Michael Manke. Amendments to the law on joint stock companies: Lithuania will become more attractive to foreign investors
Changes to the new Law on Joint Stock Companies will undoubtedly lead to greater attractiveness for foreign investors. These positive changes are part of the long-awaited reform of company law in Lithuania. The aforementioned amendments to the law:
* will reduce establishment costs, so less funds will be needed to start a business;
* more flexibility in organizing shareholder meetings;
* will make it easier to find and attract companies. Investors can choose from new share classes and instead of 30 percent. stock company to sell more number of such shares.
The main changes to the Law on Joint Stock Companies, which will contribute to the creation of a more attractive business environment
1. Smaller size of UAB’s authorized capital
UAB – a closed joint stock company – is the legal form of most companies in Lithuania. It performs responsible duties as a limited liability company for the small world, and acts as an investment company for small and medium-sized companies. After the changes come into force, the minimum amount of authorized capital will decrease from 2,500 to 1,000 euros. The shareholders transfer this amount to the accumulative account at the time of establishment, paying attention to the fact that it cannot be disposed of until the bank or electronic money institutions complete the “Know Your Customer” procedures. Know your customer). For foreign shareholders, especially those characterized by a multi-layered company structure, this process, when the authorized capital is not available, can take quite a long period of time.
2. Meetings of shareholders remotely
Although previously companies held shareholders’ meetings, used electronic means of communication and various technologies, now the company’s articles of association will have to provide for the right to participate in shareholders’ meetings and vote in them only by means of electronic means of communication. The minutes of the shareholders’ meeting can be signed remotely using a qualified electronic signature. qualified electronic signatures issued in other European Union (EU) member states are also valid for this purpose. In addition, the shareholder’s representative can obtain this signature, prepared by the program E-residence (eng. Lithuanian electronic residence). This program is intended for non-Lithuanian citizens and provides an opportunity to use services provided by the Government of the Republic of Lithuania and other institutions.
Either the general director or the board will be responsible for approving the relevant procedure and procedures for participation in electronic communication tools. These procedures should detail the means of identification and other necessary tools and software, as well as detail the procedures for registration, voting, the use of secret ballots, and the recording of shareholders’ meetings.
3. Redemption of company shares
According to the amendments, a shareholder or several shareholders, together with the acquisition of at least 95%, operate. of the company’s shares, will have the right to demand that all other shareholders of that company sell their company’s shares to the main shareholder (majority shareholder). At the same time, small shareholders (minority shareholders) will have the right to demand that the main shareholder buy out the company’s shares controlled by the minority shareholder. These redemption rules will also apply to convertible bonds that can be converted into voting shares. The redemption value of the shares must be determined by an independent valuation. The amendments to the law do not define how an independent valuation will determine the correct value of redeemable shares. shareholders will have to regulate this issue in the shareholders’ agreement.
4. More flexibility in down payment
Until now, the initial cash contribution of the person signing all the shares of the new company must be at least 1/4 of the nominal value of all the shares subscribed by him and the sum of the excess of the nominal value of all the subscribed shares. And the amendments to the law provide that in the future the payment procedure for new shares in closed joint-stock companies (UAB) and, accordingly, joint-stock companies (AB) will be distinguished. In the case of a UAB, the initial monetary contribution of each signatory must not be less than 1/4 of the nominal value of all shares. Also, the person who signed the new shares will have the right to postpone not only 3/4 of the nominal value of the new shares, but also the entire amount for 12 months.
5. More flexible regulation of share classes
Until then, the company may issue shares with or without the right to (1) receive dividends and/or (2) vote. However, such shares cannot constitute more than 1/3 of the total shares. Companies focused on rapid development and growth, such as startups, often issue shares without dividends. And non-voting shares are issued to employees as a means of compensation or an additional way of providing benefits to employees. The only remaining restriction will be that more than 50% of non-voting shares can be made. of all shares. The amendments also provide that companies can issue other classes of shares, for example, with or without certain property or non-property rights, if such a possibility is defined in the articles of association.
6. Waiver of the right of priority is provided for in the statutes
After the amendments to the law come into force, it will be possible to define in the articles of association that the right of first refusal does not apply in the case of the sale of UAB shares. Prior to these changes, before selling their shares to third parties, shareholders must first offer them to other shareholders of that company. We agree with the mentioned change for greater opportunities, as companies can agree on a different procedure for the implementation of the right of first refusal, which is currently provided for in the law.
The mentioned changes will enter into force from 2023. May 1st
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