Proposed amendements to the Commercial Law
Currently a number of important amendments to the Commercial Law are planned with respect to private limited liability companies (SIA) and joint-stock companies (AS), in relation to which proposals have been submitted to the Parliament.
If the proposed amendments are adopted at the second and final readings, they will simplify or clarify several topical issues of company activities. Among the most important proposals are:
- Simplified procedure for share capital increase of joint-stock companies AS. This provides that in certain cases shareholders’ pre-emptive rights to new shares will be restricted, including in the case of issue of convertible bonds. Also the general term for use of pre-emptive rights will be reduced from 30 days to 15 days, similarly as is already set in the case of SIA.
- Conditional share capital of AS, for example in the case of issue of convertible bonds. This will oblige the shareholders’ meeting to simultaneously decide on increase of the share capital in the amount of conversion of the bonds, whereupon information on the maximum amount of the share capital, for which the board will be able to convert the actual share issue in order to ensure conversion of the bonds, will be recorded in the commercial register. This will be a new institute of the Commercial Law, which will protect the rights of bond holders and obligations of the board. The same mechanism will apply to shares granted to employees.
- Procedure for election of council members in AS with one shareholder is simplified, and will no longer require re-election of the whole council each time that a council member resigns or is removed from their position.
- Numerical composition of the board – it will now be possible to show a variable number of board members (e.g. 1 to 3) in the articles of association, or not to indicate the number of board members at all. This approach discards the need to amend the articles of association each time the number of board members changes. Depending on the reference to the composition of the board in the articles of association, a mechanism for calculating a quorum for board meetings will be applied.
- The term for submission of creditors’ claims in the event of liquidation is reduced to one month. Additionally, the requirement on drafting the initial liquidation balance sheet is excluded. This will facilitate the procedure for liquidation.
- Notifying creditors on reduction of share capital, suspension of activity, and reorganisation will be performed only by publishing notification in the official publication “Latvijas Vēstnesis”, and the requirement to send individual notices to creditors will be lifted.
- Simplified liquidation procedure initiated by the Commercial Register (CR) against a company which cannot be reached at its registered address. Receiving correspondence will be the criterion of reachability, rather than actual presence at the registered address. If, after receipt of the CR’s notification, the company fails to submit explanations within one month, the CR will be entitled to terminate the company’s activities.
So far, it has not been established when these proposals will be reviewed at the second reading or whether the amendments will keep their present wording.