The Lithuanian Seimas has passed a Law on the Redenomination of the Nominal Value of Share Capital and Securities of Private Limited Liability Companies and Public Limited Liability Companies and on the Amendment of the Articles of Association of these Companies (the Law), to come into force on 1 January 2015. The Law sets out the procedures applicable to euro conversion of litas-denominated nominal value of share capital, shares and bonds (including convertible bonds) of both public and private limited liability companies established prior to 31 December 2014 as well as for amending the articles of association of these companies.
Please find below information on the most relevant provisions of the Law.
Conversion of the nominal value of shares and bonds into euro
The Law provides that the nominal value of shares and bonds in litas will be converted into euro in line with the Law on Euro Adoption in the Republic of Lithuania. The nominal value of shares and bonds of companies established before 31 December 2014 must be converted into euro at an exchange rate of EUR 1 = LTL 3.45280. To do so, the four-part formula is:
- first, divide by 3.45280 the litas-denominated sum of the nominal values of shares of the same class and nominal value;
- next, divide the resulting amount by the number of shares;
- then, round to two decimal places the nominal value of one share thus obtained (see note* below);
- finally, to calculate the nominal value of share capital in euro, multiply the nominal value of one share in euro by the number of shares.
Note*: for the purpose of redenomination, rounding must follow the mathematical rounding rules, ie if the digit after the last digit to be rounded is 5 or higher, add 1 to the last digit, but if the digit after the last digit to be rounded is less than 5, the last digit remains unchanged.
The converted nominal value of shares and share capital must be denominated in euro with euro cent accuracy. A change in the value of share capital resulting from conversion and rounding will not be treated as an increase or decrease in share capital but must be accounted for as income if the change is negative or as an expense if the change is positive.
Amendments to articles of association
Companies will be able to convert into euro the nominal value of their share capital and shares shown in their articles of association and must present the amended articles of association to the Register of Legal Entities by 31 December 2016. The decision to amend the articles of association due to redenomination of the nominal value of share capital and shares shown in the articles of association must be adopted by the General Meeting of Shareholders by a simple majority.
A company that has more than one shareholder and that registers the amended articles of association with the Register of Legal Entities must compile a new list of shareholders and file information on the shares held by the shareholders with the information system on legal entity stakeholders. In addition, companies with uncertificated shares that manage their security accounts themselves must change their security account entries relating to conversion of the nominal value of the shares into euro. In the case of certificated shares, companies must change the shareholder register related to translation of the nominal value of the shares into euro and, based on the request of shareholders, must replace the certificated shares with new ones or issue new share certificates indicating the nominal value of the shares in euro.
Rights and obligations of shareholders
Conversion of the nominal value of shares from litas to euro will not affect the rights and obligations of shareholders. In addition, conversion of the nominal value of share capital and shares will have no impact on the right of shareholders to vote at the General Meeting of Shareholders in view of the rights granted by their shares.
Establishing a company from 1 January 2015
Amendments to the Law on Companies also come into force from 1 January 2015. These require the share capital of private limited liability companies to be no less than EUR 2,500 (LTL 8,632) and that of public limited liability companies to be no less than EUR 40,000 (LTL 138,112). In contrast to the current practice of showing the nominal value of a share rounded up or down to the nearest litas, from 1 January 2015 it will be possible to denominate the nominal value of a share with euro cent accuracy.
From 1 January 2015, the nominal value of shares and share capital in the documents of incorporation of companies filed with the Register of Legal Entities must be shown in euro. This means that, in the event of forming a new company and preparing its documents of incorporation before 31 December 2014 but filing the documents with the Register of Legal Entities after this date, the nominal value of share capital and shares in the documents of incorporation must be shown in euro rounded up or down to the nearest euro cent and not in litas.