Text consolidated by Valsts valodas centrs (State Language Centre) with amending laws of

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 of directors 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.

Limited Liability Companies

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 directors 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 a 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; or

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 a company is less than the equity capital specified in Section 185 of this Law, the board of directors thereof shall indicate in a proposal regarding 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 a 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 a 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 a duty 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 a company is less than the equity capital specified in Section 185 of this Law and the insolvency procedure of the company has been promulgated, the shareholders thereof shall be solidarily liable for the liabilities 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.

(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.

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;

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 a 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 notification 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 of directors or an authorised member of the board of directors with his or her signature. The signature of the chairperson of the board of directors or a member of the board of directors 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 of directors and council, the auditor, as well as competent State authorities 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 of directors or an authorised member of the board of directors regarding the shares in the company that are owned by him or her, or a copy of the last division of the register.

(2) In case of alienation of a share the acquirer and alienor of the share shall submit a joint notification, by which transfer of shares is certified, or the original or a notarised copy of such transaction deed, by which shares are transferred.

(3) If shares have been acquired at a mandatory auction, as an inheritance or by a court judgment that has entered into effect, the acquirer of shares shall submit a notification to the company. A document, on the basis of which shares have been acquired, or a notarised copy thereof shall be appended to the notification.

(4) A shareholder shall submit a notification regarding changes in the information to be entered in the register of shareholders regarding him or her.

(5) The board of directors shall make an entry in the register of shareholders without the relevant notification, if changes in the information to be entered in the register of shareholders arise only from increase or reduction of the equity capital or a valid reorganisation contract, or by transferring an unchanged entry from the previous division.

(6) The board of directors has a duty 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 notification regarding changes in the information to be entered in the register of shareholders. The board of directors 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 of directors shall, within three working days after signing of the new division, submit an application to the Commercial Register Office regarding 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 of directors shall certify that the provisions of this Law and the articles of association of the company regarding alienation of shares have been complied with.

[2 May 2013]
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.

(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 of directors regarding the sale of shares, appending the purchase agreement entered into or an accordingly certified copy thereof. If the notification is sent by the acquirer of shares, it shall also be sent concurrently to the seller of shares. The notification 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 notification 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 notification regarding the sale of shares and the board of directors 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.

(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 utilisation 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]