Publication

To date, the shareholders’ register of a public limited liability company (akciju sabiedrība) have been only accessible via internal processes within the company itself or the central securities depositary [centrālais vērtspapīru depozitārijs]. The shareholders’ register is accessible by a public limited liability company’s shareholders, management board, supervisory board and the competent authorities. The accessibility of this information was found not to ensure sufficient transparency and therefore associated with increased risk of such companies of being used for illegal purposes.

With the latest amendments to the Commercial Law [Komerclikums], a public limited liability company must disclose information on their shareholders by no later than 30 June 2024 and are also required to make the necessary changes to its Articles of Association, disclosing the types of shares issued. Failure to implement these changes may result in the initiation of involuntary liquidation proceedings brought by the relevant institutions.

In this brief overview, VILGERTS’ Corporate & Commercial practice group details below the main points concerning the new shareholder disclosure requirements for public liability companies and the proposed next steps that should be taken in order to be compliant with the new rules.

A. Two types of shares

The new rules provide for the separation of two different types shares, specifically: a) registered shares; and b) dematerialized shares, a public limited liability company will only be allowed to have one type of shares, not both:

a) Registered shares are entered into the shareholders’ register, which is held by the management board. The shareholders’ register must be submitted to the Company Register [Uzņēmumu reģistrs], as is already the case for private limited liability companies (SIA) (whereby the information on the shareholders is made publicly available); and

b) Dematerialised shares, on the other hand, are recorded in the financial instruments accounts and the public limited liability companies can receive the information on the existing shareholders by way of filing a request to the depositary. Information on the majority shareholders concerning dematerialized shares will be included in the public section of the registration case file and shall be made available on the information portal of the Company Register, as well as also being available in the form of open data.

B. Register of changes

Public limited liability companies must submit an application of amendments to the Articles of Association with the Company Register by no later than 30 June 2024, detailing that all shares shall be either registered shares or dematerialized shares. The shareholders will be able to decide on the specific amendments by way of a simple majority. In addition to the amendments of the Articles of Association, it is necessary to submit to the Company Register: (i) the up-to-date shareholders’ register (for public limited liability companies with registered shares); or (ii) an application specifying the title of the central securities depository, registration number, legal address, and the depositary’s confirmation of the registration of the shares (for public liability companies having dematerialized shares).

It is important to note that already now, when public limited liability companies are registering any changes in the Company Register in relation to the Articles of Association or share capital, as well as reorganisations, at the same time the Articles of Association must be subsequently amended in accordance with the new rules including the type of shares it has chosen.

C.Registered shares

Registered shares, as has been the case for shares in a private limited liability company (SIA), are required to have assigned share serial numbers to be validly entered into the Company Register. The shareholders’ register is kept in separate compartments in chronological order and in duplicate form (if the shareholders’ register is signed in paper form with a notary), one of which must be submitted within 3 (three) working days of its signature with the Company Register. As with private limited liability companies, the shareholders’ registers must be signed electronically or in paper form at a notary public.

D. Dematerialised shares

Dematerialised shares for listed public limited liability companies and also for public limited liability companies (without shares listed on a regulated market), must be registered in a central securities depository, with the shareholder being granted the right to convert them into a financial instruments account (with a licenced credit institution or investment brokerage firm).

The decision on the registration of shares in the central depository may be adopted by the shareholders’ meeting by way of a vote, with no less than three-quarters of the votes of the shareholders being present, unless the applicable company statutes provide for a greater number of votes required. When registering shares with a central depositary, the management board must submit to the Company Register the title, registration number and the legal address of the central securities depositary, where the shares are registered, and the depositary’s confirmation of the registration of the shares.

For public limited liability companies that are not active on a regulated market, choosing dematerialized shares and recording them in a central securities depositary facilitates the administrative duties of the management board, in particular where the public limited liability company has many shareholders. It may also facilitate other processes, such as the sale of shares.

The associated costs for entrusting the central securities depositary with the holding of the shareholders’ register is EUR 40 / EUR 120 for standard or expedited share registration, starting from EUR 12 (shares valued at EUR 80,000) or a maximum rate of EUR 500 (shares worth over EUR 2,000,000) per quarter custody fee and EUR 0.85 (per shareholder) transfer order fee.

E. Additional duties of the shareholder

According to the new rules, shareholders holding dematerialized shares above 5% shall inform the public limited liability company about the share acquisition, total number of shares and voting rights, within two weeks of acquiring the shares. The shareholder shall also be required to report any subsequent acquisition or reduction of the shareholding by every 5%, otherwise the shareholders’ voting rights will not be taken into account at the shareholders’ meeting. However, a company upon receipt of a shareholders’ notification of share acquisition, increase or decrease, is obliged to submit the notification to the Company Register.

For public limited liability companies whose shares are listed on a regulated market, the respective provisions of the Financial Instrument Market Law [Finanšu instrumentu tirgus likums] shall be applied.

What next steps should the management board of a public liability company carry out?

1. By 30 June 2024, all public limited liability companies must amend their Articles of Association to specify the type of shares – either registered or dematerialised shares and submit the relevant shareholders’ meeting resolution and a new version of the Articles of Association to the Company Register.
2. By 30 June 2024, all public limited liability companies must submit to the Company Register the current shareholders’ register (for registered shares) or an application for entry of shares in a depositary (for dematerialised shares).
3. If before 30 June 2024 the public limited liability company provides documents to the Company Register concerning the changes in the Articles of Association, share capital as well as reorganisation, it is also required to submit the amendments to the Articles of Association about the type of shares and the up-to-date shareholders’ register (or an application for the shares to be entered in a depositary as specified above).