22-04-2013

Limited Liability Company

Authors

  • Erinda Ballanca, Attorney at Law
    Partner at Ballanca Law Office

What is the basic legal framework for Commercial Companies in Albania?

The main legislative source of corporate governance in Albania is Law No. 9901, dated 14.04.2008, “On the Entrepreneurs and Commercial Companies”, as amended (the “Company Law”). The current Albanian law on commercial companies was adopted in 2008 and brought profound changes to the previous legislation, ( i.e. Law No. 7638).

What are the main corporate entities in Albania?

The Law No. 9901 provides for four different types of organization business entities defined by such law under the term “commercial company”, namely:

(i) Collective Partnership Company (CPC);

(ii) Limited Partnership Company (LPC);

(iii) Limited Liability Company (LLC); and

(iv) Joint Stock Company (JSC). From all the commercial companies listed above, only a Joint Stock Company may offer tradable shares to the public. The form of bylaws of LLCs and JSCs becomes important in the hierarchy of regulatory corporate governance sources, as the Company Law provides that rules governing the relations between commercial companies and shareholders may be freely established by the company bylaws unless such law provides otherwise, meaning that any deviation from the general regulations of the legal provisions must be provided for in the bylaws (no other instrument or agreement between shareholders is deemed to be sufficient). However, it must be pointed out that the bylaws may freely provide the rules of corporate governance to the extent that they don’t conflict with mandatory rules provided by the Company Law (i.e. the rights of minority shareholders of 5% are protected by the law and cannot be excluded, although the bylaws may establish a lower percentage as minority shareholders for this purpose).

In what does consist a limited partnership?

A limited partnership consists of one or more “unlimited” partners in the capacity of entrepreneurs with unlimited liability and one or more “limited” partners whose liability is limited to the amount of their agreed contributions to the initial capital. The bylaw of the company governs the relations between limited and unlimited partners. An LLC may be established by individuals or legal entities that are not liable for the company’s liabilities and who personally bear losses only to the extent of any unpaid parts of stipulated contributions.

Which is the most common type of business organization and its facilities?

Limited Liability Company (LLC) is one of the most common forms of commercial companies. It is considered as an ideal type of organization for small to medium business entities, precisely for the facilities that our law offers for this type of organization.

The structure and the way of operation of LLC offer for the partners and managers of companies, larger facilities than joint-stock companies. Almost all the advantages of the Limited Liability Company compared to joint-stock companies are based in the simplicity of the organization. The establishment procedures of the Limited Liability Company are much simpler than those that are applied on joint-stock companies.

Which is the minimum registered capital required by the law?

Legal minimum required for registered capital of Limited Liability Company is significantly lower than the capital required for the establishment of joint-stock companies. The minimum capital required for the establishment of an LLC shall not be less than ALL 100 (1 euro). Contributions to the capital may be in cash or in assets, tangible or intangible. Quotas may be transferred, although some restrictions on this may derive from the company’s Bylaws or the law. The transfer of quotas of the company may be subject to preemption rights subject if the bylaws provide so, whilst the law sets out that LLCs are not allowed to go public.

How does a limited liability company work and which are the management bodies?

The general business policies of LLCs are defined by the General Assembly as the day to-day affairs are carried out by one or more administrators appointed by it for a period not longer than five years. No special resolution is required either for their appointment or release from duty. The right of administrators to act on behalf of the company may be restricted by the Bylaw. According to the current Albanian law on commercial companies, the administration company is made by the management bodies such as: one or more Administrators which lead the company and decide on the manner of implementation of the business policy, and the Supervisory Board which assesses the policy implementation and controls its compliance with the law and the Bylaws. Fundamental changes in the company, such as an amendment of Bylaws, alteration of capital, company’s reorganization or liquidation, are made upon special resolution of the General Assembly which must be adopted by a qualified majority of three-fourths of the participatory partners. The law requires the company to prepare annual financial statements and to file copies of such financial statements with the National Registration Centre. LLCs may be converted into joint stock companies by a decision of the partners as mentioned above. The administrators must draw up a report explaining and justifying the legal and economic aspects of the conversion and indicating the implications for the employees The Albanian legislation also provides the possibility to open branches and offices for representation of foreign companies, with the same procedures for the registration of commercial companies.

Which are the competent authorities for registration, and what documentation is required?

Law no. 9723 dated 03.05.2007 “For the National Registration Centre” have been made important changes to the system of registration of commercial companies in Albania aiming to improve the regulatory framework in line with EU present realities. www.qkr. gov.al. The legal reform for the business registration has simplified the phases of LLC registration. Procedures and formalities are minimal aiming to minimize the administrative barriers to the free initiative of the entrepreneurs. The procedures are simple and registration is easy and quick to be obtained minimizing the administrative cost of registration. The will of shareholders to incorporate the company must be presented in a notary deed. The shareholders must prepare and sign the bylaws of the company which must addresses a certain issues and basic elements of the legal entity such as, share capital, administrative bodies and relative powers, decision - making bodies and relative powers, denomination and headquarters of the company, etc An authorized person by the shareholders may present the application in the NRC including the following supporting documents: The documentation-necessary for the constitution of each type of company-which is required to submit at the NRC, consists of:

  • standard form of application, completed with all his items and duly signed by all administrators / directors;
  • act of incorporation;
  • the bylaws;
  • payment of the share capital (according to the bylaws for the limited liability company while, for the company, before registering at the NRC must be paid 25% of the capital for cash contributions);
  • in the case of sole partner -companies, all the necessary documentation that proves the existence of the company that intends to participate as a partner in the company that will be established.

At the end of the aforesaid procedure, the newly formed company will be equipped with the NUIS (Unique Identification Number of Fiscal Subject, or VAT). The accompanying documents for the registration of foreign companies (section III -Initial registration) duly legalized and translated in Albanian must contain the certificate of incorporation and/or bylaws of company of the country of origin, the social capital, documentation proving registration, the last budget, the decision of the competent organ of the company that decides to invest in Albania, the name and registered office of representation, the duration of activity of that office.

Is any other license needed to begin an activity and what procedures must be taken in order to complete all the licensing requirements?

In Albania, the operation of business, financial and productive in particular areas of market (for example, financial banking, hospitals, etc.) are organized in the form of an undertaking, is subject to a license issued by the competent authorities. With the entry into force of Law no. 10081 dated 23.02.2009, “On licenses and authorizations and permits in the Republic of Albania” and the completion of the regulatory framework by DCM no. 538 of 26.05.2009 “For licenses and permits that will be processed by or through the NLC and some other common regulations” since 09.06.2009 has been introduced the system “one stop shop” regarding the authorization to companies. From this date, all legal entities according to the legislation in force ,are required to obtain a license / permit for the performing of their activity, must apply at the National Licensing Center -NLC (public law institution dependent METE (Ministry of Economy, Trade and Energy). In certain activity sectors such as the construction sector, professionals, etc. the system “one stop shop” is not currently used and, therefore, the requests for licenses shall be temporarily submitted at the individual authority of jurisdiction (Ministry of Public Works, Transport and Telecommunications, etc..) and not to NLC/ National Licensing Center. www.qkl.gov.al Generally, obtaining a business license is necessary the submission -at-the competent authority the following documents:

  • a written request signed by the Administrator (limited liability company) or by the President of Management Board (public limited company);
  • a detailed description of the business being undertaken
  • the name and principal place of business of the company;
  • the documentation relating to the company, including a copy of the memorandum, the certificate of incorporation and the decision of registration of the company in QKR
  • the description of the experience of the company and his major associates in the activity for which the license is sought
  • a list of employees and resources of companies that demonstrate that they have the experience and skills required in the activity for which the license is sought
  • financial status etc...

In general, the request and the documentation to obtain the business license should be submitted after the incorporation (signing of the incorporation act and bylaws) and company registration at the National Registration Center. Considering that for certain licenses is required the issuance of the license before registration of the company, while the authority responsible for the licensing requires that the company should be already registered before issuing the license, normally used to adopt a procedure in two phases. The competent authority shall grant a license “temporary” which does not authorize the conducting of the activity, but it’s sufficient the registration of the company at the national Registration Center.

GREEK LAW DIGEST REPUBLIC OF ALBANIA MINISTRY OF INTEGRATION Union of Chambers of Commerce and Industry of Albania
Nomiki Bibliothiki ALBANIA INVESTMENT DEVELOPMENT AGENCY Foreign Investors Association of Albania
     

 

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