Taking counsel: Are laws amended in order to mislead businessmen?

  • 2006-09-20
  • By Jurgita Matulyte
A couple of months ago Seimas (Lithuania's parliament) passed amendments to the Law on Companies and the Law on Securities Market. The aim of the amendments was to establish a legal base and create conditions for properly implementing requirements of European Union laws into national law.

Examples include the European Commission's recommendation fostering an appropriate regimen for remunerating directors of listed companies, and the commission's recommendation on the role of non-executive or supervisory directors of the listed companies and on the committees of the (supervisory) board.

While implementing the above requirements of EU laws, Article 1 of the Law on Companies was supplemented with an addition indicating that companies listed according to the Law on Securities Market are regulated following the requirements of this law.
The above provision implies that the Law on Companies is no longer applicable to the listed companies. In other words, listed companies should convene shareholder meetings, elect management bodies, increase or decrease the authorized capital or perform other actions according to the requirements of the Law on Securities Market. On the other hand, companies that are not listed according to the Law on Securities Market should operate further according to the requirements of the Law on Companies. Thus it implies that different laws are applied to the companies of the same legal form.

Unfortunately, the Law on Securities Market does not regulate such issues as convening the meetings of shareholders of the company, electing its management bodies, rights and duties of shareholders, issues related with the authorized capital, etc.
The purpose of the securities law is to create a legal base for fair, open and effective functioning of securities market that will protect the interests of investors and limit system risks. The Law on Securities Market regulates only issues related with securities market 's e.g., methods of public offering of securities and admitting them to trading in a regulated market, obligations of the companies and natural persons, which have acquired or sold a package of securities of the listed companies, methods of rendering and implementing public offers, etc.

Following the opinion of the representatives of the Securities Commission, Article 1 of the Law on Companies was supplemented with a new provision in order to avoid frequent amendments of this Law as related to the listed companies. For example, according to the Law on Companies a notice on convening the meeting of shareholders should be published in the daily newspaper indicated in the statutes of the company or delivered against acknowledgement of receipt, or sent by registered post to each shareholder at least 30 days before the meeting of shareholders.

In order to change this term, the Law on Companies should be amended. Having the new provision of Article 1 of the Law on Companies, the respective amendments may be made directly to the Law on Securities Market. First amendment to this Law was made that it is sufficient to announce on the convocation of the meeting of shareholders at least 15 days before the meeting if it is intended to obtain approval of shareholders for performing certain actions during the implementation of the public offer.
It is interesting to note that the provisions of the above recommendations of the European Commission are even not mentioned in the amendments to the Law on Companies and the Law on Securities Market. Is this the way of implementing of the recommendations into national law or are these provisions going to be implemented by the new amendments to the above-mentioned laws or even other laws in the future?

Jurgita Matulyte is an associate lawyer at Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Teder Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.