Through its 27 September 2016 decision ("Decision 27/2016"), the Constitutional Court of Moldova ("Constitutional Court") has declared certain provisions of the local Law on Limited-Liability Companies ("Law 135/2007") unconstitutional. In particular, it ruled that the operation of amendments to constitutive acts cannot constitute a condition and impediment to an acquirer registering its property right over a share stake in the State Register of Companies.
These events began in the court of first instance while an inheritance matter was being reviewed. The claimant inherited a share stake in a Moldovan limited-liability company from his deceased mother. Shareholders in that limited-liability company refused to pass, or delayed passing the resolution amending the constitutive act that would allow the claimant to register himself as a shareholder. As a consequence, the claimant's attorney initiated a civil claim and raised the issue of constitutionality before the court. This matter was then escalated to the Constitutional Court for review by court of first instance.
It is worth mentioning that before Decision 27/2016, under Law 135/2007 all changes in constitutive documents of Moldovan limited-liability companies (both in commercial / business and private deals) had to comply with the following steps:
- a legal act (eg authenticated contract, inheritance certificate, etc.) on the basis of which a share stake is transferred, was entered into or issued;
- a shareholders' resolution needed to be passed with an authenticated amendment to constitutive documents; and
- the amendment of a new shareholder into the State Register of Companies kept by the State Registration Chamber had to be registered.
In the case at hand, the claimant claimed that the norms of Law 135/2007 imposing the resolution of shareholders amending constitutive documents (as per b. above) as a precondition before receiving state registration, constituted a limitation of a person's property right guaranteed by the country's Constitution. In addition, the claimant argued that the absence of a shareholders' resolution bars the State Registration Chamber from registering a person's property right.
Motivation of Constitutional Court
While taking the property right protected by the Constitution into consideration, and taking into regard the fact that such property right can be freely transferred both between persons and through inheritance, the Constitutional Court concluded that two formulations of Art.30 Law 135/2007 imposing the obligation to operate the amendment to constitutive documents before state registration, were unconstitutional.
The Constitutional Court rejected the claimant's allegations that the wording in Law 135/2007, whereby the general assembly has exclusive and sole power to amend constitutive documents, is unconstitutional.
In connection with the Decision, the Constitutional Court decided to also present a letter of recommendation to the Moldovan Parliament requesting the Moldovan Parliament to property regulate cases of registration of property right in various situations.
- An acquirer can register its property directly in the State Register of Companies without a shareholders' resolution;
- in commercial transactions, there will be no need for a condition precedent for an exiting shareholder to pass a resolution and ensure the acquirer's registration before closing;
- it remains unclear what will happen with constitutive documents listing former shareholders, after a new shareholder registers himself in the State Register of Companies, and without changing the constitutive documents. After all, until now it has been clear that the list of shareholders in constitutive documents corresponds to the data from the State Register of Companies, while all such information is public. At the moment, information will remain public, only the lists of shareholders in constitutive documents and the State Register of Companies may differ; and
- it is certain that cases where managing directors (also other responsible persons) of limited-liability companies, do not know when a change in shareholding occurs, will increase.
The Constitutional Court has the power to declare norms unconstitutional, but it cannot introduce / replace unconstitutional provisions. It is certain that a less formal approach is always welcome. However, in this case and until the Parliament replaces the vacuum (properly regulating this issue) it is certain that practical issues will arise, and so involved persons are advised to proceed with caution.