the holders of shares of the relevant category
agree thereto, unless the articles of association determine
otherwise.
(4) If in the case referred to in Paragraph three of this
Section the consent of all of the holders of shares of the
relevant category is not required, the holder of shares of the
relevant category who voted against the decision referred to in
Paragraph three of this Section or did not take part in the
voting is entitled to request the company to repurchase his or
her shares within two months from the moment of taking the
decision or the moment when he or she got to know or should have
gotten to know the decision taken. In such case the provisions of
Section 353, Paragraph four, five, six or seven of this Law shall
be applied respectively.
[17 December 2020]
Section 187. Register of
Shareholders
(1) For the registration of shares and disbursement thereof,
for the reflection of transition of shares, as well as for the
provision of the rights of shareholders the company shall keep a
register of shareholders.
(2) The register of shareholders shall be a file formed by
separate divisions. A division is a document that is formed by
the aggregate of entries made in one occasion, which reflects a
complete current composition of shareholders.
(3) A division of the register of shareholders shall be drawn
up in two copies. One copy of the division shall be appended to
the register of shareholders, and the other shall be submitted to
the Commercial Register Office in accordance with the procedures
specified in this Law.
(4) The register of shareholders shall be stored for 10 years
after exclusion of the company from the Commercial Register.
(5) The firm name, registration number, legal address and - in
the relevant cases - information regarding whether the company is
undergoing liquidation or insolvency proceedings, as well as the
title of the document "Division of the Register of Shareholders"
shall be indicated in each division of the register of
shareholders, and the following information shall be entered:
1) the sequence number and date of the division;
2) the sequence number of the entry, using continuous
numbering of entries from the first division of the register of
shareholders;
3) sequence numbers of shares;
31) category of shares if the company has several
categories of shares;
4) information regarding shareholders:
a) for a natural person - the given name, surname, personal
identity number (if the person does not have a personal identity
number - the date of birth, the number and date of issuance of a
personal identification document, the state and authority, which
issued the document) and address where the person may be
reached;
b) for a legal person - the name, registration number and
legal address;
5) the nominal value of a share;
6) the number of shares of each shareholder;
7) the deadline for paying-up of shares provided for in the
memorandum of association or the provisions for the increase of
the equity capital, if shares has not been paid-up;
8) the date when paying-up of shares to full extent has been
performed after founding of the company or increasing of the
equity capital or, if an increase in the equity capital has
occurred - also the time period for the payment of shares;
9) the joint representative of shareholders who has been
appointed in accordance with the procedures specified in Section
157 of this Law, indicating the information referred to in
Paragraph five, Clause 4, Sub-clause "a" or "b" of this Section
regarding him or her;
10) information regarding shares, which have been acquired by
the company itself, indicating the grounds for acquisition of
shares.
(6) Entries in the register of shareholders shall be performed
in conformity with the following provisions:
1) entries shall be made in chronological sequence;
2) deletion and exclusion of entries is not permitted;
3) each new division shall be added to the previous divisions
of the register of shareholders;
4) upon creating a new division, complete current composition
of shareholders shall be reflected;
5) payment conditions for completely paid-up shares need not
be repeated.
(7) Entries in the first division of the register of
shareholders shall be made in accordance with the information
indicated in the memorandum of association.
(8) Further entries in the register of shareholders shall be
in accordance with the information, which has been indicated in
the application for the acquisition of new shares or the notice
regarding transfer of shares, or other changes in the information
to be entered in the register of shareholders, as well as in the
cases referred to in Section 192 of this Law.
(9) Each division shall be certified by the chairperson of the
board or an authorised member of the board with his or her
signature. The signature of the chairperson of the board or a
member of the board shall be notarised. This provision need not
be applied if in the register of shareholders changes in the
information referred to in Paragraph five, Clause 4 of this
Section are made.
(10) If a shareholder alienates shares, the entry in the
division of the register of shareholders shall also be certified
by the alienor of shares and the acquirer of shares with his or
her signature. The signatures of the alienor and acquirer of
shares shall be notarised.
(11) Shareholders, members of the board and council, the
auditor, as well as competent public institutions are entitled to
become acquainted with the register of shareholders.
(12) A shareholder has the right to receive an extract from
the register of shareholders of the company certified by the
chairperson of the board or an authorised member of the board
regarding the shares in the company that are owned by him or her,
or a copy of the last division of the register.
(13) If the company has granted rights to a person to acquire
shares of the company, the board shall ensure the accounting of
such rights granted and the holders thereof, also indicating the
number of shares to be acquired and conditions for the
acquisition thereof. Shareholders, persons to whom the rights to
acquire shares of the company have been granted, members of the
board and of the council, competent public institutions and also
other persons who have a lawful interest are entitled to become
acquainted with such information.
[2 May 2013; 17 December 2020]
Section 187.1 Making of
an Entry in the Register of Shareholders and Submission of an
Application for Changes in the Register of Shareholders to the
Commercial Register Office
(1) A notice for making of an entry in the register of
shareholders to the company shall be submitted by the person
regarding whom the entry is to be made.
(2) In case of alienation of a share the acquirer and alienor
of the share shall submit a joint notice, by which transfer of
shares is certified, or the original or a notarised copy of such
transaction deed, by which shares are transferred.
(3) A notice to the company shall be submitted by the acquirer
of the share if the shares:
1) are acquired as an inheritance;
2) are acquired by a court judgment that has entered into
effect;
3) have been alienated by the bailiff upon performing duties
of his or her position;
4) have been alienated by the administrator of the insolvency
proceedings upon performing duties of his or her position;
5) are acquired by using a commercial pledge.
(31) The notice referred to in Paragraph three of
this Section shall be appended by a document on the basis of
which the shares are acquired, or a notarially certified copy
thereof.
(4) A shareholder shall submit a notice regarding changes in
the information to be entered in the register of shareholders
regarding him or her.
(5) The board shall make an entry in the register of
shareholders without the relevant notice if changes in the
information to be entered in the register of shareholders arise
only from the provisions for increase or reduction of the equity
capital or a valid reorganisation contract, or rights provided
for in the articles of association in respect of the category of
shares, or by transferring an unchanged entry from the previous
division.
(6) The board has an obligation to make an entry in the
register of shareholders or to raise justified objections against
making of an entry not later than on the following day after it
has received a notice regarding changes in the information to be
entered in the register of shareholders. The board shall refuse
making of an entry in the register of shareholders if alienation
or acquisition of shares has occurred in contradiction with the
law or founding documents, or transfer of shares is not clearly
and unequivocally apparent from the documents submitted to the
company.
(7) The board shall, within three working days after signing
of the new division, submit an application to the Commercial
Register Office for changes in the register of shareholders. The
lasts division of the register of shareholders shall be appended
to the application. In the application the board shall certify
that the provisions of this Law and the articles of association
of the company regarding alienation of shares have been complied
with.
(8) If in the case referred to in Paragraph three of this
Section the board fails to make an entry in the register of
shareholders within the time period and in accordance with the
procedures laid down in the law, or fails to submit a division of
the register of new shareholders to the Commercial Register
Office, the acquirer of the share may submit a notice to the
Commercial Register Office. The notice shall be appended by the
document referred to in Paragraph 3.1 of this Section
and it shall be certified in the notice that a notice has been
submitted to the board regarding alienation of the share by
specifying the date on which the notice has been submitted to the
board.
(9) When making an entry in the register of shareholders, an
official of the Commercial Register Office shall draw up a
division of the register of new shareholders in two copies. A
division shall be signed only by the official of the Commercial
Register Office. One copy of the division shall be appended to
the registration file of the company, but the other copy shall be
sent to the company.
[2 May 2013; 15 June 2017; 17 December 2020]
Section 188. Alienation of
Shares
(1) A shareholder has the right to freely alienate shares
owned by him or her, unless it has been otherwise specified in
the articles of association.
(2) A transaction of alienation, including transfer, of shares
shall be concluded in writing.
(3) A shareholder may make a gift of, exchange, or otherwise
alienate shares (except sell) only with the consent expressed in
the decision of shareholders, unless it has been otherwise
specified in the articles of association.
(4) Only fully paid-up shares may be alienated, unless it has
been otherwise specified in the articles of association. In case
of alienation of shares, which have not been paid up, the alienor
and acquirer shall be responsible for paying up of shares as
joint debtors.
[2 May 2013]
Section 188.1 Acquisition
of a Share in Good Faith
(1) The acquirer of shares shall be deemed as having good
faith if he or she has acquired shares from an alienor, which has
been entered as a shareholder of the company in the division of
the register of shareholders, existing in the Commercial Register
Office, appended to the registration file of the company.
(2) The acquirer of shares shall not be deemed as having good
faith if he or she is aware that shares do not belong to the
alienor, the alienor is not entitled to act with such shares, the
alienor has been imposed a prohibition of alienation of shares,
or the acquirer is not aware of such facts due to gross
negligence thereof.
[2 May 2013]
Section 189. Right of First Refusal
of Shareholders
(1) In case if shares of a shareholder are sold, other
shareholders have the right of first refusal.
(2) The seller of shares or the acquirer of shares shall
notify each shareholder and the board regarding the sale of
shares, appending to the notice the purchase agreement entered
into or an accordingly certified copy thereof. If the notice is
sent by the acquirer of shares, it shall also be sent
concurrently to the seller of shares. The notice shall be sent to
the shareholder to the address indicated in the register of
shareholders.
(3) The time period for the utilisation of the right of first
refusal shall be one month from the date when the notice
regarding the sale of shares was sent to all shareholders, unless
a shorter period of time has been specified in the articles of
association. The shareholder may refuse from the utilisation of
the right of first refusal in writing before the end of the
specified time period.
(4) The shareholder shall notify the person who has sent a
notice regarding the sale of shares and the board regarding the
utilisation of the right of first refusal, or refusal to utilise
them.
(5) During the time period specified in Paragraph three of
this Section the seller is prohibited to act with shares, to
amend the provisions of the purchase agreement or to carry out
other activities, which could deteriorate the condition of the
shareholder with the right of first refusal in case if he or she
utilised the right of first refusal.
(6) If the acquirer of shares is a shareholder of the company
and shareholders utilise their right of first refusal, shares
shall be divided between the acquirer of shares and shareholders
in proportion to the shares owned by them.
(7) If two or more shareholders utilise their rights of first
refusal and the number of the shares to be sold is sufficient,
the shares shall be divided between these shareholders in
proportion to the shares owned by them.
(8) If two or more shareholders utilise their rights of first
refusal, but the number of the shares to be sold is not
sufficient to divide them proportionally, a restricted auction
shall be organised among these shareholders in respect of the
remaining shares that cannot be proportionately divided. Other
procedures may be provided for in the articles of association, by
which the remaining shares shall be divided.
(9) The purchase price acquired in a restricted auction shall
be transferred to the seller of the share.
[2 May 2013; 15 June 2017]
Section 189.1 Right of
First Refusal of a Shareholder if Shares are Sold by a Sworn
Bailiff upon Performing Duties of his or her Position
(1) A sworn bailiff shall notify the board regarding the
announcement of the auction. The board shall, after receipt of
the abovementioned notice, immediately send it to the
shareholders.
(2) The sworn bailiff shall notify the board regarding the
rights of the shareholders to exercise the right of first
refusal. The following shall be indicated in the notice:
1) the acquirer of the share that is determined in accordance
with the procedures laid down in the Civil Procedure Law;
2) the purchase price that is determined in accordance with
the procedures laid down in the Civil Procedure Law;
3) payment term which may not be shorter than 10 days
(excluding holidays and public holidays) from the day of sending
the notice;
4) the deposit account of the sworn bailiff.
(3) The board shall, after receipt of the notice referred to
in Paragraph two of this Section, immediately notify the
shareholders regarding the rights to exercise the right of first
refusal by specifying in the notice the time period for
exercising the right of first refusal which may not be shorter
than five days and longer than the time period for payment laid
down in the notice referred to in Paragraph two of this
Section.
(4) The shareholder shall immediately notify the board
regarding exercising the right of first refusal or refusal to
exercise it. If the shareholder exercises the right of first
refusal, he or she shall pay the relevant purchase price to the
company account indicated by the board within time period of
exercising the right of first refusal indicated by the board.
(5) If the acquirer of the share indicated in the notice
referred to in Paragraph two of this Section is a shareholder of
the company and other shareholders exercise their right of first
refusal or if two or more shareholders exercise the right of
first refusal, the shares shall be divided in accordance with the
procedures laid down in Section 189 of this Law.
(6) If shareholders exercise the right of first refusal, the
board shall transfer the amounts paid by the shareholders in full
amount of the purchase price to the account indicated by the
sworn bailiff and notify the sworn bailiff regarding acquirers of
shares, the number of shares acquired by them and the purchase
price paid.
(7) If the purchase price is not paid within the time period
for payment indicated in the notice referred to in Paragraph two
of this Section, the board shall immediately after expiry of the
abovementioned time period make an entry in the register of
shareholders regarding the acquirer of the share indicated in the
notice referred to in Paragraph two of this Section.
(8) If a shareholder has not had an opportunity to exercise
the right of first refusal due to the fault of the board, the
shareholder has the right of first refusal. The right of first
refusal shall be exercised in accordance with the procedures laid
down in Section 189.3 of this Law.
[15 June 2017 / Section shall come into force from 1
January 2018. See Paragraph 58 of Transitional
Provisions]
Section 189.2 The Right
of First Refusal if Shares are Sold by an Administrator of
Insolvency Proceedings or They are Sold by Using the Right of
Commercial Pledge
The provisions of Section 189.1 of this Law shall
be applicable also for the sale of shares that is carried out by
an administrator of insolvency proceedings and for the sale of
shares by using the right of commercial pledge.
[15 June 2017 / Section shall come into force from 1
January 2018. See Paragraph 58 of Transitional
Provisions]
Section 189.3 The Right
of Pre-emption of a Shareholder
(1) If a shareholder has not had an opportunity to exercise
the right of first refusal due to the fault of the seller of
shares or the acquirer of shares, the shareholder has the right
of pre-emption.
(2) The provisions of The Civil Law regarding pre-emption
shall be applied to the right of pre-emption of the shareholder,
unless it has been otherwise specified in this Section.
(3) The right of pre-emption shall be utilised within one
month from the day when the shareholder with the right of
pre-emption found out regarding non-compliance with the right of
pre-emption, but not later than within a year from the day when a
division of the register of shareholders was appended to the
registration file of the company, in which the acquirer of shares
has been entered as the shareholder.
(4) The right of pre-emption may also be utilised in relation
to such shares, for which the acquirer has signed for in
proportion to the shares to be redeemed or which have been
acquired by him or her until the day when the right of
pre-emption was utilised.
(5) If several shareholders with the right of pre-emption
apply for the exercise of the right of pre-emption, shares shall
be divided in accordance with the procedures specified in Section
189 of this Law.
[2 May 2013; 15 June 2017 / Amendment regarding the change
of number of Section shall come into force on 1 January 2018. See
Paragraph 58 of Transitional Provisions]
Section 190. Pledging of Shares
Shares may be pledged on the basis of commercial pledge
regulations if the articles of association do not prohibit the
encumbering of shares.
Section 191. Inheritance of
Shares
(1) In the case of the death of a shareholder, the shares
belonging to him or her shall be inherited by his or her heirs if
the articles of association do not specify that the shares
devolve to the company. If the articles of association provide
for the shares of the deceased shareholder to devolve to the
company, then the company has the obligation to pay out to the
heirs, or in the case specified in Section 416 of The Civil Law -
to the State, compensation in conformity with the liquidation
quota which the deceased shareholder would have received at the
moment of the opening of the succession.
(2) Shares which have no heirs shall be deemed property
without heirs according to Section 416 of The Civil Law and
escheat to the State. The State shall have no voting rights, and,
when determining the norms for representation, these shares shall
not be taken into account.
(3) The State shall offer the shares acquired for sale. Such
shares shall be sold on behalf of the State by a sworn bailiff.
The procedures, by which a sworn bailiff shall take over and sell
shares that have been acquired by the State as property without
heirs, shall be determined by the Cabinet.
(4) Shareholders of the company shall have the right of first
refusal, if it has not been otherwise specified in the articles
of association. The right of first refusal of shareholders of the
company shall be utilised in accordance with the procedures
specified in this Law.
(5) If shares have not been sold in accordance with the
procedures specified in the law, they shall devolve to the
company.
[6 June 2013]
Section 192. Acquisition of Own
Shares
(1) The company may not acquire its own shares, except in
cases when it acquires these shares:
1) by way of inheritance;
2) in the case of the death of a shareholder if the articles
of association provide that the shares of the deceased
shareholder devolve to the company;
3) by a shareholder renouncing his or her shares in
writing;
4) by a shareholder losing rights to shares that have not been
paid-up;
5) if a shareholder is expelled from the company;
6) in the case when a shareholder - a legal person - is
terminated, if the shares of the legal person have not been
acquired by another person; and
7) reducing of the equity capital by withdrawing shares and
deleting them;
8) by acquiring another company or part thereof;
9) as a result of a transaction without compensation;
10) by recovering claims thereof from third parties;
11) as a result of re-organisation, disbursing a compensation
in the specified cases;
12) in a case if shares that escheat to the State as property
without heirs have not been sold in accordance with the
procedures specified in the law;
13) to grant them to employees and members of the board and of
the council.
(2) If the company acquires its own shares, it shall not have
any of the rights of a shareholder. When determining the norms
for representation, these shares shall not be taken into
account.
[14 February 2002; 22 April 2004; 6 June 2013; 17 December
2020]
Section 193. Alienation of Own
Shares
(1) The acquired own share shall be alienated by the company
within a year from the day when it was acquired, except for the
case referred to in Section 192, Paragraph one, Clause 13 of this
Law. In such case the provisions of Section 188, Paragraphs one,
two and three, as well as the provisions of Section 189,
Paragraph one of this Law shall be applicable accordingly.
(2) If the company fails to alienate its own shares within the
time period specified, these shares shall be cancelled,
correspondingly reducing the equity capital in accordance with
the provisions of this Law regarding the reduction of equity
capital.
[22 April 2004; 2 May 2013; 17 December 2020]
Section 194. Rights of Shareholders
to Information
Shareholders have the right to receive information from the
board regarding the activities of the company and to become
acquainted with all of the company's documents. These rights may
be restricted in each concrete case by a decision of a meeting of
shareholders if there is a justified suspicion that the
shareholder may use the information acquired in contradiction to
the aims of the company, and thus causing significant harm or
losses to the company or to one of the subjects included with the
company in a group of companies, or a third party.
[14 February 2002]
Section 195. Expulsion of a
Shareholder
(1) A court may expel a shareholder from the company on the
basis of an action by the company, if he or she has, without
justifiable reason, failed to perform his or her obligations or
have otherwise done substantial harm to the interests of the
company or have not performed obligations or have not ceased to
inflict harm after receiving a written warning from the
company.
(2) Actions may be brought regarding the expulsion of a
shareholder by shareholders who represent not less than one half
of the equity capital of the company, if a larger number of votes
is not specified in the articles of association.
(3) In the case of the expulsion of a shareholder, his or her
shares shall be transferred to the company, which has the
obligation to pay out to the expelled shareholder his or her
contribution, which shall be determined in conformity with the
provisions of Section 156, Paragraph two of this Law.
Chapter 2
Changes in Equity Capital
Section 196. Decision on Changes in
Equity Capital
(1) Equity capital may be increased or reduced only on the
basis of a decision of a meeting of shareholders in which the
regulations for the increase or reduction of equity capital have
been specified.
(2) A decision on changes in equity capital shall be regarded
as taken, if not less than two-thirds of votes of the
shareholders present vote for it, if a larger number of votes is
not specified in the articles of association.
(3) If a decision is taken on changes in equity capital,
relevant amendments shall be made at the same time to the
articles of association.
[22 April 2004]
Section 197. Increase of Equity
Capital
(1) The equity capital of the company may be increased:
1) by the existing shareholders or newly admitted shareholders
making contributions to the equity capital of the company and
receiving in return a relevant number of new shares;
2) after approval of the annual accounts or the report on
economic activities for a shorter time period than a year, by
increasing the nominal value of the existing shares or issuing
new shares, by including fully or partially in the equity capital
the positive difference between own capital and the amount, which
is formed by the equity capital and reserves, which in accordance
with the law may not be included for increase of the equity
capital. New shares shall be divided between shareholders in
proportion to the shares owned by them, except for the case when
the provisions for increasing the equity capital provide for the
transfer of the new shares to the company for the purpose of
granting them to the employees and members of the board and of
the council and all of the shareholders with voting rights have
voted for the approval of the provisions for increasing the
equity capital. The report on economic activities shall be drawn
up in accordance with the requirements of the law regarding
drawing up of the annual accounts;
3) by increasing the nominal value of the existing shares or
issuing new shares, by including the mandatory reserve fully or
partially in the equity capital. The new shares shall be divided
pro rata to shares owned by them.
(2) Equity capital may only be increased when all the existing
shares are fully paid-up.
(3) If the new shares are acquired for a price which exceeds
the nominal value of the shares in accordance with the provisions
of Section 155, Paragraph two of this Law, the difference between
the acquisition price and the nominal value of the acquired
shares shall not be included in the equity capital.
(4) Property contributions in the case of an increase of
equity capital are permitted only if they are provided for in the
regulations for the increase of equity capital.
(5) [14 February 2002]
(6) [15 June 2017]
(7) [15 June 2017]
(8) [15 June 2017]
(9) [15 June 2017]
[14 February 2002; 16 March 2006; 24 April 2008; 15 April
2010; 15 June 2017; 17 December 2020]
Section 198. Regulations for
Increasing Equity Capital
(1) A decision on the increase of equity capital shall approve
regulations for an increase of equity capital, which shall
indicate:
1) the means of increasing the equity capital;
2) the size of the increased equity capital and the amount by
which it shall be increased;
3) the number of new shares;
4) the nominal value of a share;
5) the price of a share, if a share premium has been
specified;
6) the method of payment for shares;
7) the time period during which third parties shall submit
applications for share acquisition, if the equity capital is
increased by accepting new shareholders;
8) the time period within which the new shares must be
paid-up, calculated with a view that the new shares shall be
fully paid-up not later than six months from the date when a
decision has been taken to increase the equity capital;
9) the time period from which the new shares shall give the
right to receive dividends;
10) other provisions which are not in contradiction to
law.
(2) If the equity capital of the company is less than the
equity capital specified in Section 185 of this Law, the new
shares shall be paid up in cash only.
[15 April 2010]
Section 199. Shareholder's Right of
First Refusal
(1) Within 15 days from the date when a decision has been
taken to increase equity capital, a shareholder has the right of
first refusal to the acquisition of new shares, in proportion to
the number of shares already owned by him or her.
(2) If a shareholder has not used the right of first refusal
to acquire new shares, then, within 15 days after the end of the
time period mentioned in Paragraph one of this Section, he or she
may be acquired by those shareholders, who have used the right of
first refusal referred to in Paragraph one of this Section
(3) If two or more other shareholders wish to acquire shares
to which a shareholder has not used the right of first refusal,
they shall be divided among these shareholders in proportion to
the number of shares owned by them. If the number of shares to be
sold is not sufficient to divide them proportionally, the board
shall organise a restricted auction among these shareholders for
the remaining shares that cannot be proportionately divided.
(31) The purchase price acquired in a restricted
auction shall be transferred to the account of the company.
(4) If the shareholders have not used the rights provided for
in Paragraphs one or two of this Section, then third parties may
acquire the new shares.
[14 February 2002; 15 June 2017]
Section 200. Application to Acquire
Shares
(1) If a shareholder wishes to acquire new shares, they shall
submit an application for the acquisition of shares to the
company within the time period specified in Paragraph one or two
of Section 199 of this Law.
(2) Third parties shall submit an application within the time
period specified in the decision on increase of equity
capital.
(3) An application shall be binding on the person who has
submitted it.
(4) The following shall be indicated in an application:
1) the firm name of the company;
2) an offer to acquire shares in the company;
3) the number of shares which a person wishes to acquire;
4) the method by which the acquired shares will be paid-up in
conformity with the regulations for the increase of equity
capital;
5) the item of the property contribution (if a property
contribution is made);
6) the time period within which the contribution shall be
made, not exceeding the time period referred to in the
regulations for the increase of equity capital.
Section 201. Procedures for the
Payment of Equity Capital
In the case of an increase of equity capital, the provisions
of Sections 151-154 of this Law shall be applied if it is not
specified otherwise in this Chapter.
Section 202. Application for the
Increase of Equity Capital to the Commercial Register Office
(1) After entering of new information in the register of
shareholders, the board shall submit an application for the
increase of the equity capital to the Commercial Register
Office.
(2) The following shall be attached to an application:
1) an extract of the minutes of the meeting of
shareholders;
2) the regulations for the increase to the equity capital;
3) the text of amendments to the articles of association and
the full text of the new version of the articles of
association;
4) applications of shareholders or third parties to acquire
shares;
41) the last division of the register of
shareholders;
5) if the equity capital is being increased by money
contributions already made - a bank statement or another document
regarding paid-up equity capital, except cases when the equity
capital is increased in accordance with the procedures specified
in Section 197, Paragraph one, Clauses 2 and 3 of this Law;
6) in the case of property contributions - documents which
certify the value of the contributions. If the property
contribution has been transferred to the company - documents
attesting their transfer to the company;
7) a certification that no significant circumstances have
arisen, which affect the value of the property contribution
referred to in Section 154, Paragraph 2.1 of this
Law.
8) [15 June 2017].
(3) Equity capital shall be deemed to be increased from the
day when the new amount of equity capital is entered in the
Commercial Register.
[22 April 2004; 24 April 2008; 18 December 2008; 15 April
2010; 2 May 2013; 15 June 2017]
Section 203. Notice of the Increase
of Equity Capital
Not later than within five days after the end of the time
period for paying up the shares, the board shall submit a copy of
the corrected register of shareholders to the Commercial Register
Office, in which is reflected the situation as to share payments
after the increase of the equity capital.
Section 204. Means of Reducing
Equity Capital
Equity capital may be reduced by cancelling shares or reducing
the nominal value of the shares.
Section 205. Regulations for the
Reduction of Equity Capital
(1) The regulations for the reduction of equity capital shall
indicate:
1) the reasons for reducing equity capital;
2) the means and procedures for the reduction of the equity
capital;
3) the size of the reduced equity capital and the amount by
which it shall be reduced;
4) the nominal value of a share.
(2) A notice of the reduction in the equity capital shall be
sent without delay to the Commercial Register Office. The notice
shall have attached an extract of the minutes of the meeting of
shareholders and the regulations for the decrease of equity
capital.
[18 December 2008]
Section 206. Amount of Reduction of
Equity Capital
Equity capital may be reduced up to the amount specified in
Section 185 of this Law.
Section 207. Protection of
Creditors
(1) Within five days after a decision has been taken to reduce
equity capital, the board shall send a written notice regarding
the reduction of the equity capital and the size of the new
equity capital of the company to all known creditors of the
company, who have a right to claim against the company prior to
when the decision to reduce equity capital was taken.
(2) The Commercial Register Office shall publish on its
website a notice regarding the decision taken by the company on
the reduction of equity capital. The notice shall include the
time period during which creditors may apply who wish to receive
security, and the time period for creditor claim applications,
which may not be less than one month from the date when the
notice was published.
(3) The company shall provide security for creditors who have
applied within the time periods specified (except the amount of
secured claims of secured creditors).
[29 November 2012; 15 June 2017; 6 July 2021]
Section 208. Application to the
Commercial Register Office for the Reduction of Equity
Capital
(1) After the time period for claim applications from
creditors has ended and claims are secured, the board shall
submit an application for the reduction of the equity capital to
the Commercial Register Office. The application shall have
attached the text of amendments to the articles of association
and the full text of the new version of the articles of
association.
(2) In the application, the board shall certify the provision
of security to creditors or the satisfaction of their claims.
(3) The application shall be submitted to the Commercial
Register Office not later than after six months from the day when
the decision on reduction of equity capital was taken.
(4) Equity capital shall be deemed to have been reduced from
the day when the new amount of equity capital has been entered in
the Commercial Register.
Chapter 3
Administration of the Company
Section 209. Institutions of the
Company
The administrative institutions of the company are the meeting
of shareholders and the board, as well as the council (if such
has been formed).
Section 210. Competence of the
Meeting of Shareholders
(1) The following are within the competence only of the
meeting of shareholders:
1) making amendments to the articles of association;
2) increase or reduction of the equity capital;
3) election or recall of members of the council;
4) election or recall of members of the board;
5) approval of the annual accounts and the distribution of
profits;
6) election and recall of the auditor, company controller and
liquidator;
7) the taking of decisions on the bringing of actions against
members of the board, council members, founders or shareholders,
and regarding the appointment of a representative of the company
for conducting the matter in court;
8) [14 February 2002];
9) the taking of decisions on termination, continuation,
suspension, renewal or reorganisation of the activities of the
company, as well as regarding entering into, amending or
termination of a group of companies agreement;
10) other issues which in accordance with the law or the
articles of association are transferred to the competence of the
shareholders.
(2) The meeting of shareholders also has the right to take
decisions on such issues as are within the competence of the
board or the council. In such case, the shareholders who voted
for this decision shall be solidarily liable for any losses
incurred as a result of such decisions.
[14 February 2002; 22 April 2004; 29 November 2012 /
Amendments to Paragraph one, Clause 9 shall come into force on 1
January 2014. See Paragraph 26 of the Transitional
Provisions]
Section 211. Voting Rights of
Shareholders
(1) Only a fully paid-up share shall give a shareholder voting
rights. Each fully paid-up share shall give a shareholder only
one vote, if the articles of association do not specify
otherwise.
(2) A shareholder shall not have the right to take part in
voting if a decision is to be taken:
1) regarding releasing him or her from obligations or
liability;
2) regarding the bringing of actions against him or her;
3) regarding conclusion of a transaction with him or her, or
the related person;
4) in the case referred to in Section 210, Paragraph two of
this Law and there is a conflict of interests between the
shareholder and the company;
5) in the case referred to in Section 210, Paragraph two of
this Law and the shareholder has been deprived of the right to
perform commercial activities of all types or specific type. If
the shareholder has been deprived of the right to perform
commercial activities of specific type, he or she shall not have
the right to participate in voting on issues related to the
relevant type of commercial activities.
(3) In determining the norm of representation, the votes of
the shareholder referred to in Paragraph two of this Section
shall not be taken into account.
[14 February 2002; 14 June 2012; 29 November 2012]
Section 212. Meetings of
Shareholders
(1) A meeting of shareholders is entitled to take decisions if
shareholders, who jointly represent not less than one half of the
equity capital with voting rights participate in it, if the
articles of association do not provide for a larger norm for
representation.
(2) If a meeting of shareholders convened according to the
procedures specified by law is not entitled to take decisions due
to the lack of a quorum, a reconvened meeting with the same
agenda has the right to take decisions irrespective of the number
of votes represented in it.
(3) A shareholder may participate at a meeting in person or
through a representative who has a written authorisation. An
authorisation is not necessary for a person who represents the
shareholder on the basis of law. Such persons shall present a
document which certifies the right of representation.
(4) A meeting of shareholders shall be chaired by the
chairperson of the board if the shareholders do not elect another
chairperson of the meeting.
[14 February 2002]
Section 213. Convening a Meeting of
Shareholders
(1) A regular meeting of shareholders shall be convened by the
board at least once a year in order to approve the annual
accounts, to take a decision on distribution of profit, and to
elect an auditor.
(2) If the board has not convened a regular meeting of
shareholders in the specified time period, it may be convened
by:
1) the council (if such has been formed);
2) the Commercial Register Office for fee.
(3) The board has an obligation to convene a meeting of
shareholders in the cases specified in the articles of
association, as well as if:
1) the conditions referred to in Section 219 of this Law have
occurred;
2) the council has requested it; or
3) it is requested by shareholders who represent not less than
10 per cent of the equity capital of the company.
(4) If the board does not convene a meeting of shareholders
within one month after the day of receiving a request, the
council shall convene the meeting upon request of any
shareholder. If the council does not convene a meeting of
shareholders within one month after the day of receiving a
request, it shall be convened by the Commercial Register Office
for fee. The fee and expenses for convening a meeting shall be
paid to the Commercial Register Office by the requester. The
company shall cover the amount paid to the Commercial Register
Office, if there was a good cause for convening the meeting.
(41) A meeting of shareholders shall be convened in
the administrative territory, in which the legal address of the
society has been registered, if not specified otherwise in the
articles of association.
(5) If the meeting of shareholders has not been held due to
the reason referred to in Section 212, Paragraph two of this Law,
then a repeated meeting of shareholders shall be convened within
one month.
(6) Minutes shall be kept of the proceedings of the meeting.
The provisions of Section 285 of this Law shall apply to
them.
[14 February 2002; 22 April 2004; 16 June 2005; 16 June
2011]
Section 214. Notice Regarding
Convening of the Meeting of Shareholders
(1) The board shall send a notice regarding convening of the
meeting to all shareholders not later than two weeks before the
meeting. The notices shall be sent to the addresses indicated in
the company register of shareholders. The articles of association
may provide for different notice procedures.
(2) The following shall be indicated in the notice:
1) the firm name and legal address of the company;
2) the place and time of the meeting;
3) the type of meeting (regular or extraordinary meeting);
4) the institution which is convening the meeting;
41) the procedures according to which and the time
periods during which the shareholders may exercise the right to
vote prior to the meeting of shareholders or to participate or
vote in the meeting of shareholders through electronic means;
5) the provisions of the articles of association regarding
participation of representatives of shareholders in the meeting
(if the articles of association provide for such provisions);
6) the agenda;
7) the time and place, where and when the shareholders may
become acquainted with draft decisions on issues included in the
agenda of the meeting, as well as with other issues to be
reviewed in the meeting.
(3) If the agenda of the meeting of shareholders includes the
issue regarding amending of the articles of association, a draft
decision on amendments to the articles of association shall be
appended to the notice to be sent to shareholders, particularly
indicating:
1) the provisions of the articles of association to be
amended, supplemented or cancelled;
2) the new wording of provisions of the articles of
association, if the articles of association are supplemented with
new provisions.
(4) The shareholders have the right to receive a draft
decision free of charge at least 14 days prior to the
meeting.
[22 April 2004; 20 March 2020]
Section 214.1 Remote
Participation and Voting in the Meeting of Shareholders
(1) The shareholder has the right to vote in writing
(including through electronic means) prior to the meeting of
shareholders if the following conditions are met:
1) the vote has been given in a way which allows the company
to ensure the identification of the shareholder;
2) the vote is received by the company at least one day prior
to the meeting of shareholders.
(2) The shareholder who has voted prior to the meeting of
shareholders may request the company to acknowledge the receipt
of the vote. The company shall, immediately upon the receipt of
the vote of the shareholder, send an acknowledgement to the
shareholder.
(3) The board shall, upon its own initiative or upon request
of the shareholders who jointly represent at least 20 per cent of
the equity capital of the company and the articles of association
do not provide for a smaller norm of representation, ensure the
shareholder with the right to participate or vote in the meeting
of shareholders through electronic means. In such a case the
board shall determine the requirements for identification of
shareholders and the procedures by which the shareholders can
exercise this right.
(4) It may be determined in the articles of association that
the shareholder has the right to participate or vote in the
meeting of shareholders through electronic means. In such a case
the articles of association shall determine or shall delegate the
board to determine the requirements for identification of
shareholders and the procedures by which the shareholders can
exercise this right.
(5) The right of the shareholder to participate or vote in the
meeting of shareholders through electronic means shall not
restrict the right of the shareholder to participate and vote in
the meeting of shareholders in person.
(6) It may be determined in the articles of association that
the meetings of shareholders shall take place only electronically
and the shareholders participate and vote in the meeting of
shareholders through electronic means. The decision on the
abovementioned amendments to the articles of association is taken
if all of the shareholders with voting rights agree thereto.
(7) The shareholder who votes prior to the meeting of
shareholders or participates or votes in the meeting of
shareholders through electronic means shall be considered present
at the meeting of shareholders. In such a case the board shall
prepare the list of those shareholders who have voted prior to
the meeting of shareholders, and the shareholders shall be
acquainted with such list prior to the first vote. The
information referred to in Section 278, Paragraph three of this
Law shall be indicated in the list.
[20 March 2020]
Section 215. Taking of a Decision
without Convening a Meeting of Shareholders
(1) Shareholders have the right to take decisions without
convening a meeting of shareholders, unless the law or the
articles of association specify that certain issues shall only be
decided at a meeting of shareholders.
(2) The board shall send a written draft decision and
documents that are of importance to the taking of the decision to
all shareholders, indicating the time period within which
shareholders may in writing vote "for" or "against" the taking of
the decision. Such a time period may not be less than two weeks
from the date the draft decision was sent out. If a shareholder
has not given a written reply within the specified time period,
it shall be deemed that he or she has voted against the taking of
the decision.
(3) The board shall complete minutes of voting regarding the
results of the voting and shall immediately send the minutes to
all shareholders. The following shall be indicated in the minutes
of voting:
1) the firm name and legal address of the company;
2) the given name and surname of the person who compiled the
minutes;
3) the decisions taken and the results of voting in respect of
them;
4) pursuant to the request of a shareholder regarding the
expression of a different viewpoint - the substance of such
viewpoint;
5) other essential information in respect of the voting.
(4) If a decision is taken without convening a meeting of
shareholders, the decision shall be considered taken if it has
received more than half of all of the shareholders' votes, if a
larger number of votes is not specified by law or the articles of
association.
Section 216. Taking of Decisions by
Shareholders
(1) A decision by the shareholders has been taken if it has
received more than half of the votes represented at the meeting,
if a larger number of votes is not specified by law or the
articles of association.
(2) A decision of a meeting of shareholders shall be entered
in the minutes or shall be prepared in the form of a separate
document. The minutes shall be signed by the chairperson of the
meeting, the recorder of the minutes and at least one shareholder
elected by the meeting - a person who shall attest to the
accuracy of the minutes. The decision shall be signed by the
chairperson of the meeting. If the decision is to be submitted to
the Commercial Register Office, the chairperson of the meeting
and at least one shareholder who has been elected the person to
attest to the accuracy of the decision shall sign the decision.
The original of the minutes or decision or a derivative, the
accuracy of which shall be confirmed by the same persons who
signed the original, shall be submitted to the Commercial
Register Office.
(3) A decision by the shareholders in respect of the company,
members of its council and of the board, the auditor and
shareholders shall be in effect as of the time it was taken, if
in the decision or the law another time period is not specified
for the coming into effect of the decision.
[16 March 2006; 2 May 2013]
Section 217. Declaration of a
Decision by Shareholders as Void
(1) A court, based upon a claim of a shareholder, a member of
the board or of the council, may declare a decision of
shareholders as void, if such decision or the procedures for its
taking are in contradiction to law or the articles of
association, or a significant violation has been allowed in
convening the meeting or taking the decision, including the
rights of a shareholder to receive information in accordance with
the procedures laid down in Section 214 of this Law, to
participate or vote in the meeting have been infringed. An action
may be brought within three months from the day when the person
got to know or when he or she should have gotten to know the
decision of the meeting, but not more than a year from the day of
occurrence of the meeting.
(2) If a decision was taken in violation of the procedures for
the taking of decisions, the decision may not be disputed on such
grounds if all the shareholders voted for the taking of such
decision.
[15 June 2017]
Section 218. Taking of Decisions on
Essential Issues of the Articles of Association
(1) Decisions on amendments to the articles of association,
termination, continuation, suspension or renewal of activities of
the company, reorganisation of the company and entering into,
amending and termination of a group of companies agreement shall
be taken if not less than two-thirds of the votes represented at
the meeting were given for such decision, if the articles of
association do not specify a larger number of votes.
(2) In applying amendments to the articles of association to
the Commercial Register Office, an extract from the minutes of
the meeting of shareholders with a decision on amending the
articles of association and the full text of the articles of
association signed by the board and the persons who have signed
the relevant minutes of the meeting of shareholders, in the new
wording shall be appended.
[22 April 2004; 29 November 2012; 2 May 2013 / Amendments
to Paragraph one shall come into force on 1 January 2014. See
Paragraph 26 of the Transitional Provisions]
Section 219. Convening of a Meeting
of Shareholders in Special Cases
If the losses of the company reach at least a half of the
equity capital of the company or the company has limited
solvency, the signs of insolvency have been determined or they
are likely to occur in the company, the board shall notify the
council (if such council has been established) thereof and
convene a meeting of shareholders in which the board shall
provide explanations.
[22 April 2004; 24 April 2008; 15 June 2017]
Section 220. Council
(1) The company shall establish a council if it is provided
for in the articles of association.
(2) The provisions of Sections 291-300 of this Law shall be
applied to the activity and competence of the council, in so far
as it is otherwise laid down in this Chapter.
(21) The council shall be elected for an indefinite
period of time, if not specified otherwise in the articles of
association.
(3) Members of the council shall be elected by simple majority
of votes of the present shareholders, if it is not provided for
in the articles of association that a larger number of votes is
necessary for electing members of the council or the provisions
of Section 296, Paragraphs four, five and six of this Law are
applicable.
(4) Section 296, Paragraph nine of this Law shall be
applicable, if it is determined in the articles of association
that the election of the council shall be performed in accordance
with the provisions of Section 296, Paragraphs four, five and six
of this Law.
[22 April 2004; 18 December 2008; 15 April 2010]
Section 221. Board
(1) A board is the executive institution of the company, which
manages and represents the company.
(2) The board may consist of one or more members.
(3) A natural person with the capacity to act may be a member
of a board.
(4) Members of the council of the company, the auditor of the
company and members of the council of the dominant undertaking in
a group of companies may not be members of the board. Greater
restrictions on members of the board may be specified in the
articles of association.
(5) The board has the obligation to provide information to a
meeting of shareholders regarding concluded transactions between
the company and shareholders, members of the council or members
of the board.
(6) The board has an obligation to submit to the council, at
least once every quarter, a report on the activities and
financial circumstances of the company, as well as it shall,
without delay, notify the council regarding deterioration of the
financial condition of the company, or other significant
circumstances related to the company's commercial activities.
(7) The board shall elect a chairperson of the board from
among themselves, who shall organise the activities of the board.
If the company has established a council, the articles of
association may provide that the chairperson of the board is
appointed by the council.
(8) The members of the board have a right to remuneration
which is commensurate with their obligations and the financial
circumstances of the company. The amount of the remuneration
shall be determined by a decision of the council, but if the
company has no council - by a decision of shareholders.
(9) [14 February 2002]
(10) [14 February 2002]
(11) [22 April 2004]
[14 February 2002; 22 April 2004; 29 November 2012]
Section 222. Rights of a Board to
Manage the Company
The members of a board shall manage the company only
jointly.
[14 February 2002]
Section 223. Representation Rights
of a Board
(1) All members of the board have representation rights.
Members of the board shall represent the company jointly if the
articles of association do not specify otherwise.
(2) In the case of joint representation, the members of the
board may authorise from among themselves one or more members of
the board to conclude specific transactions or specific types of
transactions.
(3) The representation rights of the board in respect of a
third party may not be restricted. The rights of the members of
the board, which are specified in the articles of association, to
represent the company jointly or individually shall not be deemed
to be restrictions of the representation rights of the board
within the meaning of this Section.
(4) In relation to the company, the board shall observe the
restrictions on representation, which are specified in the
articles of association, decisions of the meeting of shareholders
and of the council, as well as the prohibition of performance of
commercial activities of all types or specific type, or holding
specific positions.
[14 February 2002; 22 April 2004; 29 November 2012]
Section 224. Election and Recall of
Members of the Board
(1) Members of the board shall be elected and recalled by a
decision of the meeting of shareholders. In submitting an
application to the Commercial Register Office regarding the
termination of the authorisation of a member of the board or
regarding the election of a new member of the board, the
application shall have appended to it an extract of the minutes
of the meeting of shareholders with the relevant decision.
(11) A decision on the election of a member of the
board shall also be in effect if it has been taken by a person
who has not been entered in the register of shareholders, however
has acquired all shares of the company provided that all
shares:
1) are acquired as an inheritance;
2) are acquired by a court judgment that has entered into
effect;
3) have been alienated by the bailiff upon performing duties
of his or her position;
4) have been alienated by the administrator of the insolvency
proceedings upon performing duties of his or her position;
5) are acquired by using a commercial pledge.
(12) The decision referred to in Paragraph
1.1 of this Section shall be appended by a document on
the basis of which all shares are acquired, or a notarially
certified copy thereof and a division of the register of new
shareholders.
(2) In order to elect a person as a member of the board, a
consent from the relevant person shall be necessary. The
candidate for the member of the board shall indicate the
potential obstacles for holding the position in accordance with
Sections 4.1, 4.2, 171 and 221 of this Law
and the potential obstacles for implementation of the right of
representation of the company in accordance with Sections
4.1 and 4.2 of this Law, or certify that he
or she does not have such obstacles.
(21) The Commercial Register Office shall be
submitted a written consent of the member of the board, in which
he or she shall indicate the firm name and the registration
number of the company, in which he or she agrees to become the
member of the board.
(3) A member of the board shall be elected for an indefinite
period of time, if not otherwise specified in the articles of
association.
(4) A member of the board may be recalled by a decision of the
shareholders. If the company has a council, the council may
suspend any member of the board from his or her position until
the meeting of shareholders but not for longer than two
months.
(5) [14 February 2002]
(6) It may be provided for by the articles of association,
that a member of the board may be recalled only if there is an
important reason. Such reasons shall, in any case, be considered
to be gross violations of authority, failure to perform or to
appropriately perform his or her obligations, an inability to
manage the company, or causing harm to the interests of the
company, as well as loss of confidence.
(7) [14 February 2002]
(8) A member of the board may leave the position of the member
of the board, by submitting a notice thereof to the company.
[14 February 2002; 22 April 2004; 16 March 2006; 15 April
2010; 29 November 2012; 2 May 2013; 15 June 2017]
Division
XIII
STOCK COMPANY
Chapter 1
Capital and Securities of Stock Company
Section 225. Equity Capital of a
Stock Company
(1) The equity capital of a stock company (hereinafter in this
Division - company) may not be less than 35 000 euro.
(2) The equity capital specified in the articles of
association when founding the company shall be fully paid-up not
later than within one year from the date of the signing the
memorandum of association of the company.
[19 September 2013 / Amendments to Paragraph one shall come
into force on 1 January 2014. See Paragraph 35 of Transitional
Provisions]
Section 226. Stock and the Legal
Relations Associated with It
(1) Stocks are securities, which certify the stockholder's
participation in the equity capital of the company and gives them
the right, in conformity with the relevant category of stock, to
take part in the administration of the company, to receive
dividends and, in the case of the liquidation of the company, a
liquidation quota.
(2) Stocks are indivisible.
(3) The legal relations which arise in relation to stock which
is in public circulation shall be regulated by this Law insofar
as the Financial Instrument Market Law does not specify
otherwise.
[24 April 2008]
Section 227. Categories of Stock
(1) Different rights may be fixed in stock in respect to:
1) receiving dividends;
2) receiving a liquidation quota;
3) voting rights at a meeting of stockholders.
(2) Stock in which an equal amount of rights are fixed is
stock of one category. If the company has several categories of
stock, each category of stock shall be given a different
designation.
Section 228. Registered Stock and
Bearer Stock
(1) Stock may be registered stock or bearer stock.
(2) The rights arising from registered stock belong to the
person who, as a stockholder, is entered in the register of
stockholders.
(3) The rights arising from bearer stock belong to the person
the share of whom has been registered in the financial instrument
account in accordance with the provisions of the Financial
Instrument Market Law.
(4) A stockholder may request that the company convert the
bearer stock owned by them into registered stock and vice versa
if the articles of association provide for conversion.
[24 April 2008]
Section 229. Form of Stock
(1) Registered stock may be issued in printed form or
dematerialised.
(2) Bearer stock may only be dematerialised.
[24 April 2008]
Section 230. Nominal Value of
Stock
(1) The nominal value of stock shall be laid down in the
articles of association of the company and shall be expressed in
euro.
(2) The nominal value of stock may not be less than 10
cents.
(3) The nominal value of stock can be divided by the smallest
nominal value of the stock of the company and 10 cents without a
remainder.
[19 September 2013 / The new wording of Section shall come
into force on 1 January 2014. See Paragraph 35 of Transitional
Provisions]
Section 231. Preference Stock
(1) Preference stock give a stockholder special rights in
relation to dividends and liquidation quotas, as well as
receiving dividends and liquidation quotas.
(2) The company may issue preference stock if such category of
stock is provided for by its articles of association.
(3) [22 April 2004]
[22 April 2004; 16 March 2006]
Section 232. Rights Arising from
Preference Stock
(1) The rights arising from preference stock shall be
determined in the articles of association.
(2) Preference stock does not give voting rights.
(3) If a stockholder who owns preference stock with special
rights in relation to receiving dividends is not paid dividends
for two accounting years in succession or is paid only part of
them, they shall acquire voting rights in the next accounting
year under general provisions in proportion to the amount of the
nominal value of the preference stock owned by them.
(4) The acquisition of voting rights shall not release the
company from the obligation to pay the arrears of dividends, as
well as shall not impact upon other rights which arise from
preference stock.
(5) Stockholders who own preference stock with special rights
in relation to receiving dividends shall lose their voting rights
on the last day of that accounting year during which they have
fully received all previous arrears of dividends.
Section 233. Changes in,
Restrictions on or Revocation of Preferences
(1) A meeting of stockholders by making relevant amendments in
the articles of association, may take decisions on the changing,
restricting or revoking of those preferences, which arise from
preference stock.
(2) The decision referred to in Paragraph one of this Section
shall be in effect if the relevant category of holders of
preference stock have also voted for the taking of it with a
number of votes which is not less than three quarters of the
total number of this category of votes.
(3) The provisions of Paragraph two of this Section regarding
consent by the holders of preference stock shall also apply in
the case when a decision is taken to issue new preference stock
which have larger or equal preferences in comparison with the
already existing preference stock.
(4) The provisions of Paragraphs two and three of this Section
shall not apply to any of the following cases:
1) if the articles of association provide for priority right
to holders of preference stock to preference stock to be issued;
or
2) if it is explicitly specified in the memorandum of
association or in the regulations for the increase of equity
capital that when issuing the existing preference stock, the
provisions of Paragraphs two and three of this Section shall not
apply.
[14 February 2002]
Section 234. Register of
Stockholders
(1) For the entering of registered stock and their holders,
the board shall ensure the keeping of a register of
stockholders.
(2) The correctness of the record in the register of
stockholders with his or her signature shall be certified by the
chairperson of the board or a member of the board authorised by
the board.
[22 April 2004]
Section 235. Information to be
Entered in the Register of Stockholders
(1) In the register of stockholders shall be entered:
1) information on stockholders:
a) for a natural person - given name, surname, personal
identity number (if the person does not have a personal identity
number - the date of birth, the number and date of issue of a
personal identification document, the state and authority, which
issued the document) and residential address;
b) for a legal person - name, registration number and legal
address;
2) category and number of stock, nominal value, serial numbers
if such have been assigned, and the number of votes arising from
them;
3) the date by which the stockholder has fully paid-up his or
her stock or, if it has not yet been paid-up in full - the time
period by which the stock shall be paid-up;
4) the joint representative of shareholders who has been
appointed in accordance with the procedures specified in Section
157 of this Law, indicating the information referred to in
Paragraph one, Clause 1, Sub-clause "a" or "b" of this Section
regarding him or her.
(2) The initial records in the register of stockholders shall
be made in accordance with information which is indicated in the
memorandum of association.
(3) Further records in the register of stockholders shall be
made not later than the next day after the board has received
information regarding changes which have occurred in the entries
of the Commercial Register.
(4) [14 February 2002]
[14 February 2002; 15 April 2010; 2 May 2013]
Section 236. Right to Become
Acquainted with the Register of Stockholders
(1) Stockholders, members of the board and of the council, the
auditor, and competent public institutions have the right to
become acquainted with the register of stockholders.
(2) The persons referred to in Paragraph one of this Section
have the right to receive an extract from the register of
stockholders free of charge, which shall be certified by the
chairperson of the board or a member of the board authorised by
the board upon request.
(3) Stockholder has the right to receive an extract from the
register of stockholders of the company certified by the
chairperson of the board or a member of the board authorised by
the board regarding stocks owned by him or her in the
company.
[22 April 2004]
Section 236.1
Registration of Bearer Stock
(1) The board shall ensure record of bearer stocks in the
Latvian Central Depository in accordance with the provisions of
the Financial Instrument Market Law.
(2) A stockholder has the right to transfer bearer stock
entered in the Latvian Central Depository to his or her financial
instruments account.
[24 April 2008]
Section 236.2 Requesting
of Information on the Holders of Bearer Stock
The company and competent institutions are entitled to request
the information from the Latvian Central Depository on the
holders of bearer stock in accordance with the procedures
specified in the Financial Instrument Market Law.
[24 April 2008]
Section 237. Payment of Stock
(1) Stockholders shall pay up their stock to the amount,
according to the procedures and within the time periods specified
in the memorandum of association or the regulations for an
increase of equity capital.
(2) The time period for fully paying up registered stock in
the case when equity capital is being increased, may not exceed
one year from the date when the subscription to the stock was
opened.
(3) Bearer stock may not be paid-up by instalments. They shall
be fully paid-up when subscribing to the stock.
(4) Following the end of the time period for the payment of
stock, the board shall notify the Commercial Register Office
regarding the stock being fully paid-up or regarding the status
of the payment of stock.
[22 April 2004]
Section 238. Alienation of Stock
(1) A stockholder may freely alienate their stock.
(2) The articles of association may provide that the sale of
registered stock shall require the consent of a general meeting
of stockholders, as well as the grounds on which such consent may
be refused, and the right of first refusal of other stockholders
to the stock to be sold. If the rights of first refusal have been
provided for in the articles of association, then the time period
for the use thereof shall be one month from the date when the
notice regarding the sale of stock was submitted to the board.
The board shall, after receipt of such notice, without delay
publish it in accordance with the procedures specified in Section
252 of this Law. The stockholder may waive the right of first
refusal prior to the end of the specified time period.
(3) Alienation of dematerialised stock shall be by
transferring them to the financial instruments account of the
acquirer.
(4) Alienation of the registered stock in paper form shall be
by making a transfer record upon them (endorsement).
(5) The acquirer of registered stock shall notify the company
regarding the acquisition of stocks by submitting an application
and presenting registered stock in paper form with a transfer
notation upon them (endorsement), but in the case of alienation
of dematerialised registered stock - by submitting a joint
alienor and acquirer application or transaction document. An
entry shall be made in the register of stockholders in accordance
with the provisions of Section 235 of this Law regarding
such.
[14 February 2002; 22 April 2004; 24 April 2008]
Section 238.1 Inheriting
of Stock
(1) The stock which have no heirs shall be deemed property
without heirs according to Section 416 of The Civil Law and
escheat to the State. The State shall have no voting rights and,
when determining the norms for representation, this stock shall
not be taken into account.
(2) The State shall offer the stock acquired for sale. Such
stock shall be sold on behalf of the State by a sworn bailiff.
The procedures, by which a sworn bailiff shall take over and sell
the stock that has been acquired by the State as property without
heirs, shall be determined by the Cabinet.
(3) Stockholders of the company shall have the right of first
refusal, if it has not been otherwise specified in the articles
of association. The right of first refusal of stockholders of the
company shall be exercised in accordance with the procedures
specified in this Law.
(4) If the stock has not been sold in accordance with the
procedures specified in the law, it shall devolve to the
company.
[6 June 2013]
Section 239. Prohibition on
Companies to Subscribe to Their Own Stock
(1) The company may not subscribe to its own stock.
(2) A dependent company may not subscribe to the stock of its
dominant undertaking.
(3) If such person subscribes to the stock of the company who
acts in their own name but for the benefit of the company or its
dependent companies, then it shall be deemed that such person has
subscribed to the stock on their own account. An agreement which
is in contradiction with this provision shall be void.
Section 240. Prohibition to Acquire
Own Stock
(1) The company may not acquire its own stock, except in the
following cases:
1) if the company reduces its equity capital by withdrawing a
part of the stock from circulation and cancelling it;
2) if the company acquires its own stock in order to protect
itself from substantial direct losses;
3) if the company acquires its own stock in order to grant
them to employees and members of the board and of the
council;
4) if the company acquires its own stock as a result of
reorganisation, by paying compensation in the cases specified by
law;
5) if the company acquires its own stock when it acquires some
other undertaking or its part;
6) if the company acquires its own stock as a result of a
free-of-charge transaction;
7) if the company acquires its own stock by way of
inheritance;
8) if the company acquires its own stock by collecting on its
claims from third parties;
9) if the stock held by a stockholder who has not paid-up such
stock within the specified time period to the company is
devolved;
10) [22 April 2004];
11) the company shall acquire its stock if the stock that
escheats to the State as property without heirs has not been sold
in accordance with the procedures specified in the law.
12) if the company acquires its own stock in order to convert
debentures.
(11) The provisions of this Law regarding
prohibition of acquisition of own stock shall be applied for
consent of own stock as a security.
(2) In the case referred to in Paragraph one, Clauses 2, 3, 6,
8 and 12 of this Section the company may acquire only fully
paid-up stock.
(3) In the case provided for in Paragraph one, Clauses 2, 3
and 12 of this Section the company may acquire its stock on the
basis of the decision of the meeting of stockholders where the
maximum number of the stock to be acquired, and also the time
period during which such stock is to be acquired and which may
not exceed five years shall be indicated. If the stock is
acquired for compensation, the decision shall indicate the
minimum and maximum amount of compensation.
(31) In the case provided for in Paragraph one,
Clause 3 of this Section the company may acquire its stock by not
taking into account the provisions of Paragraph three of this
Section if the company alienates the stock within a year from the
day of acquisition thereof.
(4) Stock of the company, belonging to a person who has
acquired such stock in his or her own name but for the benefit of
such company, as well as company stock held by a dependent
company of such company shall be deemed to be owned by that
company if the law does not specify otherwise.
(5) If the company acquires its own stock in violation of the
provisions of this Section, then the members of the board who are
at fault, shall be solidarily liable for the payment of any
illegally acquired stock.
(6) As a result of the acquisition of its own stock, the value
of the own funds of the company may not become smaller than the
amount of the equity capital of the company.
(7) Own stock, owned by the company, shall not give the
company any of the rights which arise from such stock, and such
rights shall not be taken into account when determining the
quorum of a meeting of stockholders and in the distribution of
profit.
(8) The acquisition of own stock shall be reflected by the
company in the annual accounts, setting out the following
information regarding the stock acquired in the relevant
accounting year:
1) reason for the acquisition;
2) the number of stock acquired, the total of the nominal
value and the share of equity capital represented by the
stock;
3) if the stock are acquired by payment - the form of payment
and the amount.
(9) The annual accounts in addition to the information
referred to in Paragraph eight of this Section shall also
indicate the total number of own stocks owned by the company and
the share of equity capital represented by the stock.
[14 February 2002; 22 April 2004; 24 April 2008; 6 June
2013; 15 June 2017]
Section 241. Prohibition on
Financing of the Acquisition of Own Stock
(1) The company is prohibited from issuing loans or otherwise,
directly or indirectly, financing third parties in the
acquisition of the stock of such company.
(2) [14 February 2002]
[14 February 2002]
Section 242. Alienation and
Cancellation of Own Stock Owned by the Company
(1) If the company has acquired its own stock in accordance
with Section 240 of this Law, such stock shall be alienated
within one year from the day when they were acquired, except in
the cases referred to in Section 240, Paragraph one, Clause 1 and
Section 240, Paragraph four of this Law. This provision is not
applied to stock the total amount of nominal values of which does
not exceed one tenth of the paid-up equity capital of the
company.
(2) If the company has acquired its own stock in violation of
the provisions of Section 240 of this Law, such illegally
acquired stock shall be alienated within three months from the
day when they were acquired.
(3) [15 June 2017]
(4) If the company does not alienate its own stock within the
time periods specified in Paragraphs one and two of this Section,
or if it has acquired stock in the case referred to in Section
240, Paragraph one, Clause 1 of this Law, such stock shall be
cancelled, and correspondingly the equity capital shall be
reduced in accordance with the provisions of Sections 262 -265 of
this Law.
[22 April 2004; 15 June 2017; 17 December 2020]
Section 243. The Condition under
which the Company Takes its Own Stock as Pledge
(1) The company may take its own stock as a pledge only if it
is fully paid-up.
(2) If the provisions referred to in Paragraph one of this
Section are violated, then the members of the board who are at
fault shall be liable for full payment of the stock and for
losses inflicted on third parties.
Section 244. Convertible
Debentures
(1) The company may issue convertible debentures which a
debenture holder in a specified time period is entitled to
exchange for the stock of such company. Conversion of debentures
shall not be regarded as performance of the property
contribution.
(2) Convertible debentures may be issued both as registered
and as bearer securities.
(3) The provisions of this Law in respect of convertible
debentures shall also be applicable to other securities that can
be exchanged for company stock.
[14 February 2002; 15 June 2017]
Section 245. Issuance of Convertible
Debentures
(1) [18 December 2008]
(2) With the decision to issue convertible debentures the
regulations for the issue of debentures shall also be approved,
which shall indicate:
1) the number of debentures to be issued, the nominal value of
one debenture and the total amount of nominal value;
2) the price of debentures;
3) the time period for conversion of debentures;
4) the interest which the company undertakes to pay to the
debenture holder and their payment provisions (if such are
provided for);
5) the procedures and time periods for the payment of
debentures;
6) the procedures by which the debentures shall be exchanged
for stock;
7) the rights of debenture holders;
8) other provisions which are not in contradiction to law.
(21) A meeting of stockholders shall concurrently
with the decision on the issuance of convertible debentures take
a decision on the conditional increase of equity capital in
accordance with the procedures laid down in Section
261.1 of this Law.
(3) Debenture holders shall acquire convertible debentures
after their full selling price has been paid.
(4) [15 June 2017]
[18 December 2008; 15 June 2017]
Section 246. Priority Right of
Convertible Debentures
(1) In the case of the issuance of convertible debentures, the
stockholders of the company have a priority right to acquire such
debentures.
(2) The priority right of stockholders may be cancelled in
accordance with the procedures laid down in Paragraph two,
Section 253 of this Law. The cancellation of the priority right
shall be provided for in issue provisions.
[14 February 2002; 15 June 2017]
Section 247. Register of Debenture
Holders
(1) The board shall keep a record of the convertible
debentures and their holders in a register of debenture holders.
The following shall be entered in the register of debenture
holders:
1) information regarding debenture holders:
a) for a natural person - given name, surname, personal
identity number (if the person does not have a personal identity
number - the date of birth, the number and date of issue of a
personal identification document, the state and authority, which
issued the document) and residential address;
b) for a legal person - name, registration number and legal
address;
2) the number of debentures owned by each debenture holder,
their nominal value and ordinal number if such has been
allocated;
3) information regarding the conversion of the debentures.
(2) Debenture holders, members of the board and of the council
and competent public persons have the right to become acquainted
with the register of debenture holders.
(3) A debenture holder has the right to receive an extract
from the register of debenture holders certified by the
chairperson of the board or a member of the board authorised by
the board regarding the debentures owned by him or her.
[15 April 2010; 15 June 2017]
Section 248. Rights of Debenture
Holders
(1) Those rights of debenture holders, who own convertible
debentures, shall be determined by this Law, the articles of
association and the regulations for the issuance of
debentures.
(2) Debenture holders have the right to become acquainted with
the documents of the company according to the procedures and in
the amount specified by a meeting of stockholders. They shall
also have the right to take part at meetings of stockholders
without voting rights and, in cases specified by law - in the
taking of decisions.
Section 248.1 Personnel
Options
(1) The company may issue personnel options which give the
right to employees, members of the board and council of this
company or to that of the companies within one group of companies
to acquire its stock.
(2) If upon using personnel options the stock is acquired free
of charge or for charge that is less than the nominal value of
the stock at the time of use of the personal option, the company
shall issue the stock on the account of the undistributed profit
of the company or the payment thereof shall be carried out from
especially made reserves.
(3) Personnel options may not be alienated unless it is
otherwise provided for in the articles of association or
regulations for issuance of personnel options.
(4) The total amount of the stock which may be acquired by
using personnel options may not exceed 10 per cent of the paid-up
equity capital of the company at the time when the decision to
grant personnel options is taken.
(5) The provisions for convertible debentures of this Law
shall be applicable to the issuance of personnel options. The
following shall be additionally indicated in the provisions for
convertible debentures:
1) the purposes for the issuance of personnel options;
2) the range of those persons who may acquire personnel
options;
3) the number, nominal value, category of the stock intended
for covering personnel options and the rights corroborated
therein;
4) the procedures for granting and transfer of personnel
options including the type of payment and procedures for payment
(if any intended);
5) the number of stock to be obtained as a result of use of
each personnel option and the price of one stock (if any
intended);
6) the procedures and time periods for use of personnel
options;
7) establishment of reserves if upon use of personnel options
the stock may be acquired free of charge or for charge which is
less than a nominal value of the stock at the time of exercising
the right of purchase of employee stock.
(6) The board shall ensure the keeping of the register of
personnel options in accordance with the procedures laid down
Section 247 of this Law for recording personnel options and
holders thereof. The number of stock to be obtained by each
employee, member of the board and council shall be indicated in
the Register in addition to the information laid down in Section
247 of this Law.
[15 June 2017]
Chapter 2
Increase and Reduction of Equity Capital
Section 249. Right to Increase or
Reduce Equity Capital
(1) The equity capital may be increased or reduced only on the
basis of a decision of a meeting of stockholders, in which the
regulations for an increase or reduction of the equity capital
shall be approved, and amendments to the articles of association
of the company made, except the case referred to in Paragraph
four of this Section.
(2) If there are several categories of stock in the company,
voting on a decision on an increase or reduction of the equity
capital at a meeting of stockholders shall be in accordance with
the provisions of Section 284, Paragraph three of this Law.
(3) [18 December 2008]
(4) The authorisation for the board may be specified in the
articles of association for a period of time up to five years to
increase the equity capital in amount specified in the articles
of association or in the meeting of stockholders, not exceeding
30 per cent of the equity capital of the company at the time of
coming into effect of the authorisation.
(5) Upon increasing the equity capital in the case referred to
in Paragraph four of this Section, the amendments to the articles
of association of the company shall be made by the council. The
board shall prepare and sign complete text of the articles of
association in the new wording.
(6) The board may use the authorisation referred to in
Paragraph four of this Section insofar as it is not otherwise
provided for in the articles of association or in the decisions
of the meeting of stockholders.
[24 April 2008; 18 December 2008; 15 June 2017]
Section 250. Increase of Equity
Capital
(1) The company may increase its equity capital by issuing new
stock in accordance with a decision to increase the equity
capital and by opening subscription to them.
(11) The company may increase the equity capital
after the approval of the annual accounts or a report on economic
activities for a shorter time period than a year by increasing
the pro rata the nominal value of the existing shares or issuing
new shares, by including fully or partially in the equity capital
the positive difference between the own capital and the sum
formed by the equity capital and reserves, which in accordance
with the law may not be included for the increase of the equity
capital. New stock shall be divided pro rata the nominal value of
the shares owned by them. The report on economic activities shall
be drawn up in accordance with the requirements of the law
regarding drawing up of the annual accounts.
(2) The equity capital may only be increased after the
previous issue of stock is fully paid-up.
(3) If stock of the new issue is paid-up by a property
contribution, this contribution shall be evaluated and a
valuator's opinion shall be submitted regarding it in accordance
with the procedures specified in Section 154 of this Law.
(4) [14 February 2002]
[14 February 2002; 24 April 2008; 15 April 2010; 15 June
2017]
Section 251. Priority Right of
Stockholders
(1) In the case of the increase of equity capital the current
stockholders have priority right to purchase the newly issued
stock in proportion to the total of the nominal value of the
stock already owned by them.
(2) [14 February 2002]
(3) If any of stockholders do not exercise their priority
right within the specified time period, the relevant newly issued
stock shall be offered for subscription according to the
procedures specified in the regulations for increasing equity
capital, to those current stockholders who have already exercised
their priority right.
[14 February 2002]
Section 252. Notice Regarding
Priority Right of Stockholders
(1) A notice regarding a priority right of stockholders to the
newly issued stock shall be published in the official gazette
Latvijas Vēstnesis.
(2) The company shall send a notice regarding their priority
to the newly issued stock to all stockholders registered in the
register of stockholders according to the procedures specified in
Section 273, Paragraph two of this Law.
(3) If the company has only registered stock, then the notice
referred to in Paragraph one of this Section is not mandatory, if
the articles of association do not specify otherwise.
(4) The notice referred to in Paragraphs one and two of this
Section shall indicate:
1) the firm name and legal address of the company;
2) the size of the equity capital and the planned amount by
which the equity capital would be increased;
3) the category, number and nominal value of the stock to be
issued;
4) the selling price of the stock;
5) the time period during which the stockholders must exercise
their priority right, and which may not be less than 15 days from
the date when the notice is published, or in the case of
registered stock - from the date when the notice was sent.
[14 February 2002; 29 November 2012; 15 June 2017]
Section 253. Restrictions on and
Revocation of Priority Right of Stockholders
(1) The priority right of stockholders may not be revoked or
restricted by the memorandum of association or the articles of
association. When increasing the equity capital in the cases
provided for in Section 261.1, Paragraph two of this
Law, stockholders shall not have priority rights.
(2) The priority rights of stockholders may be cancelled by a
decision of the meeting of stockholders taken in accordance with
the procedures laid down in Paragraph two, Section 284 of this
Law. The meeting of stockholders which decides on the cancelling
of the priority rights shall provide a written justification for
the necessity to cancel the priority rights and the sales price
for the stock of new issue.
(3) Cancellation of the priority rights of stockholders shall
be provided for in the provisions for increasing the equity
capital.
(4) A decision of a meeting of stockholders regarding the
organisation of the subscription of stock for the transfer to
third parties (Section 260, Paragraph one), shall not be deemed
to be a restriction of the priority right. These persons shall
ensure the priority right of stockholders.
[15 June 2017]
Section 254. Increase of Equity
Capital for a Special Purpose
[15 June 2017]
Section 255. Employee Stock
(1) Employee stock shall be registered stock which may not be
alienated and which the company grants to its employees, members
of the board and council or to those of the companies within one
group of companies.
(2) Employee stock may be granted free of charge of for
charge. If employee stock is granted free of charge, the stock
shall be issued on the account of the undistributed profit of the
company.
(3) The company may issue employee stock of different
categories. Employee stock gives the right to receive dividends
and, if the stock is granted for charge - the right to the
liquidation quota. The employee stock gives the right to vote and
other rights if they are provided for in the articles of
association.
(4) The total nominal value of unused employee stock may not
exceed 10 per cent of the paid-up equity capital of the
company.
(5) Employee stock regardless of their form shall be kept by
the company.
(6) Upon expiration of the status of employee, member of the
board or council the employee stock shall transfer to the
company. In case of the death of the stockholder the employee
stock shall transfer to the company.
(7) Regarding the transfer of the employee stock to the
company in the case referred to in Paragraph six of this Section
relevant entries shall be made in the register of stockholders
without consent of the former stockholder.
(8) If employee stock is granted for charge, the company shall
pay a compensation to the former stockholder of employee stock or
his or her heir in the case referred to in Paragraph six of this
Section the amount of which must be equal to the amount which the
stockholder would acquire by dividing the property of the company
in the case of liquidation if such would occur at the time of
alienation of the stock.
(9) The provisions may be provided for in the articles of
association and increasing equity capital which differ from that
referred to in Paragraph six of this Section.
(10) Employee stock shall be converted or cancelled in
accordance with the general procedures.
[15 June 2017 / The new wording of Section shall come into
force on 1 January 2018. See Paragraph 55 of Transitional
Provisions]
Section 256. Increase of the Equity
Capital by Replacing the Debts of the Company with its Stock
[14 February 2002]
Section 257. Regulations for
Increasing Equity Capital
(1) The regulations for increasing equity capital shall
indicate:
1) the purposes of or reasons for increasing equity
capital;
2) the existing equity capital, categories of stocks, their
number and nominal value;
3) the intended increase of the equity capital (the
promulgated equity capital);
4) the category or categories of the stock of the new issue,
as well as the rights which arise from these categories of stock,
and the number of these stocks;
5) the nominal value, the selling price of the newly issued
stock and the minimum first payment to be made when subscribing
to the stock;
6) the type of payment for the newly issued stock (in cash or
by a property contribution);
7) the category, number and the total of the nominal value of
those newly issued stocks which shall be paid-up by property
contributions, indicating each item of property contribution and
its value;
8) the subscription and payment time periods with the
calculation that each of the newly issued stocks shall be fully
paid-up not later than one year from the date of the decision to
increase the equity capital was taken;
9) the time period within which the existing stockholders may
use their priority right in respect of the newly issued stock if
they have such rights;
10) the place and time, where and when subscription to the
stock shall take place.
(2) When taking a decision to increase equity capital in the
case referred to in Section 261.1 of this Law, the
data laid down in Paragraphs 8 and 9 of this Section shall not be
provided for in the case of increase in equity capital.
(3) Upon increasing the equity capital in the case referred to
in Section 249, Paragraph four of this Law, the newly issued
stock shall be paid up only by cash.
(4) Upon increasing the equity capital in the case referred to
in Section 249, Paragraph four of this Law, the time period for
payment of the newly issued stock shall be determined not longer
than three months from the day when a decision on increase of the
equity capital is taken.
[14 February 2002; 24 April 2008; 15 June 2017]
Section 258. Notice to Stockholders
Regarding Increasing Equity Capital
(1) The company shall send the regulations for increasing
equity capital to all stockholders entered in the register of
stockholders. If the company has also issued bearer stock, a
notice regarding increasing equity capital shall be published
also in the official gazette Latvijas Vēstnesis,
indicating the place and time, where and when one may become
acquainted with the regulations for increasing equity
capital.
(2) To the regulations for increasing equity capital shall be
appended those document forms, which are necessary for the
existing stockholders to exercise their priority right.
(3) In cases specified by law, the company shall prepare a
prospectus regarding the issue.
[14 February 2002; 29 November 2012]
Section 259. Nominal Value and
Selling Price of Newly Issued Stock
(1) The nominal value of newly issued stock shall be
determined in the regulations for increasing equity capital.
(2) For each newly issued stock shall be paid the selling
price of such stock, which shall be determined by the board, but
which may not be less than the nominal value of the stock. The
selling price of stock is composed of the nominal value of the
stock, and the additional payment and the mark up of the issue.
The board may change the selling price of stock within limits
provided for in the regulations for increasing equity
capital.
(3) [14 February 2002]
[14 February 2002; 22 April 2004]
Section 260. Subscription to a New
Issue of Stock
(1) The company may itself organise subscription to a new
issue of stock or entrust the organisation to a third party (a
bank, brokerage company, stock exchange, etc.).
(2) When subscribing to a new issue of registered stock, at
least 25 per cent of the nominal value of subscribed new issue of
stock, and all the additional payment and the mark up of the
issue shall be paid, but the remainder of the amount shall be
paid within the time periods specified in the regulations for
increasing equity capital.
(3) If the promulgated equity capital is not fully subscribed
within the time periods specified in the regulations for
increasing equity capital, the issue of stock shall be deemed to
have taken place to the value of the subscribed stock, except in
cases when such is not allowed for in the regulations for
increasing equity capital.
(4) If the issue of stock is recognised as not having taken
place, the moneys collected shall be repaid to the subscribers of
the stock.
(5) If the issue of stock is recognised as having taken place
only to the value of the subscribed stock, the council shall make
the relevant amendments to the articles of association.
[15 June 2017]
Section 261. Application for the
Increase of Equity Capital to the Commercial Register Office
(1) After the subscription time period according to the
regulations for increasing equity capital has ended or after all
the announced equity capital has been subscribed in conformity
with the regulations for increasing equity capital (if the equity
capital has been subscribed before the end of the relevant time
period), the council shall submit an application to the
Commercial Register Office regarding an increase of equity
capital.
(2) The following shall be attached to an application:
1) an extract of the minutes of the meeting of stockholders
with the decision to increase the equity capital and the
regulations for increasing equity capital;
11) an extract of the minutes of the board meeting
with the decision to increase the equity capital in the case
referred to in Section 249, Paragraph four of this Law and an
extract from the minutes of the council meeting with a decision
to allow the board to increase the equity capital;
2) the text of amendments to the articles of association and
the full text of the new version of the articles of
association;
3) a notice from the board regarding the situation of payments
of equity capital;
4) documents certifying the valuation of each item of a
property contribution and its transfer to the company (if the
payment was made by property contribution);
5) a certification that no significant circumstances have
arisen, which affect the value of the property contribution
referred to in Section 154, Paragraph 2.1 of this
Law.
(3) Equity capital shall be deemed to have been increased from
the date when a record is made in the Commercial Register.
(4) [22 April 2004]
[22 April 2004; 24 April 2008; 15 June 2017]
Section 261.1 Increase of
Equity Capital with a Condition
(1) A meeting of stockholders may take a decision to increase
equity capital with a condition (conditional equity capital) that
newly issued stock is used for a special purpose which is
indicated in the regulations for increasing equity capital. In
such cases the increase in the equity capital may not exceed the
amount necessary for the special purpose.
(2) According to the procedures specified in Paragraph one of
this Section, equity capital may be increased only for the
following purposes:
1) for the exchange of newly issued stock for convertible
debentures;
2) for the exchange of newly issued stock for the stock of the
company to be merged in the case of a re-organisation;
3) as compensation to minority stockholders which as an
exchange of stock is conducted by the dominant undertaking of a
group of companies;
4) granting of newly issued stock to employees and members of
the board and council.
(3) Upon increasing the equity capital in accordance with the
procedures laid down in this Section, the range of those persons
having the right to acquire newly issued stock shall be
additionally indicated in the regulations for increasing equity
capital.
(4) The board shall submit to the meeting of stockholders,
which is examining the question of increasing equity capital with
a condition, a justification for the necessity of such an
increase.
(5) Equity capital may be increased in accordance with the
procedures laid down in this Section also if the stock of the
previous issue have not been completely paid up.
(6) Upon increasing the equity capital in the case laid down
in Paragraph two, Clause 4 of this Section, the newly issued
stock shall be paid up only by cash.
(7) After the meeting of stockholders has taken a decision to
increase equity capital with a condition the board shall submit
an application to the Commercial Register Office in which the
amount of the conditional equity capital is indicated. The
application shall be appended an extract from the minutes of the
meeting of stockholders with the relevant decision and
regulations for increasing equity capital.
(8) After the conditions provided for in the regulations for
increasing equity capital have set in a person who in accordance
with the regulations for increasing equity capital is entitled to
acquire the stock of the company shall submit an application to
the company. A person who submits the application shall
completely pay up the stock if the payment of the stock is
necessary.
(9) The board shall take a decision to issue the stock (to
increase equity capital) within 10 days after the application of
the person referred to in Paragraph eight of this Section is
received. In this case the provisions of Section 309 of this Law
shall not be applied. The board shall firstly use own stocks
belonging to the company for the achievement of the purposes laid
down in Paragraph two of this Section, unless it is otherwise
provided for in the regulations for increasing equity
capital.
(10) The council shall within a month after the board has
taken a decision referred to in Paragraph nine of this Section
regarding issue of stock, make amendments to the articles of
association by adjusting the amount of equity capital. The board
shall prepare and sign complete text of the articles of
association in the new wording.
(11) After the issue of stock referred to in Paragraph nine of
this Section, the board shall submit an application regarding the
increase of the equity capital to the Commercial Register Office.
In the application it shall confirm the status of payment of the
equity capital, include reference to the decision of the meeting
of stockholders abovementioned in Paragraph one of this Section
and indicate the remaining amount of conditional equity capital
that is necessary for performance of a special purpose. The
following shall be attached to the application:
1) a decision of the board on the issue of stock;
2) a decision of the council on the amendments to the articles
of association;
3) the text of amendments to the articles of association and
the full text of the new wording of the articles of
association.
(12) Equity capital shall be considered as to be increased by
the amount of the issue of stock laid down in the decision of the
board from the time when the entry is made in the Commercial
Register.
[15 June 2017]
Section 262. Reduction of Equity
Capital
(1) Equity capital may be reduced:
1) by the company itself acquiring and cancelling its own
stock;
2) by cancelling stock which have been submitted by
stockholders; or
3) by reducing the nominal value of stock.
(2) Equity capital may not be reduced below the amount
specified in Section 225, Paragraph one of this Law.
(3) In the case when equity capital is to be reduced, the
equity capital shall first of all be reduced on the account of
the own stock owned by the company.
(4) In the case when equity capital is to be reduced,
stockholders may be paid the nominal value of the cancelled stock
only after the creditor protection measures specified in Section
264 of this Law have been fully implemented.
[14 February 2002]
Section 263. Regulations for the
Reduction of Equity Capital
(1) The regulations for the reduction of equity capital shall
indicate:
1) the reasons for reducing equity capital;
2) the amount by which equity capital will be reduced;
3) the means of reducing the equity capital;
4) the number of stock to be cancelled or the amount by which
the nominal value is to be reduced;
5) the time periods within which stock shall be returned or
exchanged;
6) if it is provided that a part of the equity capital shall
be paid out to stockholders - the provisions for payments.
(2) A notice of the reduction in the equity capital shall be
sent without delay to the Commercial Register Office. An extract
of the minutes of the meeting of stockholders with the decision
to increase the equity capital and the regulations for increasing
equity capital shall be appended to the notice.
Section 264. Protection of Creditors
in the Case of Reduction of Equity Capital
(1) Within five days from the date when a decision is taken to
reduce the equity capital, the board shall send a written notice
regarding the reduction of equity capital and the new amount of
equity capital to all known creditors of the company whose claim
rights against the company have arisen prior to the taking of the
decision to reduce the equity capital.
(2) The Commercial Register Office shall publish on its
website a notice regarding the decision taken by the company on
the reduction of equity capital. The notice shall indicate the
time period within which creditors who wish to receive security
may apply. The notice shall indicate a time period for the
submission of creditor claims which may not be shorter than one
month from the day of publication of the notice.
(3) The company shall provide security for creditors who have
applied within the time periods specified (except the amount of
secured claims of secured creditors).
[29 November 2012; 15 June 2017; 6 July 2021]
Section 265. Application to the
Commercial Register Office for the Reduction of Equity
Capital
(1) After the time period for the submission of creditor
claims has expired, and the claims have been secured, the board
shall submit an application regarding reduction of equity capital
to the Commercial Register Office. The application shall have
attached the text of amendments to the articles of association
and the full text of the new version of the articles of
association.
(2) In the application, the board shall certify the provision
of security to creditors or the satisfaction of their claims.
(3) The application shall be submitted to the Commercial
Register Office not later than after six months from the day when
the decision on reduction of equity capital was taken.
(4) Equity capital shall be deemed to have been reduced from
the day when the new amount of equity capital has been entered in
the Commercial Register.
Chapter 3
Organisational Structure of the Company
Section 266. Institutions of the
Company
The company shall be administered by meetings of stockholders,
a council and a board.
Section 267. Meeting of
Stockholders
(1) Stockholders exercise their rights to take part in the
administration of the company at a meeting of stockholders.
(2) Regular and extraordinary meetings of stockholders shall
be convened.
(3) A meeting of stockholders shall be convened in the
administrative territory, in which the legal address of the
society has been registered, if not specified otherwise in the
articles of association.
[16 June 2011]
Section 268. Competence of a Meeting
of Stockholders
(1) Only a meeting of stockholders has a right to take
decisions on:
1) the annual accounts of the company;
2) the use of the profit from the previous year of
activities;
3) the election and recall of members of the council, the
auditor, the company controller, and liquidator;
4) the bringing of actions against members of the board, the
council and the auditor or withdrawing actions against them, as
well as regarding the appointment of a representative of the
company to maintain actions against members of the council;
5) [14 February 2002];
6) amending the articles of association of the company;
7) increasing or reducing equity capital;
8) the issuance and conversion of the company's
securities;
9) specifying the remuneration for members of the council and
the auditor;
10) the termination of the activities of the company or their
continuation, suspension or renewal or regarding the
reorganisation of the company;
11) the general principles, types and criteria for
determination of remuneration intended for the members of the
board and the council;
12) granting of company stock to employees and members of the
board and council.
(2) A meeting of stockholders shall take decisions on other
issues only if it is provided for by law.
[14 February 2002; 24 April 2008; 29 November 2012; 15 June
2017]
Section 269. Regular Meeting of
Stockholders
(1) A regular meeting of stockholders shall take a decision on
the annual accounts, on the reports of the board and the council
and on the use of the profit from the previous accounting year,
as well as on other issues included in its agenda.
(2) A regular meeting of stockholders shall be convened by the
board each year. In convening a regular meeting the time period
provided for by law for the approval of annual accounts shall be
observed.
(3) If the board has not convened a regular meeting of
stockholders within the time period provided for, it may be
convened by:
1) the council;
2) the Commercial Register Office; or
3) [16 June 2005].
(4) The Commercial Register Office shall convene a regular
meeting of stockholders for fee upon request of one or more
stockholders, if the meeting has not taken place within the time
period specified in law.
[16 June 2005; 16 June 2011]
Section 270. Extraordinary Meeting
of Stockholders
(1) An extraordinary meeting of stockholders may be convened
by the board pursuant to its own initiative and shall be convened
if it is requested by the council, the auditor or stockholders
who jointly represent not less than one twentieth of the equity
capital of the company, if a lower representation norm is not
specified in the articles of association.
(2) In their request to convene an extraordinary meeting of
stockholders, the initiators shall indicate the reasons for
convening the meeting and the agenda. The request to convene a
meeting shall be submitted to the board and to the council, and
the auditors shall be notified of it.
(21) An extraordinary meeting of stockholders shall
be convened not later than within three months after the day when
the request was received.
(3) The board shall announce the convening of an extraordinary
meeting of stockholders not later than within two weeks from the
day when it receives a request.
(4) If the board does not convene an extraordinary meeting of
stockholders within the time period referred to in Paragraph
three of this Section, it shall be convened by the council.
(5) The Commercial Register Office shall convene an
extraordinary meeting of stockholders for fee, if the meeting has
not taken place within the time period specified in Paragraph
2.1 of this Section and it is requested by an auditor
or stockholders which in total represent not less than one
twentieth of the equity capital of the company, unless the
articles of association provide for a smaller norm of
representation.
[14 February 2002; 16 June 2005; 16 June 2011]
Section 271. Convening of the
Meeting of Stockholders in Special Cases
If the losses of the company reach at least half of the equity
capital of the company or the company has limited solvency, the
signs of insolvency procedures have been determined or they are
likely to occur in the company, the board shall notify the
council thereof and convene a meeting of stockholders, where it
shall provide explanations. The meeting of stockholders shall
decide regarding submission of an application for legal
protection proceedings or application for insolvency proceedings,
termination of the activities and liquidation, reorganisation of
the company, changes to the equity capital or shall take another
decision on improvement of the economic standing of the
company.
[24 April 2008; 15 June 2017]
Section 272. Costs of Convening
Meetings of Stockholders
(1) The company shall cover the costs related to the convening
of meetings of stockholders.
(2) The fee and expenses for convening the meeting of
stockholders shall be paid by a requester to the Commercial
Register Office. The company shall cover the amount paid to the
Commercial Register Office, if there was a substantiated reason
for convening the meeting of stockholders.
[16 June 2005]
Section 273. Procedures for
Convening a Meeting of Stockholders
(1) A notice regarding convening of the meeting of
stockholders shall be promulgated not later than 30 days prior to
the planned meeting of stockholders.
(2) The notice regarding convening of the meeting of
stockholders shall be promulgated:
1) if the company has bearer stock - by publishing the
announcement in the official gazette Latvijas Vēstnesis
and in at least one other newspaper;
2) if the company has also registered stock or only registered
stock - by sending written notices to the stockholders entered in
the register of stockholders by registered mail.
(3) The following shall be indicated in the notice:
1) the firm name and legal address of the company;
2) the place and time of the meeting;
3) the type of meeting (regular or extraordinary meeting);
4) the institution which is convening the meeting;
5) the activities which have to be conducted by the
stockholders up to the meeting, in order that they may
participate and vote;
51) the procedures according to which and the time
periods during which the stockholders may exercise the right to
vote prior to the meeting of stockholders or to participate or
vote in the meeting of stockholders through electronic means;
6) the provisions in the articles of association regarding the
participation of representatives of stockholders at the meeting
(if such provisions are provided for in the articles of
association);
7) the agenda;
8) the place and time, where and when stockholders may become
acquainted with draft decisions on the issues included in the
agenda, as well as with other issues to be examined at the
meeting.
(4) If it is intended to amend the articles of association
during the meeting of stockholders, the notice sent to
stockholders shall have appended thereto the draft decision on
amendments to the articles of association of the company
indicating the clauses of the articles of association proposed to
be recognised as void or to be amended, and new wording of these
clauses.
(5) Stockholders have the right to receive copies of the draft
decisions free-of-charge at 14 days before the meeting.
(6) [22 April 2004]
[14 February 2002; 22 April 2004; 29 November 2012; 20
March 2020]
Section 274. Agenda of a Meeting of
Stockholders
(1) The issues to be included in the agenda of the meeting of
stockholders shall be determined by the persons or the
institution which initiated the meeting.
(2) Stockholders who represent at least one twentieth of the
equity capital of the company have the right, within seven days
from the day of publication of the advertisement or within five
days from the day when they receive the notice, to request the
institution convening the meeting of stockholders to include
additional issues in the agenda of the meeting.
(3) The board or another institution which is convening the
meeting of stockholders shall include the additional issues in
the agenda of the meeting of stockholders and shall announce them
in the same manner as the notice regarding convening of the
meeting not later than fourteen days prior to the meeting.
[14 February 2002]
Section 275. Capacity to Act of a
Meeting of Stockholders
A meeting of stockholders is entitled to take decisions
irrespective of the equity capital represented there if the
articles of association do not specify a representation norm.
[14 February 2002]
Section 276. Issues to be Examined
at a Meeting of Stockholders
(1) A meeting of stockholders may take decisions only
regarding those issues of the agenda which are indicated in the
publication or notice regarding convening of the meeting, except
for the cases referred to in Paragraphs two and three of this
Section.
(2) If all the equity capital with voting rights is
represented at a meeting of stockholders, the meeting shall be
deemed to have the capacity to act irrespective of the time and
manner it was convened and the place where it occurs. Such
meeting may also discuss issues not included in the agenda and to
take decisions on them, if all the stockholders with voting
rights unanimously agree to such.
(3) A meeting of stockholders may take decisions on the
following issues (even if they are not included in the
agenda):
1) recall of the council, the auditor, company controller or
liquidator, provided that in case of recall of the council or
liquidator a new council or liquidator is elected during the same
meeting;
2) the bringing of actions against members of the council and
of the board, the company controller, liquidator or auditor if
the issue of the annual accounts of the company is discussed
during the same meeting;
3) the convening of a new meeting.
(4) If a stockholder has submitted a written request to the
board at least seven days before the meeting of stockholders, the
board must provide to him or her, not later than three days
before the meeting of stockholders, all the requested information
regarding the issues included in the agenda. The board may refuse
to issue such information only if there are the reasons provided
for in Section 283, Paragraph two of this Law. Disputes between
stockholders and the board on these issues, shall be decided by
the meeting of stockholders.
[14 February 2002; 22 April 2004; 16 June 2011]
Section 277. Participation at a
Meeting of Stockholders
(1) Stockholders may participate at a meeting of stockholders
either in person or through a representative. A proxy shall be
completed in writing and attached to the minutes of the meeting.
A proxy may be submitted up to the beginning of the meeting. A
special proxy is not necessary for persons who represent a
stockholder on the basis of law. These persons shall present
documents which certify their authorisation.
(2) It is the obligation of members of the board and the
auditor, as well as at least one member of the council to
participate in meetings of stockholders. Non-compliance with this
provision shall not be a basis for regarding the meeting of
stockholders as invalid, or to dispute decisions taken by the
meeting.
[14 February 2002]
Section 277.1 Remote
Participation and Voting in the Meeting of Stockholders
(1) The stockholder has the right to vote in writing
(including through electronic means) prior to the meeting of
stockholders if the following conditions are met:
1) the vote has been given in a way which allows the company
to ensure the identification of the stockholder;
2) the vote is received by the company at least one day prior
to the meeting of stockholders.
(2) The stockholder who has voted prior to the meeting of
stockholders may request the company to acknowledge the receipt
of the vote. The company shall, immediately upon the receipt of
the vote of the stockholder, send an acknowledgement to the
stockholder.
(3) The board shall, upon its own initiative or upon request
of the stockholders who jointly represent at least 20 per cent of
the equity capital of the company and the articles of association
do not provide for a smaller norm of representation, ensure the
stockholder with the right to participate or vote in the meeting
of stockholders through electronic means. In such a case the
board shall determine the requirements for identification of
stockholders and the procedures by which the stockholders can
exercise this right.
(4) It may be determined in the articles of association that
the stockholder has the right to participate or vote in the
meeting of stockholders through electronic means. In such a case
the articles of association shall determine or shall delegate the
board to determine the requirements for identification of
stockholders and the procedures by which the stockholders can
exercise this right.
(5) The right of the stockholder to participate or vote in the
meeting of stockholders through electronic means shall not
restrict the right of the stockholder to participate and vote in
the meeting of stockholders in person.
(6) It may be determined in the articles of association that
the meetings of stockholders shall take place only electronically
and the stockholders participate and vote in the meeting of
stockholders through electronic means. The decision on the
abovementioned amendments to the articles of association is taken
if all of the stockholders with voting rights agree thereto.
(7) The stockholder who votes prior to the meeting of
stockholders or participates or votes in the meeting of
stockholders through electronic means shall be considered present
at the meeting of stockholders and shall be included in the list
referred to in Section 278, Paragraph three of this Law. In such
a case the list shall additionally indicate the manner in which
the stockholder participates or votes in the meeting of
stockholders.
[20 March 2020]
Section 278. List of
Stockholders
(1) Not later than three days prior to a meeting of
stockholders, the board shall compile a list of stockholders
which shall be accessible to stockholders.
(2) The list shall indicate:
1) the given name, surname, and personal identity number (if
the person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) of
the stockholder, but for legal persons - name and registration
number;
2) the category, number and nominal value of stocks owned by
the stockholder;
3) the number of votes arising from the stock owned by the
stockholder.
(3) Prior to the opening of the meeting of stockholders the
board shall compile a list of the stockholders who are
participating in the meeting, indicating the information referred
to in Paragraph two of this Section. In addition the given name,
surname, and personal identity number (if the person does not
have a personal identity number - the date of birth, the number
and date of issue of a personal identification document, the
state and authority, which issued the document) of the
representative of the stockholder (if a proxy has been issued),
but for legal persons - the name (firm name), registration number
and the given name, surname, and personal identity number (if the
person does not have a personal identity number - the date of
birth, the number and date of issue of a personal identification
document, the state and authority, which issued the document) of
the representative thereof shall be indicated in the list.
(31) Information regarding stockholders to whom the
bearer stocks or the stocks in public circulation belong, shall
be indicated in the list referred to in Paragraphs one and three
of this Section in accordance with the information provided by
the Latvian Central Depository regarding stockholders of the
company.
(4) The list of stockholders referred to in Paragraph three of
this Section shall be signed by the authorised representative of
the board, and the stockholders shall be acquainted with it prior
to the first vote.
[14 February 2002; 15 April 2010; 16 June 2011]
Section 279. Voting Rights of
Stockholders
(1) Each minimum nominal value stock with voting rights gives
the right to one vote at a meeting of stockholders. A stockholder
has voting rights in conformity with the total of the nominal
values of the stock with voting rights belonging to them.
(2) In a meeting of stockholders, those stockholders shall
have voting rights who are entered in the list referred to in
Section 278, Paragraph three of this Law.
(3) If a meeting of stockholders has to decide the issue of
terminating the activities of the company, then the holders of
preferential stock shall also have the right to vote on this
issue.
(4) If a meeting of stockholders has to decide the issues of
re-organisation of the company, increase or reduction of the
equity capital, or amendments to the articles of association,
then the holders of preferential stock shall also have the right
to vote on these issues, if such issues may affect their
interests.
[14 February 2002]
Section 280. Restrictions on Voting
Rights
(1) It may be provided for in the articles of association that
only a certain amount of the nominal value of stock gives a right
to one vote, if such provisions in the articles of association
were in effect prior to the issuance of the stock.
(2) A stockholder shall not have voting rights, if:
1) he or she is a member of the council or of the board, a
liquidator, an auditor or a company controller - in the taking of
a decision on the recall of him or her, or the expression of no
confidence in him or her, or the bringing of an action against
him or her;
2) a decision is to be taken in respect of rights which the
company may use against him or her;
3) a decision is to be taken regarding the release of him or
her from obligations or liability towards the company;
4) [14 February 2002];
5) a decision is to be taken regarding the conclusion of a
transaction with the person related to him or her.
(3) The voting rights of a stockholder may also be restricted
in other cases specified by law.
[14 February 2002; 22 April 2004; 14 June 2012]
Section 281. Void Stockholder
Obligations
Obligations shall be void, in which a stockholder
undertakes:
1) to always fulfil the instructions of the company or its
institutions;
2) to always accept the proposals of the company or its
institutions;
3) to base their attitude in voting on remuneration.
Section 282. Course of a Meeting of
Stockholders
(1) In the case referred to in Section 269, Paragraph three,
Clause 2 and Section 270, Paragraph four of this Law a meeting of
stockholders shall be opened by an official of the Commercial
Register Office.
(2) The meeting of stockholders shall elect tellers of
votes.
(3) After the meeting of stockholders is opened, the
stockholders with voting rights shall elect the chairperson of
the meeting.
(4) On the basis of a proposal of the chairperson of the
meeting of stockholders, the meeting shall elect a meeting
secretary (recorder of minutes).
(5) The meeting of stockholders shall also elect at least one
stockholder with voting rights who shall attest to the
correctness of the minutes of the meeting.
(6) Voting at the meeting of stockholders shall be open,
except for cases when a secret ballot is requested by
stockholders who represent at least one tenth of the equity
capital.
[14 February 2002; 22 April 2004; 16 June 2011; 15 June
2017]
Section 283. Information to be
Submitted to a Meeting of Stockholders
(1) Pursuant to the request of stockholders, the board has an
obligation to submit to a meeting information about the economic
circumstances of the company to such an extent as is necessary to
examine the relevant issue on the agenda and to objectively take
a decision.
(2) A board may refuse to submit this information only if:
1) its disclosure may cause serious losses to the company or
to its transaction partners; or
2) such information is not to be disclosed in accordance with
law or the articles of association.
(3) Even if the circumstances referred to in Paragraph two of
this Section exist, the board shall not refuse to submit
information regarding:
1) the profit and losses of the company;
2) the solvency of the company;
3) the development perspectives of the company;
4) concluded transactions between the company and
stockholders, members of the council or members of the board, or
related persons.
(4) Disputes regarding the refusal to disclose information by
the board shall be decided by a court.
[14 February 2002; 14 June 2012]
Section 284. Taking of Decisions by
a Meeting of Stockholders
(1) A meeting of stockholders shall take decisions by a
majority of votes of the stockholders with voting rights present
if the law or articles of association does not specify a larger
number of votes.
(2) Decisions on the making of amendments to the articles of
association, the issuance of convertible debentures, the
reorganisation of the company, entering into a group of companies
agreement, amending or termination thereof, inclusion of the
company, consent for inclusion and the termination, continuation,
suspension or renewal of activities shall be taken by a meeting
of stockholders if not less than three quarters of the
stockholders with voting rights present vote for them, if the
articles of association do not specify a larger number of
votes.
(3) If there are several categories of stock in the company, a
decision on an issue which affects the rights of stockholders of
the relevant category of stock shall be taken if the stockholders
of each of the relevant categories of stock, by a majority of
votes of the stockholders with voting rights present as specified
by law or the articles of association, vote for it in each of
such groups of stockholders.
(4) A decision of a meeting of stockholders in respect of the
company, members of its council and its board, the auditor,
company controller and stockholders shall come into effect from
the time of being taken if a different time period for the coming
into effect of such decision is not specified in this decision or
by law.
(5) In applying amendments to the articles of association to
the Commercial Register Office, an extract from the minutes of
the meeting of stockholders with a decision on amending the
articles of association and the full text of the new wording of
the articles of association signed by the board and the persons
who have signed the relevant minutes of the meeting of
stockholders shall be appended.
[14 February 2002; 22 April 2004; 18 December 2008; 29
November 2012; 2 May 2013 / Amendments to Paragraph two shall
come into force on 1 January 2014. See Paragraph 26 of the
Transitional Provisions]
Section 285. Minutes of a Meeting of
Stockholders
(1) The minutes of a meeting of stockholders shall
indicate:
1) the firm name of the company;
11) the authority which convenes the meeting of
stockholders and the time when a notice regarding convening of
the meeting of stockholders has been sent and when it was
published, if the publication is provided for in the law;
2) the time and place of the meeting of stockholders;
3) the amount of the subscribed equity capital, paid-up equity
capital and equity capital with voting rights of the company;
4) the amount of the equity capital represented at the meeting
of stockholders and the number of votes of stockholders with
voting rights present;
5) the given names and surnames of the chairperson of the
meeting, secretary, tellers of the votes and the shareholders who
will attest to the correctness of the minutes;
6) the agenda of the meeting;
7) the course and content of the discussion of the issues on
the agenda;
8) the decisions taken, indicating the number of votes given
"for" and "against" each decision;
9) the objections by members of the council or of the board,
the auditor, the liquidator or stockholders.
(2) The minutes shall be signed by the chairperson and
secretary of the meeting of stockholders, as well as by at least
one stockholder elected by the meeting - a person who shall
attest to the accuracy of the minutes. The original of the
minutes or a derivative, the accuracy of which shall be confirmed
by the same persons who signed the original, shall be submitted
to the Commercial Register Office.
(3) The list of stockholders which was compiled in accordance
with Section 278 of this Law, and documents that pertain to the
meeting of stockholders shall be appended to the minutes.
(4) Stockholders have the right to become acquainted with the
minutes and the documents appended to it and to receive a copy or
an extract from the minutes free of charge.
[14 February 2002; 16 March 2006; 2 May 2013]
Section 286. Declaration of a
Decision Taken by a Meeting of Stockholders as Void
(1) A court may declare a decision taken by a meeting of
stockholders as void if:
1) it is in contradiction to the purposes of the company, the
public interest or morality;
2) it infringes the rights of third parties;
3) it is in contradiction with law or the articles of
association;
4) the provisions of the law or of the articles of association
regarding the convening of the meeting or the announcement of
information associated with it have been violated;
5) stockholders were unlawfully not allowed to participate in
the meeting;
6) stockholders were unlawfully not allowed to become
acquainted with draft decisions, the list of stockholders
participating at the meeting or the minutes of the meeting of
stockholders;
7) stockholders were unjustifiably refused the provision of
information requested by them, if such has significantly affected
their attitude regarding the relevant issue;
8) the voting provisions were not observed at the meeting and
thereby the results of the voting were significantly affected, or
the provisions of law for the number of votes given were not
observed;
9) the requirements referred to in Section 284, Paragraph
three of this Law were not observed.
(2) Declaration of a decision taken by a meeting of
stockholders as void shall not affect the rights of third parties
obtained in good faith.
[14 February 2002; 22 April 2004]
Section 287. Persons who have the
Right to Bring an Action before a Court
(1) The following persons may bring an action before a court
to declare a decision taken by a meeting of stockholders as
void:
1) a member of the board or council;
2) any stockholder - in the cases referred to in Section 286,
Clauses 1, 2 and 3 of this Law if he or she has voted against the
disputed decision and have requested that this be entered in the
minutes, but if the voting was by secret ballot - has objected to
the disputed decision and has requested that this be entered in
the minutes;
3) a stockholder who did not take part in the meeting - in the
cases referred to in Section 286, Clauses 4 and 5 of this
Law;
4) a stockholder who was not allowed to become acquainted with
the documents specified by law - in the case referred to in
Section 286, Clause 6 of this Law;
5) a stockholder, to whom the provision of information
requested by him or her was unjustifiably refused - in the case
referred to Section 286, Clause 7 of this Law if the vote of this
stockholder will be decisive for the voting result;
6) a stockholder whom an opportunity to vote was not given or
who disputes the right of another stockholder to vote or
otherwise disputes the voting procedure - in the case referred to
in Section 286, Clause 8 of this Law;
7) an interested stockholder - in the case referred to in
Section 286, Clause 9 of this Law.
(2) [15 June 2017]
[14 February 2002; 15 June 2017]
Section 288. Bringing of an
Action
(1) The time period for the bringing an action to declare a
decision of a meeting of stockholders as void shall be three
months from the day when a person should have got to know the
decision of the meeting, but not more than a year from the day of
occurrence of the meeting.
(2) [15 June 2017]
(3) An action to declare a decision of a meeting of
stockholders as void shall be brought against the company.
(4) If an action is brought by a member of the board, the
company shall be represented in court by the council.
[15 June 2017]
Section 289. Procedures for the
Enforcement of a Court Ruling to Recognise a Decision of a
Meeting of Stockholders as Void
(1) [15 June 2017]
(2) If a court declares a decision taken by a meeting of
stockholders as void, the company has an obligation to submit to
the Commercial Register Office an application for the amendment
of the entry, which was made based upon the referred to decision
of the meeting of stockholders.
[15 June 2017]
Section 290. Liability for
Unjustifiably Disputing a Decision of a Meeting of
Stockholders
If plaintiffs have brought an action in bad faith or because
of gross carelessness, they shall be solidarily liable for any
losses incurred by the company due to the unjustified disputing
of decision of a meeting of stockholders.
[14 February 2002]
Section 291. Council
Council is the supervisory institution of the company, which
represents the interests of stockholders during the time periods
between the meetings of stockholders and supervises the
activities of the board within the scope specified in this Law
and the articles of association.
Section 292. Functions of a
Council
(1) The council shall have the following functions:
1) to elect and recall members of the board and to continually
supervise the activities of the board;
2) to monitor that the business of the company is conducted in
accordance with law, the articles of association and the
decisions of the meeting of stockholders;
3) to examine the annual accounts of the company and the
proposal of the board for the use of the profits and draw up a
report (Section 174);
4) to represent the company in a court in all actions brought
by the company against members of the board as well as in actions
brought by the board against the company and to represent the
company in other legal relations with members of the board;
5) to approve the concluding of a transaction or to give a
consent for the concluding of a transaction between the company
and member of the board or council, or the related person, or the
auditor;
6) to examine in advance all issues which are within the
competence of the meeting of stockholders or which, pursuant to
the proposal of members of the board or the council, have been
proposed for discussions at the meeting, and to provide its
opinion on such issues;
7) to give a consent for a decision of the board to increase
the equity capital in the case referred to in Section 249,
Paragraph four of this Law and to make amendments to the articles
of association of the company in the case referred to in Section
249, Paragraph five of this Law.
(2) Stockholders who jointly represent not less than one tenth
of the equity capital of the company have the right to request of
the council in writing, indicating the reasons, that the council
examine the activities of the board. If within a month the
council has not carried out such examination or submitted a
reply, the stockholders have the right to give this issue to the
meeting of stockholders for examination.
(3) The council shall provide explanations to the meeting of
stockholders regarding the report thereof (Section 175), if it is
requested by at least one stockholder.
[14 February 2002; 22 April 2004; 24 April 2008; 14 June
2012]
Section 293. Rights of a Council
(1) The council has the right at any time to request that the
board report on the circumstances of the company and to become
acquainted with all of the activities of the board.
(2) The council has the right to examine the company's
registers and documents, as well as the cashier's office and all
of the property of the company.
(3) The council may entrust one of its members to perform an
examination or invite experts to perform the examination or to
clarify separate issues.
(4) The council has the right to convene a meeting of
stockholders or to request that the board convene the meeting if
the interests of the company so require.
(5) The council does not have the right to decide issues,
which are within the competence of the board.
Section 294. Consent of a Council
for the Activities of the Board
(1) It may be specified in the articles of association that
the board shall require the consent of the council to decide on
issues of major importance. The following shall be deemed to be
such issues of major importance:
1) acquiring participation in other companies and increasing
or decreasing such participation;
2) acquisition or alienation of undertakings;
3) acquisition of immovable property, alienation or
encumbering rights pertaining to property;
4) opening or closing of branches and representative
offices;
5) concluding of such transactions as exceed the amounts
specified in the articles of association or a decision of the
council;
6) issuing of such loans as are not related to the usual
commercial activities of the company;
7) issuing loans to employees of the company;
8) starting new kinds of activities or ceasing existing
activities;
9) determining the general principles for activities.
(2) The company may also provide for other issues in its
articles of association, for the deciding of which the board must
receive the consent of the council.
(3) If the council rejects a proposal of the board with
respect to the issues referred to in Paragraphs one and two of
this Section, the board has the right to convene an extraordinary
meeting of stockholders, which shall take a decision on the
relevant issue.
(4) The fact that the board has not received the consent of a
council shall not be binding as to third parties. The
announcement of the fact referred to or the existence of relevant
provisions of the articles of association shall not be sufficient
grounds to recognise this fact as binding on third parties,
except in cases when the person knew that the consent of the
council was necessary and that it was not given.
Section 295. Composition of a
Council
(1) Only natural persons with the capacity to act may be
council members.
(2) The following may not be council members:
1) members of the board, the auditor, procurator or a person
with a commercial power of attorney of this company;
2) members of the board of any dependent company of the
company or any person with the right to represent the dependent
company; or
3) [22 April 2004].
(3) The articles of association may specify stricter
restrictions for council members.
(4) The minimum number of council members shall be three, but
if the stock of the company is in public turnover - the minimum
number of council members shall be five.
(5) The maximum number of council members shall be twenty.
(6) A council member may not entrust to another person the
performance of his or her obligations.
[22 April 2004]
Section 296. Election and Recall of
Council Members
(1) The council shall be elected for a period which is not
longer than five years.
(2) A council member may not be elected without his or her
consent. In his or her written consent, the council member
candidate shall indicate any potential obstacles for holding the
position in accordance with the provisions of law or the articles
of association, or certify that he or she does not have such
obstacles.
(21) The Commercial Register Office shall be
submitted a written consent of the member of the council, in
which he or she shall indicate the firm name and the registration
number of the company, in which he or she agrees to become the
member of the council.
(3) [15 June 2017]
(4) A stockholder or group of stockholders are entitled to
nominate for election their candidates on the basis of a
calculation such that by dividing the capital with voting rights
represented by the stockholder or group of stockholders by the
number of candidates to be nominated, each of the candidates
shall have not less than five per cent of the capital with voting
rights represented at the meeting of stockholders. Each of such
nominated candidates shall be included in the council members
voting list.
(5) Voting shall take place in one ballot for all the council
member candidates included on the list voting by all the
stockholders at the same time. A stockholder is entitled to give
his or her vote for one or more of the candidates included in the
list in any proportion of whole numbers.
(6) As elected to the council shall be considered those
persons who have gained the most votes, taking into account the
maximum number of council members specified in the articles of
association. If two or more council member candidates have gained
an equal number of votes and therefore it cannot be determined
which of them is to be considered elected, the issue shall be
decided by a vote of the meeting of stockholders for each of
these candidates, and as elected shall be considered that
candidate who in the repeated ballot has gained the largest
number of votes.
(7) Council members may be recalled from their position at any
time by a decision of a meeting of stockholders.
(8) A member of the council may relinquish his or her position
at any time, submitting a notice to the company.
(9) If a council member leaves his or her position or is
recalled from position before the expiration of the time period
of the council, new council member elections shall take place in
which the whole composition of the council shall be
re-elected.
(10) The board shall inform the Commercial Register Office
regarding changes in the composition of the members of the
council and submit a list of council members, a written consent
of each member of the council and the relevant decision of a
meeting of stockholders or the relevant council member
notice.
(11) The company which has one stockholder has the right not
to apply the re-election procedures laid down in Paragraph nine
of this Section. In such case a member of the council shall be
elected for a time period which is not longer than five years and
a written consent of the member of the council shall be submitted
to the Commercial Register Office by the new member of the
council.
[14 February 2002; 22 April 2004; 16 March 2006; 15 April
2010; 29 November 2012; 15 June 2017]
Section 297. Management of a
Council
(1) Members of the council shall elect a chairperson of the
council and at least one deputy chairperson.
(2) A deputy chairperson of the council shall perform the
duties of the chairperson of the council only if the chairperson
of the council is absent (illness, business trip, vacation and
the like), or has assigned such a task.
Section 298. Convening of Council
Meetings
(1) The chairperson of the council shall convene council
meetings, but in his or her absence or by assignment - his or her
deputy, according to necessity, but not less than once per
quarter.
(2) Every council member, as well as the board, has the right
to request the council to convene a meeting, substantiating the
necessity to convene a meeting and its purpose.
(3) If the chairperson of the council does not fulfil the
request regarding the convening of a council meeting within two
weeks from the time of its receipt, the initiator of the meeting
has the right to convene a council meeting, explaining the
circumstances of the matter.
Section 299. Taking of Decisions by
a Council
(1) A council shall be entitled to take decisions if more than
one half of the council members participate at the council
meeting. If a council is composed of fewer members than is
provided for in the articles of association, the quorum shall be
determined according to the number of council members specified
in the articles of association.
(2) A council shall take its decisions by a simple majority of
votes of those present, if the articles of association do not
specify a larger majority of votes. It may be determined in the
articles of association that in the event of tied vote, the vote
of the chairperson of the council shall prevail.
(21) If a member of the council does not have the
voting rights, the majority of votes shall be determined
according to the votes of the present members of the council with
the right to vote.
(3) A council member who does not take part in a council
meeting, may give his or her vote in writing, submitting it to
another council member. Voting may be done by telephone or other
means only if the means of communication used allows council
members to simultaneously participate in the discussion of the
issue and the taking of the decision, and if such activities are
appropriately documentarily recorded.
(4) Minutes shall be taken of council meetings. The following
shall be indicated in the minutes:
1) the firm name of the company;
2) the place and time of the council meeting;
3) the participants at the meeting;
4) the issues on the agenda;
5) the course and content of the discussion of the issues on
the agenda;
6) the results of the voting, indicating each council member's
vote "for" or "against" each decision;
7) the decisions taken.
(5) If a council member disagrees with a decision of the
council and votes against it, his or her differing view shall be
recorded in the minutes of the council meeting pursuant to his or
her request.
(6) The minutes of the council meetings shall be signed by the
chairperson of the meeting and at least one more participant of
the meeting. The original of the minutes or a derivative, the
accuracy of which shall be confirmed by the chairperson of the
council meeting, shall be submitted to the Commercial Register
Office.
[14 February 2002; 16 June 2005; 14 June 2012; 15 June
2017; 20 March 2017]
Section 300. Remuneration for
Council Members
The meeting of stockholders shall determine the remuneration
for council members.
Section 301. Board
(1) A board is the executive institution of the company, which
manages and represents the company.
(2) A board shall supervise and manage the affairs of the
company. It shall be responsible for the commercial activities of
the company, as well as for accounting, in compliance with
law.
(3) A board shall administer the property of the company and
shall act with its means according to the requirements of law,
the articles of association and decisions of meetings of
stockholders.
Section 302. Rights of a Board to
Manage the Company
The members of a board shall manage the company only
jointly.
Section 303. Representation Rights
of a Board
(1) All members of the board have representation rights.
Members of the board shall represent the company jointly if the
articles of association do not specify otherwise.
(2) In the case of joint representation, the members of the
board may authorise from among themselves one or more members of
the board to conclude specific transactions or specific types of
transactions.
(3) The representation rights of the board in respect of a
third party may not be restricted. The rights of the members of
the board, which are specified in the articles of association, to
represent the company jointly or individually shall not be deemed
to be restrictions of the representation rights of the board
within the meaning of this Section.
(4) In relation to the company, members of the board shall
observe the restrictions on representation, which are specified
in the articles of association, decisions of the meeting of
shareholders and of the council, as well as the prohibition to
perform commercial activities of all types or specific type or to
hold specific positions.
[14 February 2002; 22 April 2004; 29 November 2012]
Section 304. Composition of a
Board
(1) The board may consist of one or several members of the
board. If the stock of the company is in public turnover, the
minimum number of members of the board shall be three
members.
(2) Only natural persons with the capacity to act may be
members of a board.
(3) The following may not be members of a board:
1) members of the council of the company;
2) the auditor of the company;
3) [29 November 2012];
4) a member of the council of the dominant undertaking of a
group of companies.
(4) The articles of association may provide for stricter
restrictions to be applied to members of the board.
(5) [22 April 2004]
[22 April 2004; 29 November 2012]
Section 305. Election of Members of
a Board and Specification of Representation Rights
(1) Members of a board shall be elected by the council.
(2) A member of a board may not be elected without his or her
consent. The member of the board shall indicate the potential
obstacles for holding the position in accordance with Sections
4.1, 4.2, 171 and 304 of this Law and the
potential obstacles for the implementation of the right of
representation of the company in accordance with Sections
4.1 and 4.2 of this Law, or certify that he
or she does not have such obstacles.
(21) The Commercial Register Office shall be
submitted a written consent of the member of the board, in which
he or she shall indicate the firm name and the registration
number of the company, in which he or she agrees to become the
member of the board.
(3) Members of a board shall be elected to position for five
years if the articles of association do not specify a shorter
term.
(4) The council shall appoint the chairperson of the board
from among the members of the board.
(5) [14 February 2002]
[14 February 2002; 16 March 2006; 15 April 2010; 29
November 2012; 2 May 2013]
Section 306. Recall of Members of a
Board and Their Rights to Withdraw from Position
(1) Members of a board may be recalled by the council if there
are important reasons.
(2) Such important reason shall, in any case, be considered to
be gross violations of authority, failure to perform or to
appropriately perform his or her obligations, an inability to
manage the company, or causing harm to the interests of the
company, as well as loss of confidence expressed at a meeting of
stockholders.
(3) A member of the board may leave the position of the member
of the board, by submitting a notice thereof to the company.
[14 February 2002; 22 April 2004]
Section 307. Announcement of Changes
in the Composition of a Board and Representation Rights
The board shall declare changes in the composition of the
board and representation rights to the Commercial Register
Office, submitting a list of members of the board and the
relevant decision of the council or the notice of the member of
the board.
[14 February 2002; 22 April 2004]
Section 308. Remuneration of Members
of a Board
(1) Members of a board have the right to receive remuneration
according to the scope of their obligations and the financial
circumstances of the company.
(2) The amount of remuneration for members of the board shall
be determined by the council.
[14 February 2002]
Section 309. Restrictions on Members
of a Board of the Company
(1) [14 February 2002]
(2) [14 February 2002]
(3) If there is a conflict of interest between the company and
any member of the board or the related person, the issue shall be
decided at a board meeting, in which the interested member of the
board shall not have voting rights, and this shall be noted in
the minutes of the board meeting. A member of the board has an
obligation to notify of such interests before the beginning of a
board meeting.
(4) The provisions of Paragraph three of this Section shall
also apply to such members of the board, who are a relative of
the interested member of the board up to the second degree of
kinship, the spouse or brother-in-law or sister-in-law up to the
first degree of affinity, or a person with whom he or she has a
shared household.
(5) The non-compliance with the requirements of this Section
shall not affect the validity of the transaction concluded
between the company and a member of the board or the related
person. A member of the board who violates the requirement of
this Section shall be liable for the losses incurred by the
company.
[14 February 2002; 14 June 2012]
Section 310. Taking of Decisions by
a Board
(1) A board has the right to take decisions if more than one
half of the members of the board take part in the meeting of the
board. If a specific number of the members of the board is
provided for in the articles of association and if the board has
fewer members than provided for in the articles of association,
the quorum shall be determined according to the number of members
of the board laid down in the articles of association.
(2) The board shall take its decisions with simple majority of
votes of those present, if the articles of association do not
specify a larger majority of votes. It may be determined in the
articles of association that in the event of tied vote the vote
of the chairperson of the board shall prevail.
(21) If a member of the board does not have the
voting rights, the majority of votes shall be determined
according to the votes of the present members of the board.
(3) The board meetings shall be recorded in minutes. The
following shall be indicated in the minutes:
1) the firm name of the company;
2) the place and time of the board meeting;
3) the participants at the meeting;
4) the issues on the agenda;
5) the course and content of the discussion of the issues on
the agenda;
6) the results of the voting, indicating the vote of each
member of the board "for" or "against" each decision;
7) the decisions taken.
(4) If a member of the board disagrees with a decision of the
board and votes against such, his or her different opinion shall
be recorded in the minutes of the board meeting at his or her
request.
(5) The minutes of the board meetings shall be signed by the
chairperson of the meeting and at least one more participant of
the meeting.
[16 June 2005; 14 June 2012; 15 June 2017; 20 Mach
2020]
Section 310.1
Invalidation of a Decision Taken by the Board on Increase of the
Equity Capital
(1) The court may recognise as invalid a decision of the board
on increase of the equity capital in the cases referred to in
Section 286, Paragraph one, Clauses 1, 2 and 3 of this Law, as
well as if the procedures for increase of the equity capital have
been violated.
(2) Any stockholder may bring an action to the court regarding
recognition of a decision of the board on increase of the equity
capital as invalid.
(3) The time period for bringing the action referred to in
Paragraph two of this Section shall be three months from the day
when the stockholder got to know or when he or she should have
get to know the decision of the board, but not more than a year
from the day of taking of the decision.
[24 April 2008]
Section 310.2 Procedures
for the Enforcement of a Court Ruling to Recognise a Decision of
the Board on Increase of the Equity Capital as Void
[15 June 2017]
Section 310.3 Liability
for Unjustified Contesting of a Decision of the Board on Increase
of the Equity Capital
The claimants shall be solidarily liable for the losses caused
to the company upon unjustified contesting of a decision of the
board on increase of the equity capital, if they have brought an
action in bad faith or by gross negligence.
[24 April 2008]
Section 311. Report of a Board
(1) The board has an obligation to report in writing regarding
its activities to the council once every quarter, but at the end
of the year - to a meeting of stockholders. The report shall
reflect:
1) the results of the commercial activities of the
company;
2) the economic circumstances of the company, profitability,
turnover and movement of securities;
3) the circumstances, which could have impact upon the
economic circumstances of the company;
4) the planned policies for commercial activities of the
company in the next accounting period.
(2) The board shall inform the council also regarding other
significant aspects of the company's activities.
Division
XIV
TERMINATION OF ACTIVITIES AND LIQUIDATION OF CAPITAL COMPANY
Section 312. Grounds for Terminating
the Activities of a Capital Company
(1) The activities of a capital company (hereinafter in this
Division - the company) shall be terminated:
1) by a decision of shareholders;
2) by a court ruling;
3) with the commencement of bankruptcy procedures;
4) with the termination of the time period specified in the
articles of association (if the company was founded for a
definite time period);
5) having achieved the purposes specified in the articles of
association (if the company was founded to achieve specified
purposes); or
6) in other cases as specified by law or the articles of
association.
(2) The termination of activity of a partnership shall be
applied for entering in the Commercial Register by indicating in
the application the reason for termination of activity of the
partnership.
[15 June 2017]
Section 313. Termination of
Activities of the Company based upon a Decision of
Shareholders
(1) A decision on the termination of the activities of the
company shall be taken at a meeting of shareholders.
(2) The board has the obligation to provide to the
shareholders a report regarding the previous accounting year and
regarding the activities of the company in the current year.
(3) In the report on economic activities, the time period
during which the company may satisfy the claims of its creditors
shall be indicated.
Section 314. Termination of
Activities of the Company based upon a Court Ruling
(1) The activities of the company may be terminated based upon
a court ruling if:
1) the documents of incorporation of the company are in
contradiction to law;
2) the equity capital of the company does not comply with the
requirements of law;
3) the company has not submitted to the Commercial Register
Office the information or documents required by law;
4) the shareholders have not taken a decision on the
termination of the activities of the company in cases when they
should have done so in accordance with law or the articles of
association;
5) [29 November 2012];
51) the limited liability company referred to in
Section 185.1, Paragraph one of this Law has not
increased the equity capital according to the provisions of
Section 185.1, Paragraph six of this Law;
6) in other cases specified by law.
(2) An action before a court may be brought by a member of the
board or of the council, a shareholder, the Commercial Register
Office, as well as third parties whose lawful rights have been
infringed.
(21) The third party whose lawful rights have been
infringed may bring an action in a court in the case referred to
in Paragraph one, Clause 2 or 3 of this Section.
(3) The Commercial Register Office may bring an action in a
court in the cases referred to in Paragraph one, Clauses 1, 3 and
5.1 of this Section if the company has not rectified
the indicated deficiencies within three months after receiving a
written warning.
(4) Up to the time of making of the ruling to terminate the
activities of the company, a court may specify a time period
within which the company must rectify the deficiencies, which
would be the grounds for the termination of its activities. The
time period for rectification of deficiencies shall not exceed
three months.
[22 April 2004; 15 April 2010; 29 November 2012; 15 June
2017]
Section 314.1 Termination
of Activities of the Company on the Basis of a Decision of the
Commercial Register Office or Tax Authority
(1) Activities of the company may be terminated on the basis
of a decision of the Commercial Register Office if:
1) the board of the company has not had the right of
representation for more than three months and the society has not
rectified the indicated deficiency within three months after
receipt of a written warning;
2) the company in conformity with Section 12, Paragraph four
of this Law cannot be reached at its legal address and has not
rectified the indicated deficiency within two months after
receipt of a written warning.
(2) Activities of the company may be terminated on the basis
of a decision of the tax authority if:
1) the company has not submitted an annual report within one
month after administrative punishment was imposed and at least
six months have passed since the violation was committed;
2) the company has not submitted the declarations for the time
period of six months, provided for in tax laws, within one month
after administrative punishment was imposed;
3) activities of the company have been suspended on the basis
of a decision of the tax authority, and the company has not
rectified the indicated deficiency within three months after
activities thereof were suspended.
(3) A decision of the Commercial Register Office or tax
authority on termination of activities of the company shall enter
into effect within one month after notification thereof to the
company, if the decision has not been contested or appealed in
accordance with the procedures specified by law.
(4) Paragraph one and Paragraph two, Clause 2 of this Section
shall not be applied, if an entry has been made in the Commercial
Register regarding suspension of activities of a merchant on the
basis of a decision of the merchant.
[29 November 2012; 15 June 2017]
Section 315. Termination of
Activities of the Company in the Case of Bankruptcy
Procedures by which the activities of the company shall be
terminated in the case of bankruptcy, shall be regulated by a
separate law.
Section 316. Continuation of the
Activities of the Company after the Expiration of the Time Period
for Activities or after the Achievement of Purposes
If the time period for the activities of the company, as
specified in the documents of incorporation, expires or if the
specified purpose has been achieved, the shareholders may take a
decision to continue activities, or to reorganise the company and
make the necessary amendments to the documents of
incorporation.
Section 317. Liquidation
(1) In the case of the termination of the activities of the
company, it shall be liquidated if the law does not specify
otherwise.
(2) Liquidation of the company shall not take place and the
Commercial Register Office shall take a decision on deletion of
the company from the Commercial Register, if none of the persons
interested in liquidation of the company submits an application
to a court of the Commercial Register Office regarding appointing
of a liquidator and insolvency proceedings have not been applied
in relation to the company.
(3) Property which remains after deletion of the company from
the Commercial Register falls within the jurisdiction of the
State.
[29 November 2012; 6 July 2021]
Section 318. Appointment of
Liquidators
(1) Liquidation shall be performed by the members of the board
if the articles of association, the decision of a meeting of
shareholders or a court ruling does not specify otherwise.
(2) If a meeting of shareholders appoints a liquidator, it
shall determine the amount of and procedures for the remuneration
of the liquidator.
(3) If the activities of the company are terminated on the
basis of a court ruling and the person interested in liquidation
of the company has recommended a candidate for the liquidator to
the court, or if it is requested by the shareholders who
represent not less than one tenth of the equity capital, the
liquidator shall be appointed and the amount of and procedures
for the remuneration of the liquidator shall be determined by the
court.
(4) One liquidator or several liquidators may be
appointed.
[29 November 2012]
Section 318.1 Appointing
of a Liquidator on the Basis of an Application of the Person
Interested in Liquidation of the Company
(1) A liquidator, on the basis of an application of the person
interested in liquidation, may be appointed by a court or the
Commercial Register Office.
(2) If a claim has been brought before a court regarding the
termination of activities of the company, any person interested
in liquidation of the company may recommend a candidate for the
liquidator to the court.
(3) If the activities of the company have been terminated on
the basis of a decision of the Commercial Register Office or tax
administration, or activities of the company have been terminated
on the basis of a court ruling, and none of the interested
persons has recommended to court a candidate for the liquidator,
the Commercial Register Office shall, after an entry on the
termination of activities of the company has been made in the
Commercial Register, publish on its website a notice regarding
termination of activities of the company. In the notice the
persons interested in liquidation of the company shall be invited
to submit an application to the Commercial Register Office
regarding appointing of a liquidator within one month after the
day when it was published.
(4) A person interested in liquidation of the company shall
indicate the place and time period for applying claims of
creditors in the application referred to in Paragraphs two and
three of this Section. The document referred to in Section 320,
Paragraph one, Clause 2 of this Law may be appended to the
application.
(5) The Commercial Register Office shall make an entry
regarding appointing of a liquidator on the basis of the
application submitted by the person interested in liquidation of
the company regarding appointing of a liquidator.
(6) The Commercial Register Office shall publish on its
website a notice regarding appointing of a liquidator.
(7) The amount and procedures for disbursement of remuneration
of a liquidator shall be determined by the person interested in
liquidation of the company, which has submitted the application
referred to in Paragraph five of this Section.
[29 November 2012; 15 June 2017; 6 July 2021]
Section 318.2 Covering of
Costs of Liquidation if the Liquidator has been Appointed on the
Basis of an Application of the Person Interested in Liquidation
of the Company
(1) The costs of liquidation shall be covered by the person
interested in liquidation of the company, who has submitted the
application referred to in Section 318.1, Paragraph
five of this Law.
(2) The costs of liquidation covered by the person interested
in liquidation of the company shall be repaid from the property
of the company.
[29 November 2012]
Section 319. Requirements Set for
Liquidators
(1) A natural person with the capacity to act may be a
liquidator.
(2) [15 April 2010]
(3) A person who may not be a member of the board of the
company in accordance with the restrictions specified in the
first sentence of Section 221, Paragraph four and Section 304,
Paragraph three of this Law may not be a liquidator.
(4) The liquidator has a duty to notify shareholders regarding
potential obstacles for holding the position in accordance with
Sections 4.1, 4.2, 171, 221, and 304 of
this Law and the potential obstacles for the implementation of
the right of representation of the company in accordance with
Sections 4.1 and 4.2 of this Law, or
certify that he or she does not have such obstacles.
[15 April 2010; 29 November 2012]
Section 320. Application regarding
the Termination of the Activities of the Company and the
Liquidation Thereof
(1) The board shall, within three days from the date of taking
a decision on the termination of the activities of the company,
submit the decision for entering in the Commercial Register. The
place and time period for applying claims of creditors shall be
indicated in the application. The following shall be attached to
the application:
1) an extract of the minutes of the meeting of shareholders
with the decision on termination of the activities of the
company; and
2) a written consent of each liquidator to be a liquidator.
The liquidator shall indicate the firm name and the registration
number of the company, in which he or she agrees to become a
liquidator.
(2) If the activities of the company are terminated on the
basis of a court ruling, the court shall send the relevant ruling
for making of an entry in the Commercial Register within three
days after the day of entering into effect of the ruling.
(21) If the activities of the company are
terminated on the basis of a decision of the tax authority, the
tax authority shall send a relevant decision for making of an
entry in the Commercial Register within three days after the day
of entering into effect of the decision.
(3) If the liquidation is carried out by members of the board,
this fact shall be indicated in the application or the court
ruling, and the documents referred to in Paragraph one, Clause 2
of this Section need not be appended thereto.
[15 April 2010; 29 November 2012; 2 May 2013; 15 June
2017]
Section 321. Removal of
Liquidators
(1) Liquidators may be removed by a decision of the meeting of
shareholders, except the case referred to in Paragraph
3.1 of this Section.
(2) Liquidator may be removed by a court ruling based upon the
application of the shareholder or a third party if there are
important reasons for it.
(3) A liquidator appointed by a court may only be removed by a
court ruling based upon the application of the shareholder or a
third party if there are important reasons for it, and by
concurrently appointing a new liquidator.
(31) A liquidator appointed on the basis of an
application of the person interested in liquidation of a company
to the Commercial Register Office, may be suspended by the
interested person who appointed the liquidator, appointing a new
liquidator.
(4) The decision to remove a liquidator shall be submitted by
the new liquidator to the Commercial Register Office within three
days from the day when the decision was taken.
[29 November 2012]
Section 322. Rights and Obligations
of Liquidators
(1) Liquidators shall have all the rights and obligations of
the board and the council which are not in contradiction with the
purposes of the liquidation.
(2) Liquidators shall collect debts including amounts, which
are due the company regarding unpaid capital shares, sell the
property of the company and satisfy the claims of creditors.
(3) Liquidators may only conclude such transactions as are
necessary for the liquidation of the company.
(4) If the liquidation of the company is performed by several
liquidators, they have the right to represent the company only
jointly. Liquidators may authorise one or several persons from
among themselves for the performance of particular activities or
particular types of activities.
(5) Any restrictions on representation of a liquidator shall
not be binding on third parties.
(6) During the liquidation, the word "likvidējamā" [under
liquidation] must be added to the firm name of the company.
[29 November 2012]
Section 323. Submission of an
Insolvency Petition
If it is found during the course of the liquidation that the
property of the company is not sufficient to satisfy all the
legitimate claims of creditors, the liquidator has an obligation
to submit an insolvency petition in accordance with the
procedures specified by law.
Section 324. Informing the
Creditors
(1) The Commercial Register Office shall publish on its
website a notice regarding termination of activities and
commencement of liquidation of the company.
(2) A liquidator shall, not later than on the day of
publication of the notice referred to in Paragraph one of this
Section, send a notice regarding the commencement of liquidation
to all known creditors of the company.
(3) In the notice referred to in Paragraphs one and two of
this Section and Section 318.1, Paragraph six of this
Law, the creditors of the company shall be invited to submit
their claims within one month after the day of publication of the
notice if a longer period of time for submissions by creditors
has not been specified in a decision of a meeting of shareholders
or a court ruling.
(4) [15 June 2017]
[15 April 2010; 29 November 2012; 15 June 2017; 6 July
2021]
Section 325. Submission of
Claims
Creditors shall submit their claims against the company to the
liquidator within the specified time period. In the claims,
creditors shall state the contents of their claims, the basis and
amount, and append documents on which the claims are based.
Section 326. Liquidation Initial
Financial Accounts
[15 June 2017]
Section 327. Protection of
Creditors
(1) If a known creditor has not submitted his or her claim,
does not accept fulfilment or the obligation is not ripe for
fulfilment, the amounts due to him or her shall be deposited at a
sworn notary according to the legal address of the company.
(2) When there exist disputable creditor claims, the property
of the company may be divided among the shareholders only if the
relevant creditor is given security.
[29 November 2012]
Section 328. Closing Financial
Accounts and Plan for Division of Property
(1) After the claims of creditors have been satisfied or the
monies due them are deposited and the liquidation expenditures
have been covered, the liquidator shall compile a liquidation
closing financial account and a plan for the division of the
remaining property, in which a liquidation quota shall be
determined.
(2) An auditor shall examine the liquidation closing financial
account and the plan for division of the remaining property. For
limited liability companies, an examination by an auditor shall
be performed if, in accordance with the articles of association
of the company, it is provided that the annual accounts of the
company shall be examined by an auditor or if it is so decided by
a meeting of shareholders.
(3) The liquidator shall send the liquidation closing
financial account and the plan for division of the remaining
property to all shareholders. The notice to the holders of bearer
stock shall be published in the official gazette Latvijas
Vēstnesis, indicating the place where the liquidation closing
financial account and the plan for division of the remaining
property are accessible.
(4) If violations of the law, the articles of association or
the decisions of a meeting of shareholders have been made in the
preparation of the liquidation closing financial account and the
plan for division of the remaining property, a court, based upon
an action by an interested person, may decide regarding the
preparation of a new liquidation closing financial account and
plan for division of the remaining property or the performance of
additional liquidation activities. The time period for bringing
an action shall be two months from the day when the liquidation
closing financial account and the plan for division of the
remaining property were sent to shareholders, but in relation to
holders of bearer stock - two months from the day of publication
of the notice.
[14 February 2002; 29 November 2012]
Section 329. Preservation of Company
Documents
A liquidator shall, in conformity with the provisions of the
Law on Archives, ensure the preservation of and access to the
documents of the company. The liquidator shall give the documents
of the company for preservation to one of the shareholders of the
company or to the third party in Latvia, co-ordinating the place
of storage thereof with the National Archives of Latvia. The
documents of archival value of the company, shall be given for
preservation to the National Archives of Latvia in conformity
with the provisions of the Law On Archives. Expenditures related
to the giving of the documents for preservation to the National
Archives of Latvia shall be covered from the property of the
company to be liquidated.
[29 November 2012]
Section 330. Division of the
Remaining Property of the Company
(1) The remaining property of the company shall be divided
among the shareholders in accordance with the plan for division
of the remaining property prepared by the liquidator, in
proportion to the shares owned by each shareholder, if the
founding documents do not specify otherwise.
(2) The property may be divided not earlier than two months
from the day when the liquidation closing financial account and
the plan for division of the remaining property has been sent to
shareholders or a notice was published regarding the opportunity
to become acquainted with them (if such publication is required
by law).
(21) The property may be divided before the term
laid down in Paragraph two of this Section, if all shareholders
agree thereto.
(3) [15 April 2010]
(4) All disbursements to the shareholders shall be conducted
in money, if the articles of association do not specify
otherwise.
(5) Liquidators also may not sell property if it is not
necessary for satisfaction of the claims of creditors and if it
is specified in the decision on the termination of the activities
of the company.
[14 February 2002; 15 April 2010; 15 June 2017]
Section 331. Continuation of the
Activities of the Company
(1) If the company is liquidated on the basis of the
provisions referred to in the articles of association of the
company regarding the termination of the activities of the
company or a decision taken by a meeting of shareholders, the
shareholders, up to the commencement of the division of property
may take a decision on continuation of the activities of the
company or its reorganisation. The decision shall be considered
as taken if it is voted for by the shareholders present with the
same number of votes as is provided for the taking of a decision
on the termination of the company's activities.
(2) In taking a decision on the continuation of the activities
of the company, the board and the council of the company shall
also be formed concurrently, as well as the equity capital of the
company shall be reduced in conformity with the amount of the
remaining property. If the amount of the remaining property is
less than the minimum amount of equity capital as specified by
law, the meeting of shareholders shall decide on an increase of
the equity capital.
(3) A liquidator shall submit an application to the Commercial
Register Office regarding continuation of the activities by
appending the decision on the continuation of the activities
thereto. The decision on the continuation of the activities of
the company shall come into effect after entering thereof in the
Commercial Register.
[15 June 2017]
Section 332. Deletion from the
Commercial Register
(1) After the division of the remaining property of the
company, the liquidator shall submit an application for the
completion of liquidation to the Commercial Register Office. The
liquidation closing financial account and the plan for division
of the remaining property, as well as the opinion of the auditor
(if an audit examination was performed), shall be appended to the
application.
(2) In the application, the liquidator shall certify that:
1) the liquidation closing financial account and the plan for
division of the remaining property have not been disputed in a
court or that an action was rejected;
2) all the creditors' claims have been satisfied or that the
amounts to meet the claims were deposited and all liquidation
expenditure has been covered;
3) the documents of the company were transferred to the
archive for preservation;
4) in the case referred to in Section 330, Paragraph
2.1 of this Law all shareholders have agreed to the
division of the remaining property of the company prior to the
term specified in Section 330, Paragraph two of this Law.
[14 February 2002; 15 April 2010]
Section 333. Liability of
Liquidators
(1) A liquidator shall be liable for any losses incurred
through his or her own fault.
(2) If there are several liquidators, they shall be solidarily
liable for the losses incurred through their own fault.
Division
XIV.1
Suspension and Renewal of Activities of a
Merchant
[29 November 2012 / Division
shall come into force on 1 May 2014. See Paragraph 26 of the
Transitional Provisions]
Section 333.1 Basis for
Suspension and Renewal of Activities
Activities of a merchant may be suspended and renewed:
1) by a decision of the merchant;
2) by a decision of the tax authority;
3) by a ruling made within the criminal proceedings.
Section 333.2 Entry
Regarding Suspension and Renewal of Activities
(1) Activities of a merchant shall be suspended from the day
when information regarding suspension of activities of the
merchant has been entered in the Commercial Register.
(2) Activities of a merchant shall be renewed from the day
when information regarding renewal of activities of the merchant
has been entered in the Commercial Register.
Section 333.3 Suspension
of Activities on the Basis of a Decision of the Merchant
(1) A merchant may take a decision on suspension of activities
if:
1) it does not have tax debts and it has settled tax
liabilities for the time period when the activities were
suspended;
2) it does not have employees;
3) it has submitted an annual report - or in the cases
specified by law - a financial report on the last accounting
year;
4) it has submitted a report on economic activities to the tax
authority regarding the time period after the end of the
preceding accounting year;
5) it has satisfied the claims of creditors regarding
liabilities, the term for execution of which sets it prior to or
during the time period of suspending the economic activities;
6) it has ensured the applied claims of creditors in
accordance with the procedures specified in Section
333.4 of this Law, the term for execution of which
sets it prior to or during the time period of suspending the
activities of the merchant.
(2) Activities of the merchant shall be suspended for three
years from the day when an entry has been made in the Commercial
Register, if another time period for suspending the activities
has not been specified in the decision on suspension of
activities.
(3) Suspension of activities shall be applied for entering in
the Commercial Register. In an application a merchant shall
indicate the date when the notice regarding intention to suspend
the activities was published in the official gazette Latvijas
Vēstnesis, and attest that the requirements of Paragraph one
of this Section are complied with.
(4) An application of a partnership shall be signed by all
members.
(5) An extract from the minutes of the meeting of shareholders
(stockholders) with a decision on suspension of activities of a
capital company shall be appended to the application of the
capital company.
(6) [2 May 2013]
[2 May 2013; 15 June 2017]
Section 333.4 Protection
of Creditors
(1) Prior to taking of a decision on suspension of activities,
a merchant shall inform all the known creditors in writing
regarding the intent of suspending the activities and shall
publish a notice in the official gazette Latvijas
Vēstnesis about it. The following shall be indicated in the
notice:
1) the firm name, registration address and legal address of
the merchant;
2) the place and time period for applying claims of creditors,
which shall not be less than a month from the day when the notice
was published.
(2) Liabilities of a merchant, the time period for execution
of which sets in during the time period of suspending the
activities, shall be deemed such the time period for execution of
which sets in prior to the day when a decision on suspension of
activities has been taken.
(3) If a creditor requests it and has applied a claim within
the time period specified in Paragraph one of this Section, the
merchant shall ensure such claims of creditors, the time period
for execution of which sets in after the period of suspending the
activities of the merchant.
Section 333.5 Renewal of
Activities on the Basis of a Decision of the Merchant
(1) If activities of a merchant have been suspended on the
basis of a decision of the merchant, the merchant may take a
decision on renewal of activities prior to the end of the time
period referred to in Section 333.3, Paragraph two of
this Law. Renewal of activities shall be applied for entering in
the Commercial Register.
(2) After the end of the time period specified in the decision
on suspension of activities or - if a time period has not been
indicated in the decision - after the end of the time period
referred to in Section 333.3, Paragraph two of this
Law an official of the Commercial Register Office, without taking
a separate decision, shall make an entry in the Commercial
Register regarding renewal of the activities of the merchant.
(3) [2 May 2013]
[2 May 2013 / See Paragraph 34 of Transitional
Provisions]
Section 333.6 Suspension
and Renewal of Activities on the Basis of a Decision of the Tax
Authority
Suspension and renewal of activities of a merchant, on the
basis of a decision of the tax authority, shall be regulated by
tax laws.
Part C
REORGANISATION OF COMMERCIAL COMPANIES
Division
XV
GENERAL PROVISIONS FOR THE REORGANISATION OF COMMERCIAL
COMPANIES
Section 334. Definition and Types of
Reorganisation
(1) A commercial company (hereinafter in this Part - the
company) may be reorganised by way of merging, division or
restructuring.
(2) Companies involved in the reorganisation process may be
companies of the same type or various types if the law does not
specify otherwise.
[24 April 2008]
Section 335. Merging of
Companies
(1) Merging of companies may take the form of acquisition or
consolidation.
(2) Acquisition is a process in which the company (the
acquired company) transfers all of its property to another
company (the acquiring company).
(3) Consolidation is a process in which two or more companies
(acquired companies) transfer all of their property to a newly
founded company (the acquiring company).
(4) In the case of merging, the acquired company ceases to
exist without liquidation procedures.
(5) In the case of merging, all the rights and obligations of
the acquired companies are transferred to the acquiring
company.
(6) In the case of merging, the stockholders, shareholders or
members (hereinafter in this Part - shareholders) of the acquired
companies shall become shareholders of the acquiring company.
[24 April 2008]
Section 335.1
Cross-border Merger
(1) Cross-border merger shall be such merger of two or more
capital companies, of which at least one is registered in Latvia,
but the others have been established in accordance with legal
acts of the European Union Member States.
(2) The Member State within the meaning of this Section and
Division XIX shall be a European Union Member State, the Republic
of Iceland, the Kingdom of Norway and the Principality of
Liechtenstein.
(3) The merger shall not be considered as a cross-border
merger in such case, when there is a capital company involved,
which has intended to perform collective contributions of the
capital of inhabitants in accordance with the principle of risk
division and the capital shares (stocks) are bought back or
redeemed upon request of shareholders (stockholders) directly or
indirectly from the assets of this capital company. The
activities by which the capital company wants to ensure that the
market value of its shares does not differ significantly from the
net value of assets thereof shall be equalled to such buy-back
procedure or pre-emption.
(4) The provisions of this Law regarding the merger of capital
companies shall be applied to cross-border merger insofar as it
is not otherwise provided for in Division XIX of this Law. If the
acquiring capital company is registered in another Member State,
the capital company registered in Latvia, upon involving in the
cross-border merger, shall observe the provisions of this Law
regarding merging of capital companies in respect of the
procedures for taking of decisions in relation to merging and
protection of creditors, shareholders (stockholders), debenture
holders, as well as employees of the capital company.
[24 April 2008]
Section 336. Division of
Companies
(1) Division is a process in which the company (the dividing
company) transfers all of its property to one or more other
companies (the acquiring companies) through splitting up or
divestiture.
(2) In the case of splitting up, the dividing company
transfers all of its property to two or more acquiring companies
and ceases to exist without liquidation procedures.
(3) In the case of splitting up, shareholders of the dividing
company shall become shareholders of the acquiring company in
accordance with a decision on splitting up of the company.
(4) In the case of divestiture, the dividing company transfers
part of its property to one or more acquiring companies. In the
case of divestiture, the dividing company shall continue to
exist.
(5) In the case of divestiture, all the shareholders of the
dividing company or part of them become shareholders of the
acquiring company, or the dividing company may become the sole
shareholder of the acquiring company in accordance with a
decision on divestiture of the company.
(6) The acquiring company may be an already existing company
or a company to be newly founded.
Section 337. Restructuring of
Companies
(1) Restructuring is a process in which one type of company
(the restructured company) is restructured into a different type
of company (the acquiring company).
(2) In the case of restructuring, all the rights and
obligations of the restructured company are transferred to the
acquiring company.
(3) In the case of restructuring, the shareholders of the
restructured company become shareholders of the acquiring
company.
(4) In the case of restructuring, the restructured company
ceases to exist without liquidation procedures.
Division
XVI
REORGANISATION PROCEDURES
Section 338. Reorganisation
Agreement
(1) If two or more already existing companies are involved in
the reorganisation process, they shall enter into a
reorganisation agreement (hereinafter - the agreement). A
contract shall be entered into in writing.
(2) The agreement shall indicate:
1) the firm names, legal addresses and registration numbers of
all the companies involved in the reorganisation;
2) the companies' capital shares (stocks) exchange coefficient
and the amount of premium (if such is provided for);
3) the division of the capital shares (stocks) among the
shareholders of the acquiring company;
4) the provisions for the transfer of the capital shares
(stocks) of the acquiring company to the shareholders of the
companies to be acquired, divided or restructured;
5) the time from which the capital shares (stocks) transferred
give a right to receive dividends or a profit share from the
acquiring company and any provisions affecting this time (if such
is provided for);
6) the rights granted by the acquiring company to stockholders
of each category of shares of the acquired, dividing or
restructured company, and debenture holders, who own convertible
debentures;
61) the rights granted by the acquiring company to
members of supervisory authorities and executive bodies of the
acquired, dividing or restructured company, as well as to the
controller of the company;
7) the day from which the transactions of the acquired,
dividing or restructured company shall be included in the
accounting of the acquiring company and shall be regarded as
transactions of the acquiring company;
8) the consequences of reorganisation for the employees of the
acquired, dividing or restructured company;
9) the activities to be conducted in the reorganisation
process and the time periods for conducting them.
(3) If all the capital shares (stocks) of the acquired or
dividing company are owned by the acquiring company, the
information referred to in Paragraph two, Clauses 2, 3, 4 and 5
of this Section shall not be included in the agreement.
(4) If the agreement provides for conditions precedent and if
these conditions do not come into effect within three years from
the day when the agreement is entered into, each of the companies
involved in the reorganisation process may unilaterally withdraw
from the agreement notifying the other contracting parties not
later than six months in advance, if a shorter period for notice
is not specified in the agreement.
(5) Each of the companies involved in the reorganisation
process shall submit a notice of reorganisation, with the draft
agreement appended, to the Commercial Register Office.
[16 June 2005; 24 April 2008; 29 November 2012; 6 July
2021]
Section 339. Reorganisation
Prospectus
(1) Each of the companies involved in the reorganisation
process shall prepare in writing a reorganisation prospectus
(hereinafter - the prospectus), in which the following is
indicated and explained:
1) the provisions of the draft agreement;
2) the legal and economic aspects of the reorganisation;
3) the capital shares (stocks) exchange coefficient and the
amount of premium (if such is provided for);
4) the methods used to determine the capital shares (stocks)
exchange coefficient and the amount of premium, as well as
problems which arose in the use of these methods.
(2) Companies may prepare a joint prospectus. In such case
each of the companies involved in the reorganisation process
shall indicate the data referred to in Paragraph one of this
Section.
(3) The company need not prepare a prospectus if all
shareholders agree thereto. The company to be acquired or divided
need not prepare a prospectus, if all capital shares (stocks) of
the company to be acquired or divided belong to the acquiring
company.
[24 April 2008; 16 June 2011]
Section 340. Examination by an
Auditor
(1) The draft agreement of companies involved in the
reorganisation process shall be examined by a sworn auditor. The
companies involved in the reorganisation process may elect a
joint auditor.
(2) [15 April 2010]
(3) The reorganisation agreement shall not be checked by the
auditor, if all shareholders or members agree thereto. The
auditor need not examine the draft agreement of the acquired or
dividing company if all the capital shares (stocks) of the
acquired or dividing company are owned by the acquiring
company.
(4) The companies which are involved in a reorganisation
process shall ensure that the auditor has access to all the
documents and information which have significance for performing
the obligations of an auditor.
[16 March 2006; 24 April 2008; 15 April 2010]
Section 341. Opinion of the
Auditor
(1) The auditor shall draft a written opinion regarding the
results of the examination of the draft agreement and shall
submit it to the company. If one auditor is elected for all the
companies, he or she shall submit the opinion to all the
companies.
(2) The following shall be indicated in the opinion:
1) whether all the necessary documents were submitted to the
auditor;
2) whether the capital shares (stocks) exchange coefficient
and the amount of premium are fair and justified;
3) whether the reorganisation may cause losses to the
creditors of the company;
4) whether the methods which were used to determine the
capital shares (stocks) exchange coefficient and the amount of
premium are adequate;
5) special problems which have arisen in the application of
the valuation methods used.
[16 March 2006; 24 April 2008]
Section 342. Liability of the
Auditor
The auditor shall be liable for losses incurred through his or
her fault while conducting the examination.
Section 343. Decision on
Reorganisation
(1) A meeting of shareholders of each of the companies
involved in the reorganisation process shall examine the draft
agreement and take the decision on reorganisation, and the
meeting shall take place not earlier than a month after
information regarding the draft agreement has been notified in
accordance with Section 11 of this Law.
(2) If amendments in relation to the reorganisation need to be
made in the articles of association of a capital company or in a
partnership agreement, a decision on such amendments shall be
taken concurrently with the decision on reorganisation.
(3) For not less than one month before the day of the meeting
of shareholders regarding approval of the agreement is to be
held, all shareholders shall be given an opportunity to become
acquainted to the following documents at the legal address of the
company:
1) the draft agreement;
2) the prospectus;
3) the opinion of the auditor;
4) the annual accounts of all the companies involved in the
reorganisation process for the last three accounting years;
and
5) the report about the commercial activities of the company
which shall be prepared not earlier than three months before the
reorganisation notice is submitted to the Commercial Register
Office if the previous annual accounts were completed more than
six months before the submission of the notice.
(4) The report on the commercial activities of the company
referred to in Paragraph three, Clause 5 of this Section shall be
prepared in accordance with the requirements of law regarding the
preparation of annual accounts.
(41) The company need not prepare a report on the
commercial activities, if all shareholders agree thereto or if
the company, in accordance with the provisions of the Financial
Instrument Market Law has published an interim report for a time
period of six months.
(5) Shareholders have the right to receive copies of or
extracts from the documents referred to in Paragraph three of
this Section free of charge.
(6) At the meeting of shareholders of a capital company, the
board of the company shall, pursuant to a request by the
shareholders, submit explanations regarding the draft agreement
and prospectus, regarding the legal and economic consequences of
the reorganisation, as well as information regarding the other
companies involved in the reorganisation process.
(7) The decision on reorganisation shall be compiled in the
form of a separate document.
(8) On the basis of a decision on reorganisation the relevant
company shall enter into an agreement.
(9) A list of those shareholders (with their signatures), who
voted in the meeting of shareholders against the decision on
reorganisation shall be appended to the decision on
reorganisation.
[16 March 2006; 16 June 2011; 6 July 2021]
Section 343.1 Right of
Participant to Electronic Access to Documents
(1) If the company ensures access to the documents specified
in Section 343, Paragraph three of this Law on the Internet home
page thereof, the company need not ensure the participants with a
possibility of getting acquainted with the relevant documents at
the legal address of the company.
(2) In the case referred to in Paragraph one of this Section
the company shall ensure continuous access to the documents on
the Internet home page thereof free-of-charge for not less than a
month until the day when a meeting of shareholders regarding
approval of an agreement is planned, and not less than one year
after the day when a decision was taken in the meeting of
shareholders on approval of the reorganisation agreement.
(3) If due to technical or other reasons the company is not
able to ensure continuous access to the documents on the Internet
home page thereof during the specified period of time, a
shareholder has the right to get acquainted with the relevant
documents at the legal address of the company.
(4) The company shall not have an obligation to ensure the
shareholders with a possibility of receiving the copies of the
documents specified in Section 343, Paragraph three of this Law
free of charge, if the relevant documents may be downloaded and
printed out free-of-charge from the Internet home page of the
company for not less than a month until the day when a meeting of
shareholders regarding approval of an agreement is planned.
(5) The board of the company shall be responsible for the
conformity of the documents inserted on the Internet home page of
the company with the originals of the documents specified in
Section 343, Paragraph three of this Law.
[16 June 2011; 16 January 2014]
Section 344. Obligation to
Inform
The board of the acquired or dividing company has an
obligation to inform the general meeting and the acquiring
company regarding all substantial changes in the status of the
property of the acquired or dividing company which have occurred
up to the expiry of the powers of the board or up to the time the
reorganisation comes into effect.
Section 345. Protection of
Creditors
(1) Within fifteen days from the day when a decision is taken
regarding reorganisation, each of the companies involved in the
reorganisation process shall inform in writing all of its known
creditors which have had claim rights against the company up to
the taking of the decision on reorganisation.
(2) Each of the companies involved in the reorganisation
process has an obligation to publish in the official gazette
Latvijas Vēstnesis a notice that a decision on
reorganisation has been taken. The notice to creditors shall
indicate:
1) the firm name, registration number and legal address of the
company;
2) the firm names, registration numbers and legal addresses of
the other companies involved in the reorganisation;
3) the type of reorganisation;
4) the fact that a decision on reorganisation has been
taken;
5) the place and time period for creditors to submit their
claims, which may not be less than one month from the day when
the notice is published.
(3) The acquired or dividing company shall secure the claims
of creditors if so requested and submitted by them within the
time period in the notice referred to in Paragraph two of this
Section.
(4) Creditors of the acquiring company may request to have
their claims secured only if they can prove that the
reorganisation threatens the satisfaction of their claims.
(5) Secured creditors may request security only for the amount
of the unsecured part of a debt.
[14 February 2002; 29 November 2012]
Section 346. Disputing a Decision on
Reorganisation
(1) On the basis of a request of a shareholder or a member of
a board or of a council of the company involved in a
reorganisation, a court may declare the decision on
reorganisation as void if it was taken in violation of law, the
articles of association of a capital company or a partnership
agreement, and it is not possible to rectify these violations or
they are not rectified within the time period specified by the
court.
(2) The time period for bringing an action in a court shall be
three months from the day when the notice, referred to in Section
345, Paragraph two of this Law, is published.
(3) The company, the decision on reorganisation taken by a
meeting of shareholders or board of which has been recognised as
void, has an obligation to publish a notice regarding this in the
official gazette Latvijas Vēstnesis within 15 days from
the day when the court ruling has come into effect.
(4) The declaration of a decision on reorganisation as void
shall not impact upon obligations which the company has assumed
during the reorganisation process with respect to third
parties.
(5) A decision on reorganisation shall not be applied void
only because the capital share (stock) exchange coefficient or
the amount of premium has been fixed too low.
(6) If the capital share (stock) exchange coefficient has been
fixed too low, then a shareholder of the acquired, dividing or
restructured company may request that the acquiring company pays
a once only supplementary payment.
[16 June 2011; 29 November 2012]
Section 347. Application to the
Commercial Register Office
(1) Each of the companies involved in the reorganisation
process shall, not earlier than three months after the day when
the notice is published, submit an application to the Commercial
Register Office in order that the entering of the reorganisation
is made in the Commercial Register. The following shall be
attached to the application:
1) the agreement or its copy appropriately certified;
2) an extract of the minutes and the decision on
reorganisation;
3) the list of the shareholders who voted against the
reorganisation;
4) in cases specified by law - the reorganisation permit;
5) the prospectus (if the law requires the preparation of a
prospectus);
6) the opinion of the auditor (if the law requires an
auditor's examination);
7) the closing financial account of the acquired or by way of
splitting up dividing company (if the application is being
submitted by the acquired or the dividing company);
8) the articles of association of the acquiring capital
company (if a new company is formed as a result of the
reorganisation, or if the company is being restructured);
9) the list of the members of the board of the acquiring
capital company or the shareholders of a partnership who have the
right to represent the company (if a new company is formed as a
result of the reorganisation); and
10) the list of council members of the acquiring capital
company (if a new company is formed as a result of the
reorganisation and if the acquiring company is to have a
council).
(2) In its application, the company shall certify that:
1) the claims of those creditors who have submitted their
claims within the time period specified have been secured or
satisfied;
2) the decision on reorganisation has not been disputed in
court or that the relevant action has not been satisfied;
3) in the case referred to in Section 339, Paragraph three of
this Law all shareholders have agreed that a prospectus on
reorganisation will not be prepared;
4) in the case referred to in Section 340, Paragraph three of
this Law all shareholders have agreed that the auditor will not
examine the agreement on reorganisation;
5) in the case referred to in Section 343, Paragraph
4.1 of this Law all shareholders have agreed that a
report on economic activities will not be prepared.
(3) In order to make an entry in the Commercial Register on
reorganisation, the company shall indicate in the application the
firm names and registration numbers of all companies involved in
the reorganisation.
[14 February 2002; 16 March 2006; 15 April 2010; 16 June
2011; 15 June 2017; 6 July 2021 / The amendment to
Paragraph three regarding the deletion of the words "and also the
date when the notice regarding the reorganisation was published
in the official gazette Latvijas Vēstnesis" shall come into force
on 1 July 2023. See Paragraph 63 of Transitional
Provisions]
Section 348. Firm Name of the
Acquiring Company
(1) If there is only one acquiring company, it may after
reorganisation use the firm name of the acquired company.
(2) The provisions for the continued use of the firm name of a
dividing company shall be provided for in the agreement.
(3) The acquiring company may use the firm name of the
restructured company, except for indications of the restructured
company's type.
(4) If a natural person has been a shareholder of the
acquired, dividing or restructured company and is not a
shareholder of the acquiring company, the acquiring company may
use the name of such person in the firm name only with the
written consent of such person or his or her heirs.
[14 February 2002]
Section 349. Entering of the
Reorganisation in the Commercial Register
(1) The entering of the acquired or dividing company in the
Commercial Register shall be made only after entries have been
made regarding all the acquiring companies.
(2) After making of the record regarding reorganisation in the
Commercial Register, the acquired company shall be deleted from
the Commercial Register.
(3) After entering of the reorganisation of a dividing company
has been made, extracts from the file of the dividing company
shall be attached to the files of the acquiring companies, and in
cases when the division was by the way of splitting up, the
dividing company shall be deleted from the Commercial
Register.
(4) In the case of restructuring the entry of the acquiring
company may be made in the Commercial Register after entering of
the reorganisation of the restructured company has been made.
(5) [6 July 2021]
[22 April 2004; 6 July 2021]
Section 350. Legal Meaning of the
Commercial Register Entry of the Reorganisation
(1) Reorganisation shall be considered as being in effect from
the time when entries have been made in the Commercial Register
regarding all the companies involved in the reorganisation
process including newly founded companies.
(2) From the time when a reorganisation comes into effect:
1) the property of the acquired company shall be considered to
have been transferred to the ownership of the acquiring
company;
2) the property of the dividing company shall be considered to
have been transferred to the ownership of the acquiring companies
according to the agreement.
(3) From the time when the company is deleted from the
Commercial Register, such company shall be considered to be
liquidated.
(4) From the time when a reorganisation has come into effect,
the shareholders of the acquired, dividing or restructured
company shall become shareholders of the acquiring company, and
their capital shares (stocks) shall be exchanged for the capital
shares (stocks) of the acquiring company in proportion to the
capital shares (stocks) owned by them. This provision shall not
be applied if the dividing company which is divided by
divestiture becomes the sole shareholder of the acquiring
company.
(5) The rights of third parties to the capital shares (stocks)
of the acquired, dividing or restructured company shall be
preserved in relation to the capital shares (stocks) of the
acquiring company.
(6) The capital shares (stocks) of the acquired or dividing
company, which were owned by the acquiring company or the
acquired or dividing company itself, or by a person who acted in
his or her own name but for the benefit of the relevant acquired,
dividing or acquiring company, shall not be exchanged and shall
be extinguished, except for cases when the dividing company as a
result of apportionment becomes the sole shareholder of the
acquiring company.
(7) A reorganisation after it has come into effect may not be
disputed.
Section 351. Liability of Companies
Involved in the Reorganisation Process
(1) The acquiring company shall be liable for all the
obligations of the acquired or restructured company.
(2) All the companies involved in the division of the company
shall be solidarily liable for obligations of the dividing
company which have been incurred up to the reorganisation coming
into effect. In the mutual relations between such solidarily
liable debtors, only that person shall be deemed as the obligated
subject whose obligations are provided for in the agreement.
(3) If the obligations of the company involved in a division
are not specified in the agreement, it shall be solidarily
liable, together with other companies involved in the
reorganisation process, for those obligations of the dividing
company which shall become due within five years from the time
when the reorganisation comes into effect.
Section 352. Liability of Members of
the Board and of the Council
(1) The members of the council and of the board of companies
and the shareholders of partnerships, who have representation
rights involved in the reorganisation shall be solidarily liable
for any losses caused to the company, its shareholders or
creditors during the course of the reorganisation through their
fault.
(2) The limitation period for any claims arising from
Paragraph one shall be five years from the time when
reorganisation comes into effect.
(3) If an acquiring company owns all shares (stocks) of the
acquired company, the members of the board and of the council of
the acquired company shall not be responsible for loss caused
during the reorganisation process for a shareholder of the
acquired company.
[16 January 2014]
Section 353. Compensation
(1) Shareholders of the acquired, dividing or restructured
company, who did not agree to the reorganisation, are entitled,
within two months from the time when reorganisation comes into
effect, to request the acquiring company to redeem their shares
for money (compensation).
(2) Compensation may be requested also by shareholders of the
company newly formed established as a result of division, who
voted against the approval of the articles of association.
(3) The rights referred to in Paragraphs one and two of this
Section shall not apply to those shareholders who are not entered
in the list referred to in Section 343, Paragraph nine and in the
minutes referred to in Section 355, Paragraph five of this
Law.
(4) The amount of compensation shall be equal to the amount
which the shareholder would have acquired by dividing the
property of the acquired or restructured company in the case of
liquidation if it took place at the time when the decision on
reorganisation was taken.
(5) The restrictions specified by law regarding the procedures
by which the company may acquire its own shares shall not apply
with respect to the compensation.
(6) From the time when the reorganisation comes into effect,
the acquiring company shall pay the interest set by law on any
compensation not paid out in the amount provided for and within
the time period.
(7) If shareholders of the acquired or dividing company, who
do not agree with the reorganisation, do not request
compensation, they may alienate their shares within two months,
irrespective of any restrictions provided for in the decision,
the articles of association or law.
Division
XVII
SPECIAL PROVISIONS FOR PARTICULAR TYPES OF REORGANISATION
Chapter 1
Special Provisions for Merging
Section 354. Founding of a New
Company through Consolidation of Companies
(1) Companies which unify by way of consolidation, shall be
considered to be acquired companies, and a newly founded company
- as the acquiring company.
(2) In founding a new company, the provisions for the founding
of the relevant type of company shall be applied, if in this
Section it is not specified otherwise.
(3) In addition to the information referred to in Section 338,
Paragraph two of this Law, the reorganisation agreement shall
indicate the firm name and legal address of the acquiring
company. To the agreement shall be appended the founding
company's draft articles of association or, if the acquiring
company is a partnership - the partnership agreement which shall
be approved by a decision on reorganisation of a meeting of all
the shareholders of the acquired company.
(4) The acquired companies shall submit to the Commercial
Register Office a joint application regarding entering of the new
company in the Commercial Register.
Chapter
1.1
Special Provisions for Acquisition, if the
Acquiring Company Owns at Least 90 Per cent of the Shares
(Stocks) of the Acquired Company
[16 June 2011]
Section 354.1 Notice
Regarding Reorganisation to the Shareholders of the Acquiring
Company
(1) The board of the acquiring company shall, within 15 days
from the day when the draft agreement on reorganisation has been
notified in accordance with Section 11 of this Law, send a notice
to all shareholders regarding the intent of the board to enter
into an agreement on reorganisation and a draft decision of the
board on reorganisation.
(2) If the company owns the bearer stock, the notice addressed
to the stockholders shall be published in the official gazette
Latvijas Vēstnesis and at least one more newspaper.
(3) The following shall be indicated in a notice to
shareholders:
1) the firm name, registration number and legal address of the
company;
2) the firm names, registration numbers and legal addresses of
the other companies involved in the reorganisation;
3) the type of reorganisation, indicating the acquiring
company and the acquired company;
4) the place and time where and when the shareholders may
become acquainted with a draft agreement on reorganisation and
annual reports of all companies involved in reorganisation
regarding the preceding three accounting years;
5) the time period, during which the shareholders of the
acquiring company may request that a meeting of shareholders is
convened in order to take a decision on reorganisation. Such time
period shall be not less than a month from the day of sending the
notice - or in case of the bearer stock - from the day of
publishing the notice.
(4) If as a result of reorganisation the acquiring company
must increase the equity capital thereof, a draft decision on
amendments to the articles of association shall be appended to
the notice to be sent to the shareholders, specifically
indicating the provisions of the articles of association, which
are intended to be amended.
[29 November 2012; 6 July 2021]
Section 354.2 Right of
the Shareholder of the Acquiring Company to Convene a Meeting of
Shareholders
(1) The shareholders of the acquiring company who represent
not less than one twentieth part from the equity capital of the
company have the right, within the time period indicated in
Section 354.1, Paragraph three, Clause 5 of this Law,
to request that a meeting of shareholders is convened in
accordance with the provisions of Section 213 or 273 of this Law
in order to examine the draft agreement on reorganisation and to
take a decision on reorganisation.
(2) If the shareholders of the acquiring company who represent
not less than one twentieth part from the equity capital of the
company request that a meeting of shareholders is convened, the
provisions of Section 354.3 of this Law shall not be
applied.
Section 354.3 Decision of
the Acquiring Company on Reorganisation
(1) A decision on reorganisation shall be taken by the board
of the acquiring company.
(2) The board shall take a decision on reorganisation within a
month after expiration of the time period indicated in Section
354.1, Paragraph three, Clause 5 of this Law, if the
shareholders of the acquiring company do not request convening of
a meeting of shareholders for approval of an agreement on
reorganisation.
(3) A decision on reorganisation may be taken prior to
expiration of the time period indicated in Section
354.1, Paragraph three, Clause 5 of this Law, if all
shareholders of the acquiring company agree thereto.
(4) If as a result of reorganisation the acquiring company
must increase the equity capital thereof in order to ensure the
exchange coefficient of the capital shares (stocks) of the
company and supplements (if any), the board shall take a decision
on amendments to the articles of association concurrently with a
decision on reorganisation. If a joint stock company is involved
in reorganisation, amendments to the articles of association
thereof shall be made by the council.
(5) The board of the acquiring company shall, within 15 days
after taking of a decision on reorganisation, inform the
shareholders of the company thereof.
Section 354.4 Decision of
the Acquired Company on Reorganisation
(1) A decision on reorganisation shall be taken by the board
of the acquired company.
(2) The board shall take the decision on reorganisation not
earlier than within a month after promulgation of the draft
agreement on reorganisation in accordance with Section 11 of this
Law.
[6 July 2021]
Section 354.5 Right of
the Shareholders of the Acquired Company to Remuneration
(1) If a shareholder of the acquired company owns not more
than 10 per cent from the shares (stocks) of the acquired
company, the shareholder of the acquired company is entitled,
within two months from the time of entering into effect of
reorganisation, to request that the acquiring company repurchases
his or her shares (stocks).
(2) The amount of remuneration shall be equal to the amount,
which the shareholder would obtain by dividing the property of
the acquired company in case of liquidation that would take place
at the time when a decision on reorganisation was taken.
Chapter 2
Special Provisions for Division
Section 355. Founding of a New
Company through Division of the Company
(1) The newly founded company shall be considered to be the
acquiring company.
(2) In the founding of the acquiring company, the provisions
for the founding of the relevant type of company shall be
observed, if in this Chapter it is not specified otherwise.
(3) If when the company is being divided, a new acquiring
company is founded and no other existing company is involved in
the reorganisation, the dividing company shall take a decision on
division, which shall substitute for the agreement referred to in
Section 338 of this Law. In addition to the information referred
to in Section 338, Paragraph two of this Law, the decision on
reorganisation shall indicate the firm name and legal address of
the acquiring company and the dividing company's division of
property between the acquiring companies. The division of
property document may be appended to the decision in the form of
a separate document.
(4) In the case of divestiture, as shareholders of the newly
founded company may become only those shareholders of the
dividing company which have voted for the decision on
reorganisation, as well as those who, up to the taking of the
decision have expressed their intent in writing to become
shareholders of the newly founded company.
(5) The board of the dividing company shall convene a meeting
within the time period specified in the decision of the
shareholders of the newly founded company, which shall approve
the articles of association of the newly founded company, elect
the administrative institutions and perform other activities
which are necessary in founding the company. The articles of
association of the newly founded company shall be approved by not
less than three-quarters of the number of votes present and the
provisions of this Law which regulate the relevant type of
company meeting of shareholders shall be applicable to such a
meeting. The minutes of the meeting of shareholders shall
indicate those shareholders which voted against the approval of
the articles of association.
(6) Together with the application for reorganisation, the
dividing company shall submit to the Commercial Register Office
also an application for the entering of the acquiring company in
the Commercial Register.
(7) The division shall come into effect from the time when the
acquiring company is entered in the Commercial Register and a
record is made regarding the dividing company.
Section 356. Division of Property
not Provided for in the Reorganisation Agreement
(1) In the case of splitting up, the property, the division of
which is not specified in the reorganisation agreement, shall be
divided between the acquiring companies in proportion to the
share of the property which they have acquired from the dividing
company in accordance with the reorganisation agreement.
(2) The acquiring companies shall be solidarily liable for
commitments of the dividing company, the division of which is not
specified in the reorganisation agreement.
[24 April 2008]
Section 356.1 Decision of
the Dividing Company on Reorganisation
If the acquiring company owns all shares (stocks) of the
dividing company, a decision on reorganisation shall be taken by
the board of the dividing company.
[16 June 2011]
Chapter 3
Special Provisions for Restructuring
Section 357. Decision on
Restructuring
(1) In the decision on reorganisation, the information
referred to in Section 338, Paragraph two of this Law shall be
indicated, and in addition the type of acquiring company shall be
indicated.
(2) The draft articles of association or partnership agreement
(if the acquiring company is a partnership) of the acquiring
company shall be appended to the draft decision as an
attachment.
(3) The decision shall substitute for the reorganisation
agreement referred to in Section 338 of this Law, and the
provisions of Sections 338 -343 of this Law shall apply to
it.
(4) Concurrently with the decision on restructuring, the draft
articles of association of the acquiring company or partnership
agreement, if the acquiring company is a partnership, shall be
approved.
(5) If the company is restructured as a limited liability
company or a stock company, concurrently with the taking of the
decision, the board and the council of the acquiring company
shall be elected if in accordance with the law or the articles of
association this is necessary.
[24 April 2008]
Section 358. Procedures for the
Application of the Founding Provisions
(1) In the process of restructuring, the provisions for the
founding of the relevant type of company shall be applied if it
is not specified otherwise this Chapter.
(2) Those shareholders of the restructured company shall be
considered to be founders of the acquiring company who have voted
for the restructuring of the company.
Section 359. Features of Protection
of the Interests of Creditors
The provisions of Section 345, Paragraph three of this Law
shall not be applicable if a capital company is restructured into
a partnership.
Section 360. Valuation of
Property
(1) If the company is being transformed into a limited
liability company or a stock company, it is necessary to evaluate
the property contributions, in order to determine whether the
property of the company to be restructured is sufficient for the
formation of the equity capital of the acquiring company.
(2) The valuation of the property shall be done according to
the procedures in this Law, and the documents certifying the
valuation shall be submitted to the Commercial Register Office
together with the application for restructuring.
Division
XVIII
SPECIAL PROVISIONS FOR THE REORGANISATION OF PARTICULAR TYPES OF
COMPANIES
Chapter 1
Partnerships as Companies Involved in Reorganisation
Section 361. Contents of a
Reorganisation Agreement
If the acquiring company is a partnership, in addition to the
information referred to in Section 338, Paragraph two of this
Law, the status of each shareholder of the acquired or dividing
company (general partner or limited partner) in the acquiring
company, as well as the amount of their shares shall be indicated
in the reorganisation agreement.
[14 February 2002]
Section 362. Reorganisation
Prospectus
[16 June 2011]
Section 363. Examination by an
Auditor
[24 April 2008]
Section 364. Decision on
Reorganisation and Application to the Commercial Register
Office
(1) A decision on reorganisation shall be taken if all the
members vote for it.
(2) It may be provided for in the partnership agreement that a
decision on reorganisation shall be taken if not less than two
thirds of the members vote for it.
(3) In the entering of newly founded acquiring partnerships in
the Commercial Register the provisions of Section 78 of this Law
shall be applicable.
Section 365. Protection for Minority
Shareholders
(1) If the acquiring company is a partnership, a shareholder
of the company involved in the reorganisation, which has voted
against the reorganisation or did not take part in the voting
shall become a limited partner of the acquiring company.
(2) If the acquiring company is a partnership, a member who
withdraws from the partnership may request compensation.
[14 February 2002]
Section 366. Liability of
Shareholders
(1) If the acquiring company is a limited partnership or a
capital company, the general partner of an acquired or dividing
company shall be liable for such obligations of the relevant
acquired or dividing company as for which the time period for
performance has come into effect or shall come into effect within
five years from the time when the reorganisation comes into
effect.
(2) If the general partner of an acquired or dividing company
becomes a general partner of the acquiring company, the
limitation period specified in Paragraph one shall not be
applied.
[14 February 2002]
Chapter 2
Limited Liability Companies as Companies Involved in
Reorganisation
Section 367. Reorganisation
Prospectus
[16 June 2011]
Section 368. Examination by an
Auditor
[24 April 2008]
Section 369. Decision on
Reorganisation, if Limited Liability Company is Involved in
Reorganisation
(1) A decision on reorganisation shall be taken if not less
than two thirds of the votes represented at the meeting of
shareholders vote for it (if the articles of association do not
specify that a larger number of votes is necessary in order to
take a decision on reorganisation).
(2) In determining a quorum, the shares that have been
acquired by the company itself shall not be taken into
account.
[16 March 2006; 24 April 2008]
Section 370. Increase of the Equity
Capital of the Acquiring Company as a Result of Merging or
Division
(1) If the equity capital of the acquiring company is being
increased as a result of merging or division, its shareholders
have no priority right to the new shares provided for
exchange.
(2) In addition to documents specified in Section 202 of this
Law, which are to be submitted to the Commercial Register Office
in relation to an increase of the equity capital, the
reorganisation agreement and extracts from the minutes and the
decisions on reorganisation taken by the meeting of shareholders
of each of the companies involved in the reorganisation shall be
appended to the application.
[14 February 2002]
Section 371. Transfer of Stock in
the Case of Reorganisation
(1) The acquiring company shall transfer in exchange, to the
shareholders of the acquired or dividing company, firstly, the
shares owned by the company itself.
(2) The shares of the acquired or dividing company shall not
be exchanged for the shares of the acquiring company if:
1) the shares of the acquired or dividing company are owned by
the acquiring company or by a third party who acts in his or her
own name but on behalf of the acquiring company;
2) the shares of the acquired or dividing company are held by
the acquired or dividing company itself or by a third party who
acts in his or her own name but on behalf of the acquired or
dividing company.
Section 372. Valuation of Property
Contributions, if Acquiring Company is a Limited Liability
Company
(1) If the acquiring company is a limited liability company
which as a result of a reorganisation must increase its equity
capital or which is to be founded as a new company, a valuation
shall be conducted of the property of each of the acquired
companies or the relevant part of the dividing company, in order
to determine whether the property is sufficient to increase the
equity capital of the acquiring company or for its founding.
(2) The valuation shall be conducted and a written report
compiled by the person who has examined the reorganisation
agreement in the relevant company. In the case referred to in
Section 340, Paragraph three of this Law the valuation shall be
conducted and a written report shall be provided by a person who
has been included in the list of valuators of property
contributions.
(3) All the shareholders of the relevant company, as well as
the shareholders of the acquiring company have the right to
become acquainted with the report on the valuation of the
property contribution in accordance with the procedures specified
in Section 343, Paragraphs three and five of this Law.
(4) The report shall be appended to the application regarding
reorganisation submitted to the Commercial Register Office.
[24 April 2008; 15 April 2010]
Section 372.1
Restrictions on Reorganisation
(1) A limited liability company, which conforms to the signs
referred to in Section 185.1, Paragraph one of this
Law, may not be reorganised.
(2) If the acquiring company is a limited liability company,
the equity capital thereof may not be less than the equity
capital specified in Section 185 of this Law.
[15 April 2010]
Chapter 3
Stock Companies as Companies Involved in Reorganisation
Section 373. Decision on
Reorganisation, if a Stock Company is Involved in
Reorganisation
(1) [18 December 2008]
(2) If the company has several categories of stock, the
decision shall be taken according to the procedures specified in
Section 284, Paragraph three of this Law.
(3) If the acquiring company is not a stock company,
stockholders who own preference stock, and debenture holders who
own convertible debentures shall take part in the specifying of
the representation norms and shall vote with the same rights as
the other stockholders. The provisions of this Law regarding the
taking of decisions for the different categories of stock shall
apply to them.
[24 April 2008; 18 December 2008]
Section 374. Increase of the Equity
Capital of the Acquiring Company as a Result of Merging or
Division
(1) If the equity capital of the acquiring company is being
increased as a result of merging or division, its stockholders
have no priority right to the stock issued for exchange.
(2) In addition to documents specified in Section 261 of this
Law, which are to be submitted to the Commercial Register Office
in relation to an increase of the equity capital, the
reorganisation agreement and the decisions on reorganisation
taken by the meeting of stockholders of each of the companies
involved in the reorganisation shall be appended to the
application.
[14 February 2002]
Section 375. Transfer of Stock in
the Case of Reorganisation
The acquiring company shall transfer in exchange, to the
stockholders of the acquired or dividing company, firstly, the
stock belonging to the company itself.
[14 February 2002]
Section 376. Amount of Premium
(1) The premiums provided for in the agreement, which are to
be paid by the acquiring stock company to the stockholders of the
acquired, dividing or restructured company, may not exceed in
total 10 per cent of the amount of the nominal value of stock
offered for exchange.
(2) If the capital stocks exchange coefficient has been fixed
too low, then a stockholder of the acquired, dividing or
restructured company may request that the acquiring company pay a
once only supplementary payment which may exceed the amount
specified in Paragraph one of this Section.
Section 377. Valuation of Property
Contributions, if Acquiring Company is a Stock Company
(1) If the acquiring company is a stock company which as a
result of a reorganisation must increase its equity capital or
which is to be founded as a new company, a valuation shall be
conducted of the property of each of the acquired companies or
the relevant part of the dividing company, in order to determine
whether the property is sufficient to increase the equity capital
of the acquiring company or for its founding.
(2) The valuation shall be conducted and a written report
compiled by the person who has examined the reorganisation
agreement in the relevant company. In the case referred to in
Section 340, Paragraph three of this Law the valuation shall be
conducted and a written report shall be provided by a person who
has been included in the list of valuators of property
contributions.
(3) All the shareholders of the relevant company, as well as
the shareholders of the acquiring company have the right to
become acquainted with the report on the valuation of the
property contribution in accordance with the procedures specified
in Section 343, Paragraphs three and five of this Law.
(4) The report shall be appended to the application regarding
reorganisation submitted to the Commercial Register Office.
[24 April 2008; 15 April 2010]
Section 378. Anonymous Stockholders
and Debenture Holders
(1) If the acquiring company is a limited liability company or
a stock company which has only bearer stock and if there is no
information regarding stockholders or debenture holders who own
convertible debentures of the acquired, dividing or restructured
company, the numbers and the nominal value of stock or debentures
shall be indicated in the place of the names of the shareholders
or stockholders in the register of shareholders of the acquiring
company or register of stockholders.
(2) If the acquiring company is a partnership, and if there is
no information regarding stockholders or debenture holders who
own convertible debentures of the acquired, dividing or
restructured company, the numbers and the nominal value of stock
or debentures shall be indicated in the place of the names of the
shareholders or stockholders in the reorganisation agreement and
the application to the Commercial Register Office.
(3) If the names of these stockholders or debenture holders
become known later, they shall be entered in the register of
shareholders (stockholders) of the acquiring company, but if the
acquiring company is a partnership - in the Commercial
Register.
Section 379. Protection of Interests
of Holders of Preference Stock and Debenture Holders
(1) The rights of the holders of preference stock and
debenture holders of the acquired or dividing company shall be
preserved in the acquiring stock company.
(11) The debenture holders may take a decision on
amending the rights thereof, which are granted to them by the
acquiring company, until taking of the decision on
reorganisation. The referred to decision shall be taken, if not
less than three fourths of debenture holders of each category of
debentures vote for it, if the articles of association do not
specify a larger number of votes.
(2) If the acquiring company is not a stock company, the
holders of preference stock and debenture holders of the acquired
or dividing company shall acquire the shares of the acquiring
company on the basis of the same provisions as other stockholders
of the acquired or dividing company.
(3) The holders of preference stock and debenture holders, who
disagree with the decision on reorganisation, may request
compensation in accordance with the provisions of Section 353 of
this Law.
[24 April 2008; 18 December 2008]
Division
XIX
SPECIAL PROVISIONS FOR CROSS-BORDER MERGER
[24 April 2008]
Section 380. Reorganisation
Agreement in Case of Cross-border Merger
The following information shall be indicated in the
reorganisation agreement in addition to the information specified
in Section 338, Paragraph two of this Law:
1) the types of capital companies involved in the cross-border
merger and the type of the capital company to be newly
founded;
2) the data regarding valuation of assets and obligations
within the composition of the property to be transferred to the
acquiring capital company; and
3) the report on commercial activities of the capital company,
upon which the provisions for cross-border merger are based.
Section 381. Reorganisation
prospectus in Case of Cross-border Merger
(1) In addition to the information referred to in Section 339,
Paragraph one of this Law the information regarding how the
cross-border merger affects the shareholders (stockholders) and
creditors of a capital company involved in this merging shall be
indicated in the reorganisation prospectus.
(2) Not less than one month before the day when the meeting of
shareholders (stockholders) regarding approval of the agreement
is intended, the employees of a capital company or
representatives thereof have the right to get acquainted with the
reorganisation prospectus.
Section 382. Decision on
Reorganisation in Case of Cross-border Merger
(1) If the legal acts governing the activity of a capital
company registered in another Member State and involved in a
cross-border merger do not provide for a procedure for
determination of a compensation for minority shareholders
(stockholders), without preventing the registration of the
cross-border merger, the acquired capital company registered in
Latvia may apply such procedure, if the shareholders
(stockholders) of a capital company registered in another Member
State and involved in a cross-border merger decide to allow the
application of the referred to procedure.
(2) If the legal acts governing the activity of the acquired
capital company registered in another Member State do provide for
a procedure for scrutinising and amending the ratio applicable to
the exchange of securities or shares (stocks), without preventing
the registration of the cross-border merger, the acquired capital
company registered in Latvia may allow the application of such
procedure, if the meeting of shareholders (stockholders), which
approves the reorganisation agreement, takes a decision by
unanimous vote. The decision taken in the referred to procedure
shall be binding to the acquired capital company registered in
Latvia and the shareholders (stockholders) thereof.
Section 383. Pre-merger
Certificate
(1) If it is intended to register the acquiring capital
company in another Member State, the acquired capital company
registered in Latvia shall submit an application to the
Commercial Register Office for the receipt of a certification
that the acquired capital company has performed all the necessary
activities for the completion of cross-border merger.
(2) The documents referred to in Section 347, Paragraph one,
Clauses 1, 2, 3, 4, 5, 6, 7 and 8 of this Law shall be attached
to the application. The capital company shall attest in the
application that all claims of those creditors, who have applied
their claims within the specified time period, have been provided
or satisfied and that a decision on reorganisation has not been
appealed to the court or that the relevant claim has not been
satisfied.
Section 384. Submission of
Application and Documents to be Attached Thereto to the
Commercial Register Office
If the acquiring capital company is registered in Latvia, a
document issued by the Commercial Register Office of another
Member State not later than six months before, which attests that
the acquired capital company has performed all the necessary
actions for the completion of the cross-border merger, shall be
submitted to the Commercial Register Office in addition to the
documents referred to in Section 347 of this Law.
Section 385. Special Provisions of
Acquisition
If the cross-border merger is carried out within the framework
of acquisition process and this merger is carried out by a
capital company, which owns all capital shares (stocks) of the
acquired capital company, the provisions of Section 343,
Paragraph one of this Law shall not be applied to the acquired
company registered in Latvia.
Section 386. Record in the
Commercial Register Regarding Cross-border Merger
If a record regarding the acquiring capital company is made in
the Commercial Register of another Member State, the record in
the Commercial Register regarding the acquired capital company
shall be made, when the Commercial Register Office has received
the information from the Commercial Register Office of another
Member State regarding the making of the relevant record.
Section 387. Entry into Effect of
the Cross-border Merger
If the acquiring company is registered or is being registered
in Latvia, the cross-border merger shall be considered as
effective when a record regarding the acquiring company has been
made in the Commercial Register.
Part D
COMMERCIAL TRANSACTIONS
[18 December 2008 / Part shall
come into force on 1 January 2010. See Transitional
Provisions]
Division
XX
GENERAL PROVISIONS FOR COMMERCIAL TRANSACTIONS
Section 388. Concept of Commercial
Transactions
Commercial transactions shall be lawful transactions of a
merchant, which are connected with commercial activities.
Section 389. Commercial Transaction
in which One Party is Merchant
If a transaction is a commercial transaction only for one of
the parties to the transaction, the provisions of this Law
regarding commercial transactions shall be equally applicable
also to other parties to the transaction, insofar as it is not
otherwise provided for in laws and regulations in the field of
protection of consumer rights or in other laws.
Section 390. Presumption of
Commercial Transaction
(1) In case of any doubts a transaction of a sole
proprietorship shall be deemed a commercial transaction. Within
the meaning of this Section, making of the record in accounting,
input tax deduction, use of benefits obtained as a result of the
transaction in commercial activities, etc. shall be deemed
application of the transaction to commercial activities.
(2) A debt document signed by a sole proprietorship shall be
deemed signed in relation to his or her commercial activities
performed, insofar as the contrary does not arise from this
document.
Section 391. Commercial
Practices
In interpreting the intent expressed by a merchant, as well as
the meaning and consequences of an action, the practices existing
in the scope of commercial rights in the relevant sector shall be
taken into account in the mutual legal relations of
merchants.
Section 392. Merchant's Silence
(1) If a merchant (commercial agent, broker, commission agent,
forwarder, etc.), who enters into transactions in favour of other
persons or prepares entering therein, is conveyed a proposal for
entering into such transaction or preparation of such entering by
a person with whom he or she has relations of commercial
transactions; the merchant has an obligation to reply to this
proposal as soon as possible.
(2) Also if the merchant refuses the proposal regarding
entering into a transaction or preparation of entering therein,
he or she has an obligation to ensure temporary storage of such
movable property, which was sent together with the proposal, at
expense of the person who expressed the proposal, insofar as it
is not connected with incommensurate expenses and insofar as the
covering of storage expenses of the movable property is ensured
for a merchant.
Section 393. Obligation of Diligence
of the Merchant
(1) In relations of commercial transactions a merchant has an
obligation to act with the diligence of a respectable and
accurate merchant.
(2) The condition of Paragraph one of this Section shall not
limit the application of such provisions of the Law where the
liability of a debtor for evil intent, gross negligence or lack
of such diligence, which he or she is used to observe in his or
her own dealings, is regulated.
Section 394. Joint Liability
If several merchants jointly undertake to fulfil a divisible
obligation, they shall be solidarily liable for this obligation
in case of doubts.
Section 395. Remuneration and
Calculation of Interest
(1) A merchant who enters into transactions in favour of
another person or prepares the entering into them, or provides
services, is entitled to request remuneration even if it has not
been agreed upon. The amount of the remuneration shall be
determined pursuant to the amount of remuneration usually paid in
the relevant geographical territory.
(2) The merchant referred to in Paragraph one of this Section
is entitled to calculate lawful interest for loans, pre-payments,
expenditures and other payments, counting from the day of making
the relevant payment.
Section 396. Time Period for
Fulfilment
Fulfilment of obligations in commercial transactions may be
requested and obligations may be fulfilled only during the usual
working hours of a merchant, unless it arises otherwise from the
conditions of the matter.
Section 397. Medium Benefit
Property
If the subject-matter of an obligation of a merchant is such
movable property, which is characterised by grade and amount,
medium benefit properties shall be given for the fulfilment of
the obligation, unless the parties to the transaction have not
agreed otherwise. A medium benefit property shall mean a
property, which has been recognised as such within the scope of
commercial rights at the place of fulfilment of the
obligation.
Section 398. Units of Measurement
and Currency
In case of any doubts it shall be considered that the parties
to a commercial transaction have agreed on such units of
measurement of length, area, volume, mass and other units of
measurement, as well as on currency, which exists at the place of
fulfilment of the relevant obligation.
Section 399. Right to Retainer
(1) A merchant is entitled to retain movable property and
securities owned by another merchant and possessed by him or her,
which pursuant to the will of the other merchant have come in the
possession of the retainer on the basis of a commercial
transaction, and not to release this property and securities as
long as the money claim of the retainer arising from the
commercial transaction entered into between them against another
merchant is not satisfied. In order to achieve the satisfaction
of such claim, the merchant may retain also such objects which he
or she has obtained in the ownership from another merchant or a
third party, however, in favour of the other merchant, and which
the retainer has an obligation to hand over in the ownership of
the other merchant.
(2) The right to retainer may only be used if the obligation
of the other merchant is already fulfilled and is not limited
either by conditions or time period.
(3) The right to retainer is not effective against the third
party who has obtained the right of commercial pledge for the
retained object. In such case the provisions of Section 40 of the
Commercial Pledge Law shall be applicable accordingly. Also the
right to retainer shall not be effective against the third party
who has lawfully obtained some other property right to the
retained object prior to the use of the right of retainer.
(4) A merchant is not entitled to retain objects with which he
or she has an obligation to act in a specific way on the basis of
an obligation which the merchant has undertaken in relation to
another merchant.
(5) The other merchant may prevent the use of the right to
retainer by providing suitable collateral. The collateral may not
be the guarantee of a third party, except the case when the
retainer agrees to receive such collateral. The retainer shall
obtain the pledge rights to properties received as collateral in
accordance with the provisions of the law regarding establishment
of the pledge rights.
Section 400. Right of Retainer to
Satisfy the Claim
(1) A retainer is entitled to satisfy his or her claim against
another merchant by selling the retained objects in an auction
with the intermediation of the court, if they have not definitely
agreed that the retainer has the right to sell the retained
objects for a free price. The provisions of The Civil Law
regarding the right of possessory pledge shall be applicable
accordingly for satisfaction of the retainer's claim.
(2) The retainer has the benefit of a right to satisfy his or
her claim against other persons that are not referred to in
Section 399, Paragraph three of this Law and in favour of whom
the retained objects have been pledged after the use of the right
to retainer by selling the retained objects.
Section 401. Obtaining of Movable
Property into Ownership in Good Faith
(1) Even if a merchant alienates a property in favour of
another person on the basis of a commercial transaction, the
acquirer obtains the property rights with respect to this
property, except the case when he or she was not acting in good
faith at the time of transfer. The acquirer is not acting in good
faith if he or she knows that the property is not owned by the
alienor or the alienor is not entitled to handle this property,
or the acquirer is not aware thereof due to gross negligence.
(2) If the alienated property is burdened by rights of a third
party, these rights shall expire with the transfer of the
property rights to the acquirer of good faith, except the case
when he or she did not know regarding the referred to rights at
the time of transfer or was not aware thereof due to gross
negligence.
(3) The provisions of this Section shall not be applied to a
property obtained in illegal way, lost property or such property,
the possession of which has been terminated against the will of
the owner, except money, securities of bearer, as well as
properties which have been sold in an auction with intermediation
of the court.
Section 402. Legal Rights of
Possessory Pledge
(1) The provisions of the Civil Law regarding the rights of
possessory pledge shall be applied accordingly to legal rights of
possessory pledge of a merchant, insofar as it is not otherwise
specified in this Section.
(2) A pledgee whose claim has not been satisfied by the debtor
within the specified time is entitled to sell the lawful
subject-matter of the rights of possessory pledge at the expense
of the debtor, informing the debtor thereof in advance and taking
into account the provisions of the Civil Law regarding the sale
at an auction. The relevant provisions of the Civil Procedure Law
shall be applied for notification of an auction and for the
procedures of auction.
(3) The lawful subject-matter of the rights of possessory
pledge shall be sold for the highest price which is possible
during the sale and the sale shall not be deferred.
(4) A pledgee shall be liable to the debtor as an authorised
representative for the sale of the subject-matter of the right of
possessory pledge and his or her obligation shall be to reimburse
all losses of the debtor, which the pledgee could have prevented
by observing diligence of a respectable and accurate
merchant.
Section 403. Bill of Lading,
Consignment Note and Warehouse Receipt as Instruments to
Order
(1) Bill of lading, consignment note and warehouse receipt may
be transferred further with an endorsement, if it is directly
indicated in the relevant document (hereinafter within the
framework of this Division - the instrument to order).
(2) Endorsement shall transfer all the rights arising from the
endorsed instrument to order to endorsee.
(3) A debtor may raise only such objections against the
legitimised holder of the instrument to order, which refer to the
validity of the expression of will of the debtor included in the
instrument to order and arise from the content of the instrument
to order, or also objections, which the debtor has against the
legitimised holder of the instrument to order himself or
herself.
(4) A debtor shall be obliged to fulfil his or her obligation
only upon receiving the instrument to order with a receipt
regarding fulfilment issued by the legitimised holder of the
instrument to order. If the obligation is fulfilled partly, a
relevant note shall be made on the instrument to order and a
receipt regarding partly fulfilment shall be issued to the
debtor.
Section 404. Endorsement Form and
Blank Endorsement
(1) Endorsement shall be written on the instrument to order or
a sheet attached thereto. Endorsement shall be signed by the
endorser.
(2) The endorsee need not be indicated in the endorsement and
the endorsement may be expressed only in the signature of the
endorser (blank endorsement). In the latter case endorsement
shall be written on the other side of the instrument to order or
a sheet attached thereto in order for it to be valid.
(3) If a blank endorsement is made, the holder of the
instrument to order may:
1) fill in the endorsement on his or her own or other person's
name;
2) endorse the instrument to order further with a blank
endorsement or on the name of another person; or
3) transfer the instrument to order further without filling in
a blank endorsement and making a new endorsement.
Section 405. Legitimation of the
Holder of the Instrument to Order
(1) The person whose hands the instrument to order has reached
shall be recognised as the legitimized holder thereof insofar as
he or she proves his or her rights with a continued row of
endorsements, also if the last endorsement is a blank
endorsement. In this respect the deleted endorsements shall be
considered as not entered. If any other endorsement follows a
blank endorsement, it shall be assumed that the signatory of this
last endorsement has obtained the instrument to order on the
basis of the blank endorsement.
(2) If the instrument to order is lost by the former holder
thereof, the new holder who proves his or her rights in
accordance with the provisions of Paragraph one of this Section
has an obligation to return the instrument to order only if he or
she has obtained it in bad faith or by admitting gross
negligence.
(3) A debtor has an obligation to check whether the row of
endorsements entered in the instrument to order is continuous,
however, he or she is not obliged to ascertain the genuineness of
endorsement signatures.
Section 406. Limitation Period
Claims arising from a commercial transaction are subjected to
a limitation period of three years, unless other limitation
period is specified by the law.
Division
XXI
SPECIAL PROVISIONS FOR CERTAIN COMMERCIAL TRANSACTIONS
Chapter 1
Commercial Purchase Agreement
Section 407. Concept of Commercial
Purchase Agreement
(1) Commercial purchase agreement (hereinafter within the
framework of this Chapter - the purchase agreement) shall be such
agreement, by which the seller undertakes to sell and the buyer
undertakes to buy goods and pay the agreed purchase price and in
which at least one of the contracting parties is a merchant.
Goods within the meaning of this Chapter shall be movable
property intended for sale which has not been withdrawn from the
circulation in the private sector.
(2) The provisions of this Chapter shall be applicable also to
the purchase of securities.
[15 April 2010]
Section 408. Delay of Purchaser
(1) If a purchaser, by admitting a delay, fails to accept the
goods, a seller is entitled, notifying the purchaser thereof in
advance:
1) to transfer the goods for storage in a warehouse or in
another safe place for reasonable remuneration at the purchaser's
expense and risk;
2) to sell the goods for a free price, which is not less than
the purchase price agreed;
3) to sell the goods at the purchaser's expense in a voluntary
public auction with intermediation of a sworn bailiff, taking
into account the provisions of the Civil Law regarding the sale
at an auction and notification of an auction, as well as applying
the relevant provisions of the Civil Procedure Law regarding an
auction of movable property to the procedures of the auction.
(2) The seller is entitled to sell perishable goods or goods,
which are subjected to other risk, for a free price without an
auction and without notifying the purchaser thereof in
advance.
(3) If the goods referred to in Paragraph one, Clause 3 or
Paragraph two of this Section are sold for a price lower than has
been agreed in the purchase agreement, the purchaser has an
obligation to pay the difference between the agreed price and the
sales price of the goods.
(4) If the goods are sold in a voluntary public auction with
intermediation of a sworn bailiff, a seller has an obligation to
notify a purchaser regarding the time and place of the auction
within reasonable time period before the auction, moreover, the
purchaser is entitled to participate in bidding. The seller has
an obligation to notify the purchaser regarding the sale
immediately. If the seller fails to fulfil the referred to
obligation, he or she shall be liable for the losses caused to
the purchaser.
(5) The provisions of this Section shall not limit the rights
of a seller which he or she may use in accordance with the Civil
Law, if a purchaser admits a delay.
[15 April 2010]
Section 409. Purchase with
Specification
(1) If pursuant to a purchase agreement a purchaser is
entitled to specify more detailed form, size, quality, sort of
goods or other features of goods, the purchaser has an obligation
to specify them within the agreed period of time or as soon as
possible after receipt of the request from the seller.
(2) If a purchaser admits delay in relation to specification
of features of goods, the seller is entitled to specify the
referred to features instead of the purchaser or to unilaterally
withdraw from the agreement or request a compensation for losses
which have been caused to him or her due to the delay of the
purchaser.
(3) If a seller himself or herself specifies the features of
goods instead of the purchaser, he or she has an obligation to
notify the purchaser regarding this specification and determine a
reasonable period of time during which the purchaser may specify
other specification. If the purchaser fails to provide other
specification to the seller within the referred to period of
time, the specification specified by the seller shall be binding
to the purchaser.
Section 410. Term Purchase
(1) Term purchase is such purchase agreement by which at least
one of the contracting parties has undertaken to fulfil his or
her obligation precisely on a certain day or within a certain
period of time and pursuant to decisively expressed will of the
contracting parties the agreed time of performance is a
substantial part of such agreement.
(2) If the contracting party referred to in Paragraph one of
this Section fails to fulfil his or her obligation on the agreed
day or within the agreed period of time, the other contracting
party is entitled to unilaterally withdraw from the agreement, as
well as request a compensation for losses caused to the other
contracting party due to the delay of the debtor in relation to
the non-fulfilment of the agreement. The other contracting party
may request that the debtor fulfils the obligation only if he or
she immediately after expiration of the time period notifies the
debtor regarding his or her wish that the obligation be
fulfilled.
(3) [15 April 2010]
[15 April 2010]
Section 411. Obligation of Purchaser
to Check the Goods and Notify Regarding Deficiencies
(1) A purchaser has an obligation to check the goods as soon
as possible after receipt thereof. In determining deficiencies of
the goods, the purchaser has an obligation to notify the seller
regarding them without delay, indicating their type and
scale.
(2) If the purchaser fails to notify the seller regarding the
deficiencies of the received goods pursuant to the provisions of
Paragraph one of this Section, it shall be considered that the
purchaser has accepted the goods and he or she loses the right
provided for in Section 1620, Paragraph two of the Civil Law to
request the cancellation of the purchase agreement or reduction
of the price for goods, except the case when the goods have
hidden deficiencies which were impossible to determine during
checking of goods.
(3) If the hidden deficiencies of goods are determined later,
the purchaser has an obligation to notify the seller immediately
after determination thereof. If the purchaser fails to notify the
seller regarding the deficiencies of the received goods, it shall
be considered that the purchaser has accepted the goods with
these hidden deficiencies.
(4) The provisions of this Section shall not be applicable if
the seller has concealed or hidden the deficiencies of the goods
in bad faith or convincingly asserted that the goods have certain
properties.
(5) The provisions of this Section shall be applicable if the
purchaser and seller are merchants.
Section 412. Temporary Storage of
Goods
(1) If a purchaser has notified a seller regarding
deficiencies of such goods, which have been delivered to the
purchaser from another place, the purchaser has an obligation to
ensure temporary storage of such goods.
(2) Perishable goods or goods, which are subjected to other
risk or storage of which is related to incommensurate costs, the
purchaser is entitled to sell, taking into account the provisions
of Section 408, Paragraphs two and three of this Law.
(3) The provisions of this Section shall be applicable if the
purchaser and seller are merchants.
Section 413. Mass of the Packaging
of Goods
(1) If the purchase price is determined pursuant to the mass
of goods, the mass of the packaging of goods shall not be taken
into account if it does not arise otherwise from the agreement or
the commercial usage of the place where a seller is bound to
fulfil his or her obligation.
(2) Within the meaning of this Law, the concept "packaging"
shall also mean a container used for inland, water and air
transport.
Section 414. Application of
Provisions of the Purchase Agreement to Barter, Supply and
Work-performance Contract
(1) The provisions of this Chapter shall also be applicable to
such barter and supply contract accordingly (Sections 2092 and
2109 of the Civil Law), the subject-matter of which is the
goods.
(2) The provisions of this Chapter shall be applicable to
work-performance contract regarding production of movable
property from the material provided by the entrepreneur (Section
2214, Paragraph one of the Civil Law).
Chapter 2
Commercial Commission Contract
Section 415. Concept of the
Commercial Commission Contract and Commission Agent
(1) Commercial commission contract is such contract, by which
a merchant (commission agent) undertakes in his or her name,
however, at another person's (committent) expense to purchase or
sell goods or securities or enter into other types of
transactions with third parties, but the committent undertakes to
pay the agreed commission.
(2) Commission agent is such agent who has undertaken in his
or her name, however, at the committent's expense to enter into
transactions with other persons independently. The provisions of
Sections 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59,
60 and 61 of this Law shall be applicable to mutual relations of
the commission agent and the committent.
Section 416. Obligations of
Commission Agent
(1) A commission agent has an obligation to fulfil the
commission with the diligence of a respectable and accurate
merchant. The commission agent, in particular, has an obligation
to observe the interests of the committent and his or her
instructions.
(2) The commission agent shall transfer all the necessary
information and documents to the committent. The commission
agent, in particular, has an obligation to notify the committent
regarding the fulfilment of the commission without delay.
(3) The commission agent has an obligation to provide the
committent with a settlement of accounts regarding each
transaction entered into, as well to transfer to the committent
what the commission agent has acquired in fulfilling his or her
obligations.
(4) The commission agent shall be liable for the fulfilment of
a transaction in relation to the committent if he or she,
concurrently with a notice regarding the fulfilment of the
commission, has not indicated to the committent the third party
with whom this transaction has been entered into.
Section 417. Instructions of the
Committent
(1) If a commission agent fails to act pursuant to the
instructions of a committent, he or she shall be liable for the
losses caused to the committent, moreover, the committent has no
obligation to recognise the transaction as entered into at his or
her expense.
(2) The commission agent is entitled to derogate from
instructions of the committent only if he or she has a reason to
consider that in the particular case, knowing the circumstances
of the matter, the committent himself or herself would have acted
the same. In such case the commission agent shall notify the
committent regarding his or her derogation from instructions
without delay and wait for the decision of the committent, unless
there is a risk of delay.
Section 418. Price Limits
(1) If a commission agent, upon entering into a transaction
with a third party, violates the price limits specified by the
committent and the committent does not want to acknowledge that
the relevant transaction has been entered into at his or her
expense, the committent has an obligation, as soon as a notice
regarding the fulfilment of the commission is received, to notify
the commission agent thereof without delay. Otherwise it shall be
considered that the committent has agreed to the deviation from
the price limit allowed by the commission agent.
(2) If the commission agent, concurrently with the notice
regarding the fulfilment of the commission, offers to cover the
difference between the price specified by the committent and the
price agreed with the third party, the committent is not entitled
to refuse to admit that the transaction has been entered into at
his or her expense.
Section 419. More Advantageous
Provisions
(1) If a commission agent enters into a transaction under more
advantageous provisions than the ones specified by a committent,
the benefit acquired from entering into such transaction shall be
due to the committent.
(2) Particularly, the sales price exceeding the lowest price
limit specified by the committent, as well as the purchase price,
which does not reach the highest price limit specified by the
committent, shall be considered as a more advantageous
provision.
Section 420. Goods with Deficiencies
or Damaged Goods
(1) If the goods supplied by a commission agent and the goods
to be sent further have external deficiencies or damages, the
commission agent has an obligation to use his or her rights
against the carrier, forwarder, keeper or seller (in case of a
purchase commission), to provide evidence attesting to the state
of goods, as well as to notify the committent thereof without
delay. If the commission agent fails to fulfil the referred to
obligations, he or she shall be liable for the losses caused to
the committent.
(2) If the goods perish or changes have occurred or may occur
later therein, which could cause decrease in the value of the
goods, and there is no time to receive instructions of the
committent regarding further action or the committent hesitates
to provide instructions, the commission agent is entitled to sell
the goods at expense of the committent, taking into account the
provisions of Section 408, Paragraphs two and three of this
Law.
Section 421. Transfer of Goods for
Storage or Sale of Goods
If a committent fails to act with the purchased goods or the
goods to be sold, which are placed in storage of the commission
agent, although in accordance with the circumstances of the
matter it is the obligation of the committent to do so, the
commission agent pursuant to the provisions of Section 408 of
this Law is entitled to hand over the goods for storage to
another person or to sell them.
Section 422. Liability of the
Commission Agent for the Goods
(1) A commission agent shall be liable for the damages,
perishing or destruction of the goods stored by him or her, which
he or she could have prevented by observing the diligence of a
respectable and accurate merchant.
(2) The commission agent shall be liable for the fact that the
goods are not insured only if the committent had instructed the
commission agent to insure the goods.
Section 423. Obligation to Check the
Goods and Temporary Storage of Goods
(1) If an obligation to perform a purchase commission has been
entrusted to a commission agent and if the commission agent and
the committent are merchants, the provisions of Sections 411 and
412 of this Law shall be applicable to the obligation of the
committent to check the goods and to notify the commission agent
regarding the determined deficiencies of the goods, as well as to
the obligation to store the goods and to the right to sell
them.
(2) Also if the committent has not notified the commission
agent in due time regarding the deficiencies of the goods, the
committent is entitled to request that the commission agent cedes
his or her claims against the third party from whom he or she has
bought the goods at the committent's expense.
Section 424. Claims Arising from
Commission Transaction
(1) A committent is entitled to bring claims arising from a
transaction, which a commission agent has entered into at the
committent's expense (including claims regarding cancellation of
a purchase agreement or reduction of the price for goods),
against a debtor only after the commission agent has ceded these
claims to a committent.
(2) In relations between the committent and the commission
agent or his or her creditors the claims referred to in Paragraph
one of this Section shall be considered as the claims of the
committent even if they have not been ceded to the committent
yet.
Section 425. Pre-payment and
Post-payment
(1) If a commission agent makes a pre-payment in favour of a
third party without the consent of the committent or agrees
regarding a post-payment, the commission agent shall be liable
for the risk related to such action.
(2) If the commission agent sells goods or securities to the
third party with post-payment without the consent of the
committent, the commission agent has an obligation to immediately
pay the full purchase price to the committent instead of the
third party.
Section 426. Right of the Commission
Agent to Commission and Reimbursement of Expenses
(1) A commission agent has the right to the agreed commission
as soon as and insofar as the third party has fulfilled the
transaction entered into with the commission agent. The
commission agent has the right to a commission even if the
transaction has not been fulfilled because of the committent.
(2) The obligation of the committent is to reimburse the
expenses of the commission agent, which were necessary for the
fulfilment of the commission pursuant to the circumstances. These
expenses shall also include reimbursement for the use of
warehouse premises of the commission agent or another place
suitable for storage and for the use of vehicles for the
fulfilment of the commission.
Section 427. Rights of the
Commission Agent to Del Credere
(1) A commission agent who guarantees the fulfilment of the
obligation of a third party has the right to a special
compensation (del credere).
(2) Upon setting in of the term for the fulfilment of the
obligation or the condition of the third party, the commission
agent who has guaranteed the fulfilment of the obligation of the
third party shall be directly liable for the fulfilment of the
relevant obligation, and the commission agent is not entitled to
request that the committent brings his or her claim to the third
party at first.
Section 428. Lawful Rights of
Possessory Pledge of the Commission Agent
A commission agent has the lawful rights of possessory pledge
to the commission goods in the possession of the commission
agent, which ensure the claims of the commission agent against
the committent regarding payment of the commission and del
credere, as well as regarding reimbursement of expenses necessary
for the fulfilment of the commission.
Section 429. Right of the Commission
Agent to Get Satisfaction from Claims
A commission agent has the priority right in comparison with
the committent and his or her creditors to satisfy the claims
referred to in Section 424 of this Law for which the term or the
condition for fulfilment of the claim arising from the commission
transaction has set in. In this respect, the commission agent is
entitled to refuse to cede the claims arising from the commission
transaction in favour of the committent, to receive and keep the
fulfilment provided on the basis of this claim, to suggest those
claims for set-off, as well as to cede them to another
person.
Chapter 3
Forwarding Agreement
Section 430. Concept of Forwarding
Agreement
Forwarding agreement shall be such agreement, by which a
merchant who provides freight forwarding services (forwarder)
undertakes to organise delivery of freight to its consignee at
consignor's expense, using transport services of the carrier and
the consignor undertakes to pay the agreed remuneration.
Section 431. Rights and Obligations
of Forwarder
(1) In providing freight forwarding services, a forwarder is
entitled if the parties have not agreed otherwise:
1) to specify the type of transport and the route of freight
conveyance;
2) to choose persons who deliver the freight to the consignee,
to enter into the transport, storage and forwarding agreement
necessary for delivery of the freight, to provide information and
instructions to the referred to persons and to perform the
relevant payments.
(2) If the parties have not agreed regarding the time of
freight delivery, the forwarder has an obligation to ensure the
delivery of the freight to its consignee within a reasonable
period of time.
(3) In providing the freight forwarding services, the
forwarder has an obligation to request statements if violations
have been determined during the carriage of freight, to
participate in drawing up of a statement upon the request of the
consignor or consignee, as well as, in ensuring the rights of the
consignor, to submit objections and claims in his or her behalf
in a timely manner.
(4) The forwarder shall also perform other agreed obligations,
which are related to organisation of freight delivery, including
insurance, packing, labelling and performance of customs
clearance of the freight. The forwarder has an obligation to
enter into the necessary agreements with third parties for the
performance of the abovementioned obligation only when such
obligation arises from the forwarding agreement.
(5) The forwarder shall enter into agreements necessary for
organisation of freight delivery in his or her name or in the
name of the consignor, if the forwarder has been authorised for
that.
(6) If the forwarder acts as the representative of the
consignor, the forwarder is not entitled to calculate for the
consignor a larger fee for the carriage of freight than he or she
has agreed with the carrier.
Section 432. Packaging, Labelling of
Freight, Accompanying Documents and Obligation to Provide
Information Regarding Freight
(1) A consignor has an obligation, insofar as it is necessary,
to pack and label the freight to be transferred for forwarding,
to submit accompanying documents to the freight forwarder, as
well as to provide him or her with all the information necessary
to the forwarder in order to fulfil his or her obligation, also
information regarding freight to be carried and stored in
accordance with special provisions and for which special
equipment or servicing is necessary. If dangerous goods are
consigned for forwarding, which during carriage or storage may
cause explosion, fire or other damage, endanger human life,
health, personal property or the environment due to their
properties, the consignor has an obligation to inform the
forwarder in writing regarding the type of dangerousness of the
freight and the necessary safety measures.
(2) An order for delivery of dangerous goods or excisable
goods shall be submitted to the forwarder in writing.
(3) Even if the consignor is not to be blamed, he or she shall
be responsible for losses and expenses in relation to the
forwarder, which have arisen because of the following
reasons:
1) the freight has not been adequately packed or labelled;
2) the forwarder has not been informed regarding the
dangerousness of the freight; or
3) the consignor has not submitted all accompanying documents
referred to in Paragraph one of this Section or has not provided
the necessary information, or the information is incomplete,
incorrect or false.
(4) If the losses or expenses referred to in Paragraph three
of this Section have arisen also due to the action of the
forwarder, the consignor shall be bound to reimburse the losses
or expenses. The amount of reimbursement to be paid shall depend
on the extent of the losses or expenses being caused by the
action of the consignor or forwarder.
(5) If the consignor is a consumer, he or she shall, in
accordance with the provisions of Paragraphs three and four of
this Section, be liable in relation to the forwarder for losses
and expenses, insofar they have arisen due to the fault of the
consignor.
Section 433. Loading and Unloading
of Freight
A consignor shall be liable for loading of freight at the
starting point and a consignee - for unloading at the endpoint if
it is not otherwise specified in the forwarding agreement.
Section 434. Freight with
Deficiencies or Damaged Freight
(1) If a freight, which a forwarder has received from a third
party and which is to be delivered to a consignee, has external
deficiencies or damages, the forwarder has an obligation, upon
ensuring the rights of the consignor, to notify the third party
regarding these deficiencies or damages without delay, to take
care of the evidence attesting to the state of the freight, as
well as to notify the consignor thereof without delay. If the
forwarder fails to fulfil the referred to obligations, he or she
shall be liable for the losses caused to the consignor.
(2) If the freight perishes or changes occur or are likely to
occur later, which would cause decrease of the value of the
freight, and there is no time to receive instructions from the
consignor for further action involving freight or the consignor
hesitates to give instructions, the forwarder is entitled to sell
the freight at the consignor's expense, taking into account the
provisions of Section 408, Paragraphs two and three of this
Law.
Section 435. Payment of
Reimbursement
(1) A consignor has an obligation to pay the agreed
reimbursement to the forwarder as soon as the forwarder has
fulfilled the freight forwarding service, if it is not otherwise
specified in the agreement.
(2) If in accordance with the agreement by and between the
consignor and the forwarder the reimbursement for the provision
of forwarding services is to be collected from the consignee or
another person, however, this person does not make the referred
to payment, the consignor shall be liable for payment of the
reimbursement.
Section 436. Claims of the
Consignor
(1) A consignor is entitled to bring forward claims arising
from the agreement, which has been entered into by the forwarder
in his or her name at consignor's expense, against a debtor only
when the forwarder has ceded these claims to the consignor.
(2) In relations between the consignor and the forwarder or
his or her creditors the claims referred to in Paragraph one of
this Section shall be considered as the claims of the consignor
also if they have not been ceded to the consignor.
Section 437. Liability of the
Forwarder
(1) A forwarder shall be liable for non-fulfilment of the
obligations of the third parties involved in implementation of
the forwarding agreement if he or she is acting in his or her
name or if one of the following conditions exists:
1) the forwarder has directly or indirectly undertaken the
liability of the carrier;
2) the forwarder has specified the fee for carriage;
3) the forwarder issues a transport document in his or her
name; or
4) the forwarder organises carriage, using road transport.
(2) The forwarder shall not be liable for non-fulfilment of
the obligations of the third parties involved in implementation
of the forwarding agreement if he or she acts on behalf of the
consignor and proves that he or she has chosen these persons duly
and carefully.
Section 438. Freight Insurance
A forwarder has an obligation to insure the freight
transferred for forwarding at consignor's expense if it is
requested by the consignor or they have agreed about it in the
forwarding agreement.
Section 439. Obligation of the
Consignor to Reimburse the Forwarder's Expenses
A consignor has an obligation to compensate the forwarder's
expenses, which according to the circumstances, have been
necessary for the fulfilment of the forwarder's obligations, also
such expenses, which are related to:
1) the increase of customs and other payments or changes in
currency exchange rate;
2) waiting period, which has arisen due to circumstances
beyond his or her control; or
3) incompletely, incorrectly or inappropriately drawn up
accompanying documents of the freight submitted by the
consignor.
Section 440. Transfer of Freight for
Storage
If the consignee of the freight, in admitting the delay, does
not accept the freight delivered or the freight is suspended
during carriage due to circumstances beyond his or her control,
the forwarder is entitled to transfer the freight for storage in
a warehouse or in another safe place at the consignor's expense,
notifying the consignor and the carriage insurer thereof without
delay, if the forwarder has made insurance.
[15 April 2010]
Section 441. Liability of the
Forwarder for Non-preserving of the Freight or Delay of the
Freight Delivery
(1) A forwarder shall be liable for damages, perishing,
shortfall, destruction, loss of the freight or delay of freight
delivery under his or her supervision, which he or she could have
prevented, observing the diligence of honest and careful
merchant.
(2) The forwarder shall not be liable for non-preserving of
the freight (damages, perishing, shortfall, destruction or loss),
if he or she proves that the freight has not been preserved:
1) because it was carried in an open vehicle in accordance
with the agreement of the forwarder and the consignor or upon
request of the consignor;
2) due to damaged packaging thereof if the freight was
packaged by the consignor, or because the consignor used
packaging, which did not comply with the properties or standards
of freight;
3) upon loading or unloading it if loading or unloading was
performed by the consignor or the consignee;
4) due to individual natural properties, which may easily
cause freight damages, perishing, shortfall or destruction, if
the consignor did not inform the forwarder regarding these
properties before the transfer of the freight for forwarding;
or
5) due to inappropriate labelling thereof if freight was
labelled by the consignor, or because the consignor has not
indicated special properties of the freight in the accompanying
documents of the freight, because of which it is necessary to
observe special safety provisions or to perform the relevant
measures in order to ensure the preservation of the freight
during the carriage or storage.
(3) Upon reimbursing the losses for non-preserving of the
freight, the forwarder shall also return a reimbursement paid to
him or her for the provision of the forwarding services and
compensate other payments related to the carriage of the freight
in proportion to the amount of the freight non-preserved, as well
as any expenses which are related to determination of the amount
of reimbursement for the losses pursuant to the provisions of
Section 443 of this Law.
(4) The forwarder shall be liable for other losses only if he
or she has not fulfilled his or her obligations pursuant to the
provisions of Section 431 of this Law.
(5) If losses have been caused also due to the action of the
consignor or due to specific deficiencies of the freight
transferred for forwarding, the forwarder has an obligation to
reimburse the losses. The amount of reimbursement to be paid
shall depend on the extent of the losses being caused by the
action of the consignor or the forwarder or the deficiencies of
the freight transferred for forwarding.
Section 442. Reimbursement of the
Freight Value
(1) If a forwarder has an obligation to reimburse losses
arisen due to damages or perishing of the freight, the
reimbursement for losses shall be determined in such amount, by
which the value of the freight has reduced, but due to the
shortfall, destruction or loss of the freight - pursuant to the
value of the missing, destroyed or lost freight.
(2) The value of freight shall be determined pursuant to the
market price thereof or in accordance with the usual value of
items of the same grade and quality. If freight is transferred
for forwarding with a notified value, the amount of reimbursement
for losses shall be determined pursuant to this value, if the
forwarder does not prove that the value of the freight
transferred for forwarding was smaller.
Section 443. Limits of the Amount of
Reimbursement for Losses
(1) If a forwarder has an obligation to reimburse losses
arisen due to damages, perishing, shortfall, destruction or loss
of the freight, the amount of reimbursement for losses may not
exceed the amount, which complies with the 8.33 money units of
payment specified by the International Monetary Fund for
each:
1) gross mass kilogram of freight if all freight has been
damaged or lost;
2) gross mass kilogram of the damaged or lost part of the
freight if part of the freight has been damaged or lost.
(2) [19 September 2013 / See Paragraph 35 of Transitional
Provisions]
(3) The limit of the reimbursement for losses provided for in
Paragraph one of this Section shall not be applicable if the
forwarder or the person referred to in Section 444 of this Law,
in causing losses, has acted in bad faith or allowed gross
negligence.
[19 September 2013]
Section 444. Liability of the
Forwarder for Other Persons
A forwarder shall be liable for any illegal action committed
by employees of the forwarder in their work or other persons
employed by his or her company to the same extent as for his or
her own action.
Section 445. Limitation Period of
Claim
(1) Claims against a forwarder regarding damages, perishing,
shortfall, destruction or loss of a freight transferred for
forwarding, as well as for delivery of the freight shall expire
within one year. If the forwarder has acted in bad faith or
allowed gross negligence, the referred to claims shall expire
within three years. All other claims against the forwarder shall
expire within three years.
(2) If the freight transferred for forwarding has not been
preserved due to damages, perishing or shortfall, the limitation
period shall begin from the day, on which the freight was
delivered to the consignee, but due to destruction, loss of the
freight or delay of delivery of the freight - on the day when the
freight should have been delivered to the consignee.
Section 446. Lawful Right of
Possessory Pledge of the Forwarder
(1) A forwarder has the lawful right of possessory pledge to a
freight transferred for forwarding and in the possession of the
forwarder, which ensures the claims of the forwarder against the
consignor. The lawful right of possessory pledge shall apply also
to accompanying documents of freight.
(2) If the forwarder has involved a sub-forwarder in order to
fulfil the obligation agreed upon in the agreement regarding
provision of freight forwarding services, the claims of the
forwarder and the lawful right of possessory pledge provided for
in Paragraph one of this Section shall be transferred to the
sub-forwarder until he or she satisfies the claims of the
forwarder arising from the forwarding agreement.
Chapter 4
Commercial Storage Agreement
Section 447. Concept of Commercial
Storage Agreement
Commercial storage agreement (hereinafter within the framework
of this Chapter - storage agreement) shall be such agreement, by
which a merchant dealing with storage of movable properties
(keeper) undertakes to place the property handed over for storage
in a warehouse or in another place suitable for storage and store
it in favour of a depositor, and the depositor undertakes to pay
the agreed remuneration.
Section 448. Packaging, Labelling,
Accompanying Documents of the Property and Obligation to Provide
Information regarding Property
(1) A depositor has an obligation, insofar as it is necessary,
to package and label a property handed over for storage, to
submit accompanying documents to the keeper, as well as to
provide all information to him or her, which is necessary so that
the keeper could fulfil his or her obligations. If dangerous
property is handed over for storage, which due to its properties
under certain conditions may cause explosion, fire or other
damages, endanger human life, health, personal property or the
environment, the depositor has an obligation to notify the keeper
regarding the type of dangerousness of the property and the
necessary safety measures in writing.
(2) If the depositor is a consumer, the keeper has an
obligation, insofar as it is necessary, to package and label the
property handed over for storage. The depositor has an obligation
to inform the keeper regarding dangerousness of the property.
(3) Even if the depositor is not to be blamed, he or she shall
be liable for losses and expenses caused to the keeper due to the
following reasons:
1) the property was not appropriately packaged or
labelled;
2) the keeper was not informed regarding dangerousness of the
property;
3) the depositor failed to submit all the accompanying
documents referred to in Paragraph one of this Section or has not
provided the necessary information or the information was
incomplete, inaccurate or false.
(4) If the losses or expenses referred to in Paragraph three
of this Section have been caused also due to the action of the
keeper, the depositor has an obligation to reimburse losses or
expenses. The amount of reimbursement to be paid shall depend on
the extent of the losses or expenses being caused by the action
of the depositor or the keeper.
(5) If the depositor is a consumer, he or she shall be liable
for losses or expenses in respect of the keeper in accordance
with the provisions of Paragraphs three and four of this Section
insofar as they have been caused due to the fault of the
depositor.
Section 449. Fungible Property
Storage
(1) A keeper is entitled to combine fungible property handed
over for storage with any property of the same grade and quality
only if the relevant depositors have explicitly permitted it.
(2) If the keeper is entitled to combine properties handed
over for storage, the owners thereof shall obtain joint ownership
right in undivided shares to the properties handed over for
storage starting from the day when the referred to properties are
placed in a warehouse or in another place suitable for
storage.
(3) In the case referred to in Paragraph two of this Section
the keeper may return to each depositor the share due to him or
her without the consent of other joint owners.
Section 450. Property with
Deficiencies or Damaged Property
(1) If a property, which a keeper has received from a third
party and which is to be stored in favour of a depositor, has
external deficiencies or damages, the keeper has an obligation,
in ensuring the rights of the depositor, to notify the third
party regarding these deficiencies or damages without delay, to
take care of the evidence attesting the condition of the
property, as well as to notify the depositor thereof without
delay. If the keeper fails to fulfil the referred to measures, he
or she shall be liable for the losses caused to the
depositor.
(2) If after consent of the property for storage such changes
occur or are likely to occur, which would cause damages to the
keeper, he or she has an obligation to notify the depositor
thereof without delay, but if a warehouse receipt has been issued
- the last legitimised holder of the warehouse bill of lading
known by him or her, as well as to request instructions from the
depositor (the holder of the warehouse receipt) regarding further
action in this matter. If the keeper is not able to receive the
referred to instructions within appropriate period of time, the
keeper is entitled to sell the property handed over for storage
at expense of the depositor (the holder of the warehouse
receipt), taking into account the provisions of Section 408,
Paragraphs two and three of this Law or upon his or her
preferences pursuant to the action of a respectable and accurate
merchant, to perform other actions necessary for storage of the
property.
Section 451. Inspection of the
Property Handed over for Storage and Measures for Preservation
Thereof
A keeper has an obligation to allow the depositor to inspect a
property handed over for storage in usual working time, to take
samples, as well as to allow the taking of measures necessary for
the preservation of the property. The keeper has the right and,
if fungible properties handed over for storage are combined, - an
obligation to take measures necessary for the preservation of the
property by himself or herself.
Section 452. Duration of Storage
(1) A depositor may reclaim from the keeper the property
handed over for storage at any time.
(2) If a storage agreement has been entered into for an
indefinite period, the depositor is entitled to give a notice of
termination of the storage agreement one month in advance. If the
depositor has an important reason, he or she is entitled to give
the notice of termination of the storage agreement, not taking
into account the term of the notice.
(3) The keeper may request that the depositor takes back the
property handed over for storage only after termination of the
agreed period of time, but, if the storage agreement has been
entered into for an indefinite period, - by giving a notice of
termination of the storage agreement one month in advance. If the
keeper has an important reason, he or she is entitled to demand
that the depositor takes back the property handed over for
storage before termination of the agreed period of time, not
taking into account the period of notice. If the keeper has
issued a warehouse receipt, the notice of termination of the
storage agreement and the claim regarding taking back of the
property shall be directed against the last legitimised holder of
the warehouse receipt known to him or her.
Section 453. Insurance of the
Property Transferred for Storage and Transfer for Storage to a
Third Party
(1) A keeper has an obligation to insure a property
transferred for storage at expense of the depositor, if it is
requested by the depositor or if they have agreed upon it in the
storage agreement.
(2) The keeper is entitled to pass on a property transferred
for storage to a third party for storage only if the depositor
has allowed it.
Section 454. Obligation of the
Depositor to Reimburse Expenses of the Keeper
A depositor has an obligation to reimburse expenses to the
keeper, which according to the circumstances have been necessary
for the fulfilment of the obligations of the keeper.
Section 455. Responsibility of the
Keeper Regarding Property Transferred for Storage
(1) A keeper shall be liable for such damages, perishing,
shortfall or destruction of a property transferred for storage
from the time of receipt of the property until return thereof,
which he or she could have prevented, observing the diligence of
a respectable and accurate merchant.
(2) The provisions of Paragraph one of this Section shall be
applicable even if, in accordance with the provisions of Section
453, Paragraph two of this Law, the keeper of the properties
transferred for storage has passed on for storage to a third
party.
Section 456. Limitation Period and
Beginning of Limitation Period
(1) Claims against a keeper regarding damages, perishing,
shortfall, delay of return or destruction of a property
transferred for storage shall expire within one year. If the
keeper has acted in bad faith or admitted gross negligence, the
referred to claims shall expire within three years.
(2) If the property transferred for storage has not been
preserved due to damages, perishing or shortfall, the limitation
period shall begin on the day when the property transferred for
storage is returned, but due to the delay of return of the
property - on the day when the property should have been
returned. In case of complete destruction of the property the
limitation period shall begin on the day when the keeper notifies
the depositor or the last legitimised holder of the warehouse
receipt known by him or her regarding the referred to destruction
if a warehouse receipt has been issued.
Section 457. Lawful Right of
Possessory Pledge of the Keeper
(1) He or she has the lawful right of possessory pledge to a
property transferred for storage and in the possession of the
keeper, and this right ensures the claims of the keeper against
the depositor arising from the storage agreement.
(2) If a warehouse receipt of order is passed on to with
endorsement, the keeper has the lawful right of possessory pledge
in relation to the legitimised holder of the warehouse receipt,
and this right ensures only those claims regarding payment of
remuneration or reimbursement of expenses, which arise from the
warehouse receipt or regarding the existence of which the
legitimised holder of the warehouse receipt knew or did not know
at the time of acquisition of the warehouse receipt due to gross
negligence.
Section 458. Warehouse Receipt
(1) After consent of the property for storage the keeper may
issue a warehouse receipt. The warehouse receipt is a security,
in which the claim against the keeper regarding return of the
property transferred for storage is registered. The warehouse
receipt may be issued as a registered instrument, bearer
securities or instrument to order.
(2) The following information shall be indicated in the
warehouse receipt:
1) a designation that the deed is a warehouse receipt;
2) the place and date of issuance of the warehouse
receipt;
3) the name, registration number and legal address or the
given name, surname, personal identity number (if the person does
not have a personal identity number - the date of birth, the
number and date of issue of a personal identification document,
the state and authority, which issued the document) and place of
residence of the depositor;
4) the firm name, registration number and legal address of the
keeper;
5) the place (the address of the warehouse or other place
suitable for storage) and the date when the property has been
received for storage;
6) a designation adopted for characterisation of the property
and the type of packaging thereof, but for a dangerous property -
special and common designation thereof;
7) the number of packaging units, special labelling and
numbering thereof;
8) the gross mass or quantity of the property in other units
of measurement;
9) a note whether the fungible property transferred for
storage is combined with other properties of the same grade and
quality in accordance with the provisions of Section 449 of this
Law.
(3) In addition to the mandatory information referred to in
Paragraph two of this Section the keeper may also indicate other
information in the warehouse receipt.
(4) The warehouse receipt shall be signed by the keeper.
[15 April 2010]
Section 459. Force of Warehouse
Receipt
(1) The warehouse receipt shall prevail in mutual legal
relations between the depositor and the legitimised holder of the
warehouse receipt.
(2) The warehouse receipt shall establish an assumption that,
in terms of external appearance and status, as well as in terms
of the number of units, labelling and numbering thereof, the
keeper has accepted for storage such property and packaging
thereof as described in the warehouse receipt. If the keeper has
checked the gross weight or amount of the property transferred
for storage in other units of measurement or also the content of
the property and has indicated the results of such check in the
warehouse receipt, the warehouse receipt shall establish an
assumption that the weight, amount or content of the property
complies with the information indicated in this receipt. The
evidence to the contrary shall not be permissible if the
warehouse receipt has been transferred to a third party of good
faith.
(3) The storage agreement shall prevail in mutual legal
relations between the keeper and the depositor.
Section 460. Return of the Property
Transferred for Storage in Return for a Warehouse Receipt
(1) If a warehouse receipt has been issued, a keeper has an
obligation to return a property transferred for storage only upon
receipt of the relevant warehouse receipt, in which a note
regarding return of the property is made.
(2) Upon returning part of the properties transferred for
storage, a relevant note shall be made in the warehouse receipt.
The warehouse receipt shall be signed by the keeper.
(3) The keeper shall be liable in respect of the legitimised
holder of the warehouse receipt for such damages, which have
occurred because the property transferred for storage has been
returned without receiving the warehouse receipt or without
making the note referred to in Paragraph two of this Section.
Section 461. Legitimation with the
Warehouse Receipt
Such person shall be legitimised to receive a property
transferred for storage to whom the property is to be returned in
accordance with the warehouse receipt or who has been transferred
a warehouse receipt of order with endorsement. The keeper has no
obligation to check the authenticity of endorsement.
Section 462. Consequences of
Endorsement of the Warehouse Receipt of Order
In terms of obtaining the rights, the transfer of a warehouse
receipt of order with endorsement to another person if the keeper
has accepted a property for storage, shall cause the same legal
consequences as in the case of transfer of a property transferred
for storage in the ownership or possession of another person.
Chapter 5
Lease Contract
Section 463. Concept of the Lease
Contract
(1) A lease contract shall be such contract by which a
merchant (lessor) undertakes to acquire in the ownership a
property selected by the lessee from a third party (seller)
selected by the lessee and to ensure the transfer of this
property in the use of the lessee, but the lessee undertakes to
accept this property and pay the agreed remuneration.
(2) The provisions for the purchase contract of the Civil Law
and this Law shall be applied to the lease contract, insofar as
it is not in contradiction with the provisions of this Chapter,
in the following cases:
1) if it is agreed that the lessee has an obligation to buy
out the property transferred for lease; or
2) if it is agreed that at the end of the duration of the
lease contract, provided that the lessee has no unfulfilled
commitments against the lessor, the lessee has the right to
obtain the property transferred for lease into ownership without
additional remuneration or for remuneration, which on the date
when such opportunity could be used will be sufficiently low so
that on the day of commencement of the use a justified certainty
existed that the lessee will use this opportunity.
(3) In other cases the provisions for the rental contract of
the Civil Law shall be used insofar they are not in contradiction
with the provisions of this Chapter.
Section 464. Obligation of the
Lessee to Check the Property and Liability for Action of the
Property Seller
(1) A lessee, as a respectable and accurate proprietor, has an
obligation to check as soon as possible the compliance of the
property with the provisions of the contract before consent of
the property.
(2) The lessee shall take the risk of failure to deliver the
property.
Section 465. Property with
Deficiencies
(1) If deficiencies of a property transferred for lease are
determined, a lessee has an obligation to notify the seller
thereof without delay and to bring claims against the seller
arising from the purchase contract entered into, as well as
claims arising from wrongful self-enrichment.
(2) If the property with deficiencies is replaced by a
property of the same grade without deficiencies, such replacement
shall not affect the validity of the lease contract.
Section 466. Use of the Property
Transferred for Lease and Risks Related to Such Property
(1) A lessee has an obligation to use a property transferred
for lease as a respectable and accurate proprietor in accordance
with the objectives and procedures specified in the lease
contract, but if such objectives and procedures have not been
agreed upon - in accordance with the common targets and
procedures, as well as to cover all expenses related to the
maintenance of the property transferred for lease.
(2) The deficiencies (including legal restrictions) of a
property transferred for lease, due to which it is not possible
to use the property, shall not affect the obligation of the
lessee to pay the remuneration agreed in the lease contract.
(3) The risk of damaging, destruction, theft or loss of the
property shall be transferred to the lessee after consent of the
property.
(4) In case of damaging, destruction, theft or loss of a
property transferred for lease the lessee has an obligation to
reimburse all losses to the lessor, except the loss of predicted
profit.
(5) If the use of a property transferred for lease is
connected with increased dangerousness to others, all the risks
arising from such dangerousness and the liability for losses,
which have arisen due to the impact of the source of the
increased dangerousness, shall be transferred to the lessee after
receipt of this property.
Section 467. Immediate Termination
by the Lessor
A lessor is entitled to terminate a lease contract immediately
and to take over the subject-matter of lease in his or her actual
possession without notification if:
1) a lessee who has delayed the term for payment of the agreed
remuneration has not paid this remuneration within 15 days after
receipt of a reminder from the lessor;
2) a seller has failed to transfer a property to a lessee
within the period of time specified in the purchase agreement or
the ownership rights to this property have not been transferred
to the lessor due to circumstances not depending on him or her;
or
3) a lessee, upon entering into the lease contract, has
provided the lessor with false information regarding
circumstances, which have a substantial meaning upon entering
into the contract.
[15 April 2010]
Chapter 6
Factoring Contract
Section 468. Concept of the
Factoring Contract
A factoring contract is such contract, by which one
contracting party (customer) undertakes an obligation to transfer
money claims of a client against a third party (debtor) known
thereto, as well as to fulfil other commitments specified in the
factoring contract to another contracting party - merchant
(factor) for the agreed remuneration.
Section 469. Claims to be
Transferred
(1) A client is entitled to transfer to a factor such money
claims, the fulfilment of commitments of which has already set
in, as well as such claims, which will arise in the future
(future claims). The claims to be transferred shall be
characterised in the factoring contract so that it would be
possible to determine the present claims at the time of entering
into the factoring contract, and future claims - not later than
at the time of occurrence thereof.
(2) A future claim shall be transferred to the factor at the
time of occurrence thereof.
Section 470. Validity of Transfer of
Claim
An agreement entered into by and between a debtor who is a
merchant and a client, according to which the transfer of the
client's claims to another person is prohibited or restricted,
shall not be valid in respect of the transfer of claims to such
person who provides factoring services.
Section 471. Liability of the Client
for Authenticity and Safety of Claim
(1) A client shall be liable to the factor for the
authenticity of a claim transferred or to be transferred, unless
it is otherwise agreed in the factoring contract.
(2) The client shall not be liable to the factor for the
safety of a claim transferred or to be transferred, unless it is
otherwise agreed in the factoring contract.
Section 472. Further Transfer of
Claims
The factor is not entitled to transfer a claim transferred to
him or her further to another person, unless it is otherwise
provided for in the factoring contract.
Section 473. Payment
A debtor has an obligation to fulfil the commitment complying
with a claim by making a payment in favour of the factor, if the
debtor has received a notice from the client or the factor
regarding the transfer of this claim to the factor. The payment
in favour of the factor shall release the debtor from the
commitments complying with the claim against the client.
Chapter 7
Franchise Contract
Section 474. Concept of the
Franchise Contract
A franchise contract is such contract by which a merchant
(franchisor) grants another contracting party (franchisee) the
right to use a trade mark, other intellectual property rights,
know-how for selling, distribution of goods or provision of
services in accordance with the system developed and verified by
the franchisor (franchise), and the franchisee pays the agreed
remuneration.
Section 475. Form of the Franchise
Contract
The franchise contract shall be entered into in writing.
Section 476. Obligations of the
Franchisor
(1) A franchisor has an obligation to provide the following
information in writing to the potential franchisees prior to
entering into a franchise contract regarding franchise:
1) a general characterisation of the offered franchise
complying with the actual circumstances;
2) evidence of the existence of the rights included in the
franchise and general characterisation of the know-how;
3) duration of the franchise contract and the possibilities
for extension thereof;
4) the amount of remuneration for the use of the franchise and
the procedures for payment thereof;
5) other information, which the franchisor considers as
necessary upon entering into the franchise contract.
(2) The franchisor has an obligation to ensure that the
intellectual rights specified in the franchise contract shall be
valid throughout the time period of validity of this
contract.
(3) In accordance with the provisions of the franchise
contract, the franchisor has an obligation to co-operate with the
franchisee and to provide the support to him or her throughout
the time period of validity of the franchise contract. The
franchisor, in particular, has an obligation to train the
franchisee, to provide him or her with commercial and technical
assistance, accounting, delivery, logistics, management services,
as well as other services and information, which is necessary for
the use of the franchise in accordance with the provisions of the
franchise contract.
(4) The franchisor shall transfer to the franchisee all
documents (instructions, permissions, licences, technical
regulations, descriptions etc.), which are necessary for the use
of the franchise in accordance with the franchise contract.
(5) If the franchisee has an obligation to purchase goods only
from the franchisor or a person specified by him or her, the
franchisor has an obligation to ensure the supply of goods in
reasonable time.
(6) In case of application of Paragraph five of this Section
the franchisor has an obligation to notify the franchisee in
reasonable time regarding the delay of delivery period of goods
or the inability to deliver goods in the amount agreed
previously.
(7) In accordance with the provisions of the franchise
contract the franchisor has an obligation to ensure the measures
of advertising and visibility of the franchise, taking care of
maintaining the good reputation of the franchise.
Section 477. Obligations of the
Franchisee
(1) A franchisee has an obligation to provide the franchisor
with current and true information regarding the circumstances,
which have a substantial meaning upon entering into a franchise
contract, prior to entering into the franchise contract.
(2) The franchisee has an obligation to use the franchise in
accordance with the provisions of the franchise contract, obeying
reasonable instructions of the franchisor, respecting the trade
mark, other intellectual property rights, know-how for selling,
distribution of goods or provision of services of the franchisor
and without harming the good reputation of the franchisor.
(3) The franchisee has an obligation not to use commercial
secrets, which were entrusted or became known to the franchisee,
using the franchise, in contradiction with the objective of the
franchise contract and not to disclose them to third parties.
Also the franchisee has such an obligation for five years after
expiry of the franchise contract.
(4) The franchisee has an obligation to provide the franchisor
with information necessary for the fulfilment of commitments of
the franchisor agreed upon in the franchise contract, as well as
to allow the franchisor to check the work of the franchisee at
the place of selling of goods or provision of services during
usual working hours.
Section 478. Consequences of the
Franchise Contract
(1) A legally entered into franchise contract shall impose an
obligation to the contracting parties to fulfil the promised. Any
of the contracting parties is entitled to terminate the franchise
contract in cases and in accordance with the procedures specified
in the Franchise Contract Law and in the franchise contract.
(2) The contracting parties may withdraw from the franchise
contract if the fulfilment of commitments has become too
burdensome due to changes in impartial circumstances or if any
contracting party, prior to entering into the franchise contract,
has provided false information regarding circumstances which have
a substantial meaning upon entering into the franchise
contract.
(3) If the fulfilment of commitments has become too burdensome
due to impartial changes in circumstances, the contracting
parties have an obligation to conduct discussions in order to
amend the contract or to terminate it. A contracting party may
refer to impartial changes in circumstances if:
1) the changes in circumstances have occurred after entering
into the franchise contract;
2) the contracting party could not predict the changes in
circumstances at the time of entering into the contract; or
3) the contracting party has not undertaken the risk of change
in circumstances.
(4) If the contracting parties are not able come to an
agreement regarding amendments to the franchise contract or
termination thereof within a month, any of the contracting
parties is entitled to request that a court:
1) terminates the contract, determining the date of
termination; or
2) amends the contract, determining fair division of losses
and benefits caused by the changes in circumstances.
Section 479. Restriction on
Competition
(1) An agreement, by which the professional activity of a
franchisee is limited after the termination of the franchise
contract (restriction on competition), shall be entered into in
writing.
(2) The time period for restriction on competition may not
exceed one year, counting from the day of termination of the
franchise contract.
(3) A franchisor has an obligation to pay the franchisee the
agreed remuneration for the time period of restriction on
competition. If the franchisor withdraws from the franchise
contract due to threats to the good reputation or due to such
substantial reason, which was based on blameable action of the
franchisee, the franchisee shall lose his or her rights to
receive the remuneration for the time period of restriction on
competition.
Section 480. Application of the
Competition Law
The provisions of this Law shall not limit legal order, which
in respect of the franchise contract has been included in the
laws and regulations governing the field of competition law.
Transitional
Provisions
1. This Law shall come into force on 1 January 2002.
[26 June 2001]
2. The procedures for the coming into force of this Law shall
be determined by a special law.
3. The Cabinet shall, up to 1 March 2001, ensure the necessary
funding for the implementation of the conditions for the coming
into force of the Commercial Law.
[21 December 2000]
4. In order to ensure the compliance of the articles of
association of a capital company and a partnership with the
requirements of this Law in respect of the condition that members
of the board or members of the partnership are not limited in
their right of representation by a procurator, the capital
company shall submit the relevant amendments to the articles of
association to the Commercial Register Office by 1 June 2005, if
it is specified there that one or several members of the board
are entitled to represent the capital company only jointly with a
procurator, or the partnership shall apply the change in the
representation model to the Commercial Register Office, if it is
specified in the partnership agreement that one or several
members of the company are entitled to represent the partnership
only jointly with a procurator. Until making of the relevant
amendments to the articles of association of the capital company
or to the partnership agreement, but not longer than until 1 June
2005, the representation model specified in the articles of
association of the capital company or in the partnership
agreement shall be in force.
[22 April 2004]
5. The second sentence of Section 149, Paragraph three, Clause
5 and the third sentence of Section 224, Paragraph two (regarding
the right of the member of the board not to submit a written
consent to be a member of the board), as well as amendments, by
which Clause 5 of Section 25, Paragraph two and Clause 4 of
Section 75, Paragraph three of this Law are deleted, shall come
into force on 1 July 2006.
[16 March 2006]
6. New wording of Section 10, Paragraph two, amendments to the
second sentence of Section 38, Paragraph one, Section 107,
Paragraph three, the first sentence of Section 149, Paragraph
three, Clause 6, Section 320, Paragraph one, Clause 3, as well as
the second sentence of Section 347, Paragraph one, Clause 9 of
this Law (regarding the right of an official of the Commercial
Register Office to certify sample signatures) shall come into
force on 1 July 2006.
[16 March 2006]
7. The Cabinet shall issue the regulations referred to in
Section 15, Paragraph three of this Law not later than by 1 July
2006.
[16 March 2006]
8. Starting from 10 April 2006 when amendments to the Law come
into force, which determine that the data regarding an auditor
are not the data to be entered in the Commercial Register, an
official of the Commercial Register Office, without taking a
separate decision and applying the provision of Section 11 of
this Law, shall make a record in the Commercial Register
regarding exclusion of such data from the Commercial Register,
which contain information regarding an auditor of the
company.
[16 March 2006]
9. A natural person whose economic activity complies with the
activity of a commercial agent (Section 45 of this Law) or the
activity of a broker (Section 64, Paragraph one of this Law) and
who is not registered in the Commercial Register, shall apply
himself or herself for registration in the Commercial Register by
31 December 2008.
[24 April 2008]
10. Amendments to Section 181 (regarding exclusion of this
Section) shall come into force concurrently with amendments to
the Annual Accounts Law and the Law On Consolidated Annual
Accounts in which the procedures for submission of annual
accounts and consolidated annual accounts are specified.
[24 April 2008]
11. If a stock company has bearer stocks, which have not been
entered in the Latvian Central Depository in accordance with the
provisions of the Financial Instrument Market Law, the stock
company shall, not later than until 31 December 2009, take a
decision on the conversion of bearer stocks to entered stocks or
shall ensure the record of bearer stocks in the Latvian Central
Depository.
[24 April 2008]
12. If the main types of commercial activity are not specified
in the articles of association of a stock company, the company
shall, by taking into account the requirements of Section 144,
Paragraph two, Clause 4 of this Law, make the relevant amendments
to the articles of association thereof and submit them to the
Commercial Register Office not later than until 31 December
2009.
[24 April 2008]
13. Section 154, Paragraph 3.2 of this Law shall
come into force on 1 June 2008.
[24 April 2008]
14. The opinions regarding valuation of the property
contribution provided until 1 June 2008 shall be in force until
31 December 2008.
[24 April 2008]
15. Division D of this Law shall come into force on 1 January
2010.
[18 December 2008]
16. If the limitation period specified in the Civil Law or
other law has not expired on the day of coming into force of
Division D of this Law, however, the Division D of this Law
determines a shorter limitation period, the limitation period
specified in Division D of this Law, which is counted from 1
January 2010, shall be applicable. If, according to such
calculation, the limitation period is longer than the present
limitation period, the limitation period shall expire on the day
when it would have elapsed in accordance with the Civil Law or
other regulatory enactment.
[18 December 2008]
17. Section 11, Paragraph four and Section 15, Paragraph
1.1 of this Law shall be in force until 1 May
2012.
[15 April 2010]
18. Amendments to Section 28 of this Law shall come into force
concurrently with amendments to the Law On the Enterprise
Register of the Republic of Latvia, which provide for a condition
to be observed in the creation and registration of a firm name of
a merchant that the firm name of the merchant applied for
registration shall not coincide with a firm name or name applied
for entering or entered in the registers of the Commercial
Register Office.
[15 April 2010]
19. Amendments to Section 28 of this Law regarding a firm name
being different from firm names or names which have already been
entered in other registers of the Commercial Register Office
shall not affect the right of the merchant to a firm name, which
has been entered in the Commercial Register until the coming into
force of these amendments.
[15 April 2010]
20. If a member of the board or of the council of a limited
liability company was elected by 30 April 2010 and his or her
authorisation has not expired by 1 May 2010, it shall be
considered that the member of the board or of the council has
been elected for an indefinite period of time. This condition
shall not be applicable in case if the term of authorisation of
the board of the council has been determined in the articles of
association of the company.
[15 April 2010]
21. If a member of the board or of the council of a stock
company was elected by 30 April 2010, his or her authorisation
shall expire on the date when it would have expired in accordance
with the provisions of this Law, which were in force on the date
when the member of the board of the council was elected.
[15 April 2010]
22. Amendments to Section 154, Paragraphs one and
1.1 of this Law (regarding the maintaining of the list
of valuators of property contributions) shall come into force on
1 July 2010.
[15 April 2010]
23. Starting from 1 July 2011 when amendments to the law come
into force determining that information regarding place of
residence of a person is not information to be entered in the
Commercial Register, an official of the Commercial Register
Office, without taking a separate decision and without applying
the provisions of Section 11 of this Law, shall make an entry in
the Commercial Register regarding exclusion of such information
from the Commercial Register, which contains information
regarding the place of residence of a person.
[16 June 2011]
24. During a time period from 1 July 2011 until 1 April 2014
the laid down in Section 9, Paragraph four of this Law (that the
Commercial Register Office shall provide information regarding
the address of a person where he or she may be reached upon a
justified request) shall not apply to the information regarding
the place of residence of a person, which has been entered in the
Commercial Register until 1 July 2011.
[16 January 2014]
25. [15 June 2017]
26. The new wording of Section 8, Paragraph five, Clause
4.1 of this Law, amendments to Section 210, Paragraph
one, Clause 9, Section 218, Paragraph one, Section 268, Paragraph
one, Clause 10, Section 284, Paragraph two, as well as Division
XIV1 (regarding suspension and renewal of activities
of a merchant) shall come into force from 1 January 2014.
[29 November 2012]
27. The Cabinet shall, until 30 June 2013, prepare and submit
to the Saeima the amendments necessary to the laws and
regulations governing taxes and accounting in relation to
suspension and renewal of activities of a merchant on the basis
of a decision of the merchant.
[29 November 2012]
28. Section 7, Paragraph four of this Law shall come into
force from 1 January 2014.
[2 May 2013]
29. An official of the Commercial Register Office shall
perform certifications of the signature of a person specified in
Section 9, Paragraph one and Section 10, Paragraph two of this
Law to full extent, starting from 1 January 2014. Until 31
December 2013 the official of the Commercial Register Office
shall certify the signature of a person on an application
regarding:
1) entering of a merchant in the Commercial Register, if the
application regarding entering of a sole proprietorship in the
Commercial Register has been submitted;
2) entering of a capital company in the Commercial Register,
if the capital company is founded by one founder;
3) entering of such capital company in the Commercial
Register, which conforms to the provisions of Section
185.1, Paragraph one of this Law.
[2 May 2013]
30. If the application referred to in Section 10, Paragraph
two of this Law or a document appended thereto has been submitted
to the Commercial Register Office until 30 June 2013, but an
official of the Commercial Register Office examines it after 30
June 2013, the official is entitled to take a relevant decision
also if the signature on the application or the document appended
thereto has not been notarised (except an application regarding
entering of a merchant in the Commercial Register and a consent
of a person to hold the position of the member of the board of a
capital company or the liquidator of a commercial company).
[2 May 2013]
31. Until 30 June 2013 limited liability companies in which
there are more than one shareholder and which are registered in
the Commercial Register shall, in accordance with the
requirements of Section 187 of this Law, draw up and not later
than until 30 June 2015 submit the current register of
shareholders of the company to the Commercial Register Office.
Until 30 June 2013 the limited liability companies registered in
the Commercial Register where there is one shareholder shall
submit a register of shareholders drawn up in conformity with the
requirements of Section 187 of this Law concurrently with other
changes infringing transition of shares or changes in equity
capital.
[21 May 2015]
32. The provisions of this Law regarding the right of
pre-emption shall be applicable, if the transaction of
alienation, including transfer, of the equity capital shares of a
limited liability company has been concluded after 30 June
2013.
[2 May 2013]
33. During the time period from 1 July 2013 until 30 June 2014
a capital company, which has been registered in the Commercial
Register until 30 June 2013, is entitled to take a decision in
the meeting of shareholders or stockholders on amendments to the
articles of association, determining that the progress of the
meeting of shareholders or stockholders is certified by a sworn
notary (Section 9, Paragraph 3.1 ), with a simple
majority of votes of the shareholders or stockholders present in
the meeting of shareholders or stockholders.
[2 May 2013]
34. Amendments to Section 333.3 of this Law
regarding deletion of Paragraph six and amendments to Section
333.5 regarding deletion of Paragraph three shall come
into force from 1 January 2014.
[2 May 2013]
35. Amendments to Section 75, introduction of Paragraph one
and Clause 1, Section 151, Paragraph two, Section 154, Paragraph
two, Section 172, Paragraphs two and six, Section 185, Section
186, Paragraph one, Section 225 of this Law (by which amounts of
money in lats are expressed in euro), as well as new wording of
Section 230 and exclusion of Section 443, Paragraph two shall
come into force from 1 January 2014.
[19 September 2013]
36. Starting from 1 January 2014 when amendments to this Law
come into force regarding denomination of the equity capital and
nominal value of the equity capital share (stock) of the capital
company from lats to euro, an official of the Commercial Register
Office may take a decision to enter the capital company in the
Commercial Register, if the equity capital and nominal value of
the equity capital share (stock) are expressed in lats in the
documents of incorporation and application regarding entering of
the capital company in the Commercial Register has been submitted
to the Commercial Register Office by 31 December 2013.
[19 September 2013]
37. If the equity capital of the capital company is expressed
in lats, starting from 1 January 2014:
1) a nominal value of the equity capital share of the limited
liability company shall be expressed in whole lats and amount of
the equity capital may not be lesser than the amount laid down in
Section 185 of this Law, taking into account the exchange rate of
lats against euro that has been determined by the Council of the
European Union in accordance with Article 140 (3) of the Treaty
on the Functioning of the European Union;
2) a nominal value of the equity capital share of the limited
liability company conforming to the conditions of Section
185.1, Paragraph one of this Law shall be expressed in
whole lats and amount of the equity capital may not be lesser
than the amount laid down in Section 185.1 of this
Law, taking into account the exchange rate of lats against euro
that has been determined by the Council of the European Union in
accordance with Article 140 (3) of the Treaty on the Functioning
of the European Union;
3) a nominal value of the joint stock company stock shall be
expressed in whole lats and amount of the equity capital may not
be lesser than the amount laid down in Section 225 of this Law,
taking into account the exchange rate of lats against euro that
has been determined by the Council of the European Union in
accordance with Article 140 (3) of the Treaty on the Functioning
of the European Union;
[19 September 2013]
38. A capital company, the equity capital of which is
expressed in lats, from 1 January 2014 until 30 June 2016 shall
apply amendments to the articles of association to the Commercial
Register Office which stipulate denomination of the equity
capital and nominal value of the equity capital share (stock)
from lats to euro.
[19 September 2013]
39. Starting from 1 July 2014, when applying amendments to the
articles of association to the Commercial Register Office, a
capital company, the equity capital of which is expressed in
lats, shall concurrently stipulate denomination of the equity
capital and a nominal value of the equity capital share (stock)
from lats to euro.
[19 September 2013]
40. If in conformity with Paragraph 38 or 39 of the
Transitional Provisions of this Law a limited liability company
applies amendments to the articles of association to the
Commercial Register Office which stipulate denomination of the
equity capital and nominal value of the equity capital share
(stock) from lats to euro, it shall additionally submit the last
division of the register of shareholders in which nominal value
of a share of the equity capital is expressed in euro.
[19 September 2013]
41. A nominal value of the equity capital share (stock)
acquired by denomination performed in conformity with Section 22,
Paragraphs two and three of the Law on Procedure for Introduction
of Euro shall be rounded down up to the nearest value which
divides with minimum nominal value of the equity capital share
(stock) in euro without remainder. The capital company may
determine other nominal value of the equity capital share
(stock), where it is necessary for the conforming to the
principles laid down in the Section 22, Paragraph one of the Law
on Procedure for Introduction of Euro.
[19 September 2013]
42. Remaining value of the equity capital shares (stocks)
acquired by denomination [including determining other nominal
value of the equity capital share (stock)] performed in
conformity with Section 22, Paragraph three of the Law on
Procedure for Introduction of Euro, which is paid out to
shareholders (stockholders) of the capital company or transferred
to the reserves of the capital company, shall be the value which
cannot be expressed in new equity capital shares (stocks) and
granted to shareholders (stockholders) of the capital company in
proportion to the equity capital shares (stocks) belonging to
them.
[19 September 2013]
43. Denomination of the equity capital and equity capital
share (stock) of the capital company from lats to euro which is
performed in conformity with Section 22 of the Law on Procedure
for Introduction of Euro and Paragraphs 41 and 42 of the
Transitional Provisions of this Law shall not be considered as
reduction of the equity capital of the capital company within the
meaning of this Law. In an application to the Commercial Register
Office the board shall certify that the principles laid down in
Section 22, Paragraph one of the Law on Procedure for
Introduction of Euro have been complied with in the denomination
of the equity capital and equity capital share (stock) and the
interests of creditors are not involved.
[19 September 2013]
44. Starting from 1 January 2014 a decision of the meeting of
shareholders (stockholders) of the capital company to amend the
articles of association, which stipulate denomination of the
equity capital and equity capital share (stock) of the capital
company from lats to euro, shall be taken by simple majority of
votes of shareholders (stockholders) present in the meeting of
shareholders (stockholders).
[19 September 2013]
45. If an application regarding amendments to the articles of
association of the capital company and the last division of the
register of shareholders of the limited liability company are
submitted to the Commercial Register Office during a time period
from 1 January 2014 until 30 June 2016 and in a decision of the
meeting of the shareholders (stockholders) to amend articles of
association, in a new full wording of the articles of association
and in the last division of the register of shareholders of the
limited liability company only denomination of the equity capital
and nominal value of the equity capital share (stock) or other
amount of money laid down in the articles of association from
lats to euro is intended:
1) a capital company shall not be subject to the requirement
regarding notarial certification of the signature on the minutes
of the meeting of the shareholders (stockholders) or derivative
thereof, a new full wording of the articles of association and
the last division of the register of shareholders of the limited
liability company;
2) a capital company shall be released from the State fee for
the registration of the amendments to the articles of association
and last division of the register of shareholders to the
Commercial Register and making of entries in the Commercial
Register which are related to the denomination of the equity
capital and nominal value of the equity capital share (stock) or
other amount of money laid down in the articles of association
from lats to euro;
3) a capital company shall be released from charge for the
entries and announcement of information in the official gazette
Latvijas Vēstnesis, which are related to the denomination
of the equity capital and nominal value of the equity capital
share (stock) or other amount of money laid down in the articles
of association from lats to euro.
[19 September 2013]
46. Sub-paragraphs 2 and 3 of Paragraph 45 of these
Transitional Provisions shall also be applied if in addition to
the articles of association of the limited liability company
which stipulate denomination of the equity capital and nominal
value of the equity capital share from lats to euro, the actual
register of the shareholders of the company is submitted to the
Commercial Register Office in conformity with Paragraph 31 of
these Transitions Provisions.
[19 September 2013]
47. Starting from 1 January 2014 an amount of the investment
of each limited partner and total amount of investments of the
limited partners entered in the Commercial Register expressed in
lats, the Commercial Register Office shall express in euro until
1 July 2014 taking into account the exchange rate of lats against
euro that has been determined by the Council of the European
Union in accordance with Article 140 (3) of the Treaty on the
Functioning of the European Union. The entry shall be announced
in the official gazette Latvijas Vēstnesis free of
charge.
[19 September 2013]
48. The new wording of Section 8, Paragraph five, Clause 7 of
this Law (regarding the information which shall be entered in the
Commercial Register on a guardian of the member of a sole
proprietorship or partnership with the right of representation)
and Section 7.1 of this Law shall come into force on 1
September 2014.
[16 January 2014]
49. Until 1 October 2014 the Commercial Register Office,
without taking a separate decision, shall update the information
entered in the Commercial Register until 31 August 2014 regarding
a trustee of the sole proprietorship by replacing the name and
surname of the trustee with the information on the establishment
of trusteeship.
[16 January 2014]
50. Section 161.1 of this Law, as well as
amendments to Section 161, Paragraph four and Section 182,
Paragraph three of this Law (regarding the procedures for the
determination, calculation and paying out of extraordinary
dividends) shall come into force on 1 July 2014.
[16 January 2014]
51. Until 1 March 2014 the Cabinet shall draw up and submit to
the Saeima the necessary amendments to the laws and
regulations governing taxes and accounting in relation to the
procedures for determination, calculation and paying out of
extraordinary dividends.
[16 January 2014]
52. If a capital company fails to provide the documents
referred to in Paragraph 38 or 40 of Transitional Provisions of
this Law by 30 June 2016, the Commercial Register Office shall
recalculate the equity capital in euros without taking a separate
decision. The equity capital shall be expressed in whole euros by
complying with the exchange rate of lats against euros determined
by the Council of the European Union in accordance with Article
140(3) of the Treaty on Functioning of the European Union.
[21 May 2015]
53. If the Commercial Register Office has carried out
recalculation of the equity capital in conformity with Paragraph
52 of the Transitional Provisions of this Law, the capital
company shall concurrently carry out denomination of the equity
capital and share of the equity capital, when applying changes in
the entries of the Commercial Register or applying registration
of documents (adding to the registration file) in the Commercial
Register Office.
[21 May 2015]
54. Amendments to Section 207, Paragraph two and Section 264,
Paragraph two of this Law determining the obligation for the
Commercial Register Office to announce at the expense of a
capital company a notice regarding the decision taken by the
company on the reduction of equity capital shall come into force
on 1 January 2018. Until 31 December 2017 a capital company shall
indicate the date in the application for the reduction of equity
capital when the notice regarding the reduction in equity capital
has been published in the official gazette Latvijas
Vēstnesis.
[15 June 2017]
55. Amendments to Section 255 of this Law shall state Section
in a new wording which comes into force on 1 January 2018. If the
joint stock company has transferred employee stock to an employee
or member of the board until 1 January 2018 and employment legal
relationships between the joint stock company and employee
terminate or the member of the board has been removed from the
position or left the position, the provisions which were in force
at the time of acquisition thereof shall be applied to action
with employee stock.
[15 June 2017]
56. Amendments to Section 169.1 of this Law
regarding administrative liability of the members of the board
for the violations of the provisions for keeping the register of
shareholders shall come into force concurrently with the relevant
amendments to the Latvian Administrative Violations Code.
[15 June 2017]
57. Amendment regarding deleting of Section 17.1 of
this Law shall come into force concurrently with the amendments
to the Law on the Prevention of Money Laundering and Terrorism
Financing that provides for the obligation for legal persons to
identify and disclose beneficial owners, and also to submit
information regarding beneficial owners to the Enterprise
Register of the Republic of Latvia.
[15 June 2017]
58. New Sections 189.1 and 189.2 of this
Law (regarding the right of first refusal of the shareholders of
the limited liability companies if shares of the equity capital
are sold by a sworn bailiff, administrator of insolvency
proceedings or they are sold by using the right of commercial
pledge), and also amendments to considering Section
189.1 as Section 189.3 shall come into
force from 1 January 2018.
[15 June 2017]
59. If a limited liability company has shares of various
categories, the Commercial Register Office has the right, until
31 December 2023, by adding a division of the register of
shareholders to the registration file, not to register the
information regarding equity capital shares owned by the person
in electronic form in the information system of the Commercial
Register Office. In such case, Section 4.11, Paragraph
one, Clause 2 and Paragraph four of the law On the Enterprise
Register of the Republic of Latvia shall not be applied to the
provision of information regarding equity capital shares owned by
the person and the Commercial Register Office shall provide
information regarding equity capital shares owned by the person
in accordance with Section 4.10, Paragraph five of the
law On the Enterprise Register of the Republic of Latvia by
issuing the division of the register of shareholders that is
attached to the registration file of the company.
[17 December 2020]
60. Entries made in the Commercial Register until 31 July 2021
shall be promulgated in the official gazette Latvijas
Vēstnesis. Information on documents of incorporation and
their amendments, on draft reorganisation agreement and
amendments thereto which have been attached to the registration
file until 31 July 2021 shall be promulgated in the same way.
Entries and information for promulgation shall be submitted by
the official of the Commercial Register Office within three days
(excluding holidays and public holidays) from the day of making
the entry or from the day when the document is attached to the
registration file.
[6 July 2021]
61. Section 11, Paragraph three of this Law (in relation to
indicating the date of making the entry in the Commercial
Register and attaching the document to the registration file)
shall come into force on 1 July 2023.
[6 July 2021 / The abovementioned amendment shall be
included in the wording of the Law as of 1 July 2023]
62. Until the moment when the Commercial Register Office and
the register of the relevant Member State referred to in Section
8, Paragraph 4.1 of this Law ensure the transfer of
information and documents in the system of interconnection of
registers, not only the documents referred to in Section 25,
Paragraph three, Clauses 2 and 4 of this Law but also the
documents referred to in Clauses 1 and 3 shall be attached to the
application for the entry of a branch of a capital company of a
Member State in the Commercial Register. The Commercial Register
Office shall publish on its website the list of Member States
which ensure transfer of information and documents in the system
of interconnection of registers.
[6 July 2021]
63. Amendments regarding the deletion of the second sentence
of Section 333.3, Paragraph three of this Law,
amendments to Section 347, Paragraph three of this Law, and also
amendments regarding the new wording of Section 333.4,
Paragraph one, Section 345, Paragraph two, and Section 346,
Paragraph three of this Law which stipulate the obligation of the
Commercial Register Office to publish notices on its website
shall come into force on 1 July 2023.
[6 July 2021 / The abovementioned amendments shall
be included in the wording of the Law as of 1 July 2023]
64. By 30 June 2023, the notices referred to in Section 207,
Paragraph two, Section 264, Paragraph two, Section
318.1, Paragraphs three and six, and also Section 324,
Paragraph one of this Law shall be promulgated in the official
gazette Latvijas Vēstnesis. Notices for publishing shall
be submitted by the Commercial Register Office within three days
(excluding holidays and public holidays) from the day of making
the entry or from the day when the document is attached to the
registration file.
[6 July 2021]
65. The amendment to this Law regarding the new wording of the
second sentence of Section 15, Paragraph one shall be applicable
from 1 September 2021. By 31 August 2021, the Cabinet shall make
amendments to Cabinet Regulation No. 664 of 11 October 2016,
Regulations Regarding the State Fee to be Paid for Making Entries
in the Enterprise Register Journal and Commercial Register and
also for Registering the Documents to be Submitted, ensuring the
compliance of the amount of the State fee for making entries in
the Commercial Register and attachment of documents to the
registration file with that specified in the second sentence of
Section 15, Paragraph one of this Law. Until the day of entry
into force of the relevant amendments, but not later than until
31 August 2021, the amount of the State fee for making entries
and registration of documents to be submitted (attachment to the
file) in the Commercial Register shall be determined in the
amount stipulated in Cabinet Regulation No. 664 of 11 October
2016, Regulations Regarding the State Fee to be Paid for Making
Entries in the Enterprise Register Journal and Commercial
Register and also for Registering the Documents to be Submitted
(the wording effective on 31 July 2021).
[6 July 2021]
Informative
Reference to Directives of the European Union
[6 July 2021]
This Law contains norms arising from:
1) Council Directive 86/653/EEC of 18 December 1986 on the
coordination of the laws of the Member States relating to
self-employed commercial agents;
2) Directive 2009/102/EC of the European Parliament and of the
Council of 16 September 2009 in the area of company law on
single-member private limited liability companies;
3) Directive (EU) 2017/1132 of the European Parliament and of
the Council of 14 June 2017 relating to certain aspects of
company law;
4) Directive (EU) 2019/1151 of the European Parliament and of
the Council of 20 June 2019 amending Directive (EU) 2017/1132 as
regards the use of digital tools and processes in company
law;
5) Directive (EU) 2019/1023 of the European Parliament and of
the Council 20 June 2019 on preventive restructuring frameworks,
on discharge of debt and disqualifications, and on measures to
increase the efficiency of procedures concerning restructuring,
insolvency and discharge of debt, and amending Directive (EU)
2017/1132 (Directive on restructuring and insolvency).
President V. Vīķe-Freiberga
Riga, 4 May 2000
1 The Parliament of the Republic of
Latvia
Translation © 2021 Valsts valodas centrs (State
Language Centre)