22-04-2013

Societe Anonyme - Joint Stock Company General Provisions - Administration

Authors

  • Artur Asllani, LLM, Attorney at Law
    Partner at Tonucci & Partners Law Firm
    Iva Nathanaili, Associate at Tonucci & Partners Law Firm

Which is the key piece of legislation governing Albanian joint stock companies?

An Albanian joint-stock company is regulated by Law No. 9901, dated 14.04.2008 “On entrepreneurs and commercial companies”, as amended (hereinafter “Company Law”).

What is the liability of the shareholders of a joint-stock company?

A joint stock company is liable for its debts and obligations towards third parties with all its assets. Shareholders are not liable towards commitments of their company but based on the principle of limited liability enshrined by Company Law, shareholders shall bear company’s losses to the extent of their unpaid subscribed shares. In company’s insolvency, although contributions are paid in full, shareholders suffer the economic risk of losing their investment pro rata with the share capital their contribution represent and not beyond that. However, the corporate veil is pierced in case of shareholder’s abusive behavior which exposes personally a shareholder with all his assets against the losses caused to the company thereby. According to Article 16 of Company Law, shareholder’s abusive behavior is deemed: (i) abusing the company form for illegal purposes, (ii) treating company’s assets as if they were shareholder’s own assets, and (iii) once knowing or must have known of the company’s insolvency, failing to take the necessary steps to ensure that the company, depending on the type of business, has sufficient capital to meet its commitments against third parties.

Are there any number/age and nationality/residency restrictions applicable on shareholders?

There are no nationality, age or residency restrictions for founders / shareholders of a joint-stock company pursuant to Company Law. Hence, a joint stock company may be established by one or more shareholders, whether physical or legal person, Albanian or foreigner.

What is the maximum share capital required for the establishment of a joint stock company?

The minimum capital requirement for a public joint-stock company is ALL 10.000.000 (approximately Euro 72.000.000), whereas for a private joint-stock company is ALL 3.500.000 (approximately Euro 25.000). Different capital requirements apply instead to joint-stock companies which, beside Company Law, are subject to a special law regulating their area of activity such as banks, microfinance institutions, insurance companies and non-bank financial institutions (etc).

How is a joint-stock company established?

Joint stock companies are registered with the Commercial Registry maintained by the National Registration Center (NRC). In order to establish a joint-stock company, an application form accompanied by additional documents is filed with the NRC, by hand delivery or electronically. This application is examined by NRC with the purpose of verifying the completeness of the information required by law, without undergoing any test of accuracy or authentically of submitted data. Hence, a complete application is approved within at least one (1) day from submission and the joint-stock company is registered with the Commercial Registry and provided with a Unique Identification Number (NUIS) for identification and tax purposes. Finally, NRC issues a Registration Certificate and publishes the newly registered company in the NRC Bulletin of Official Registration Announcements for public notification purpose.

What assets can be contributed to the share capital of a joint-stock company?

Shareholders and founders contributions to the capital of a joint-stock company may be in cash or kind. Contributions in kind may consist of immoveable or moveable properties, as well as in rights measurable in money; they may not consist in labor or service. Assets, quotes or shares of an existing company may serve as contribution to a joint-stock company if the former company has been registered at least for two (2) years in advance. The value of any contribution in kind is estimated by a licensed expert appointed by a competent court.

Is there an upper or lower price threshold for the issue of shares?

The capital of a joint-stock company is divided into shares, each share having the same par value. The lower price threshold for the offered shares shall not be lower than their par value, thus shares cannot be issued at a discount; on the other hand, there is no restriction to the upper price and the shares may be offered at any price which is above the par value.

How are the initial capital and any increase of the share capital paid up?

Initial share capital subscribed in cash by shareholders shall be paid up at least one-fourth (1/4) of its par value prior to the initial registration of the joint-stock company with the Commercial Registry. The remaining due amounts of cash contributions may be liquidated either in one or more installments following the registration, as decided by a decision-making body of the company. If shares are taken up with a higher price than their par value, the difference between the par value and the price shall be paid in full. The par value or the price of the shares exceeding their par value is allocated to a special company’s account. Likewise, contributions in kind are fully paid up prior to registration. Same rules apply mutatis mutandis to any subsequent capital increase by way of issuing new shares.

Can a joint-stock company acquire its own shares?

As a default rule, a joint-stock company may not subscribe its own shares unless otherwise provided by law; neither may a subsidiary subscribe its parent’s company shares. In case a company has subscribed its own shares then:

  • such company may not exercise any of the rights attached to the shares; and
  • within one year from the transaction, the company must resell or annul the shares by decreasing its registered capital, as well as cancel the registration of the shares from company’s inside registry.

Which corporate body is competent to decide changes to the capital of a joint-stock company (capital increase or decrease) and under what conditions?

The increase and decrease of the share capital is generally in the exclusive competence of the General Meeting of shareholders which decides, unless the articles of association stipulates a higher quorum, with the affirmative vote of three quarters (3/4) of shareholders (or respective representatives voting by proxy), representing more than half of the total voting shares. If rights of certain class of shares are affected in any manner by an increase or decrease of the share capital, the consent of the affected shareholder shall be obtained as a prerequisite for the legal validity of such General Meeting’s resolution. General Meeting’s resolution on a share capital increase or decrease shall be filed with the NRC in order to become effective. Under provisions of articles of association or through a resolution of General Meeting of shareholders, administrators of the company may be entitled to carry out an “authorized capital increase” by issuing new shares up to a specified value (known as the authorized capital) within a five (5) year period from company’s registration. The General Meeting may assemble at any time, either to amend the conditions for carrying out or cancel the authorized capital increase. The increase of share capital may not take place when previously subscribed shares are not fully paid up yet.

Can the share capital fall under the minimum capital requirement?

The share capital must not fall under the applicable minimum capital requirement. If the share capital falls below this minimum legal threshold, it constitutes an event of winding up the company unless the reduction is accompanied by a simultaneous capital increase up to the minimum amount required by law.

What are the administrative bodies of a joint-stock company?

The General Meeting is the decision-making body of a joint-stock company, responsible for company’s most sensitive issues. Additionally, subject to the articles of association, a joint-stock company’s management structure may be fashioned either as one-tier or two-tier model.

How is a one-tier and a two-tier model organized?

Under a one-tier model, there is a (i) Board of Administration (BoA) which manages and supervises the company and (ii) one or more Administrators, who represent the company while running its everyday business under the BoA supervision, directives and occasionally, consent to specific matters. The one-tier model is the most encountered in practice. Under a two-tier model, the management and supervisory powers are split up between (i) Administrators and (ii) the Supervisory Board (SB). There is no BoA. Under Article 166 of Company Law, Administrators manage the company and implement business policies set up by the General Meeting and enjoy in addition BoA’s competences applicable to the one-tier model, whereas the SB has only supervisory powers belonging to the BoA in the one-tier model. Administrators cannot be at the same time members of the SB.

What are the minimum and the maximum number of members of the Board of Administration of a joint-stock company prescribed by law?

Articles of association establishes the number of BoA’s member which shall be least three (3) but not more than twenty-one (21) individuals, being shareholders, company’s employees or any other individual not related to the company.

How are BoA members appointed and removed?

BoA’s members are appointed and removed by General Meeting’s resolution voted by simple majority. If so provided in the articles of association, shareholders holding five percent (5%) or less of the share capital are entitled to appoint a member of the BoA, which appointment shall not cause the exceeding of the legal upper threshold of 21 members of BoA. Half of members shall be independent (not having a conflict of interest according to Article 13 (3) of Company Law) and shall not be simultaneously Administrators of the company. A member of the BoA is removed from duty under these circumstances:

  • at any time, under the absolute discretion of the General Meeting;
  • if the case, by minority shareholders who appointed him unless articles of association’s provision granting this right has been repealed, which in the latter case General Meeting is entitled to remove instead the respective member by simple majority; or
  • by decision of competent court for breaching his fiduciary duties, pursuant to BoA’s initiative to bring the case in court.

What is the term of BoA members?

BoA members’ mandate is established in the articles of association, but it is legally provided that it shall not be longer than three (3) years, with right of re-election.

What is the process for meetings of the BoA?

The conduct of BoA meetings and decision-making procedures are established in the articles of association or bylaws of BoA adopted unanimously. BoA has its chairman, who may not be an Administrator of the company, as well as a vice-chairman. Meetings are recorded in minutes which are signed by the chairman and each member is entitled to request a copy. Subject to articles of association or BoA bylaws specifications, resolutions are voted through a ballot, by telephone or other electronic means unless a member of the BoA opposes to that manner of decision-making.

Under which conditions is a BoA decision valid?

BoA’s resolutions are deemed valid if a quorum consisting of more than half of its members is constituted. Unless otherwise provided in the articles of association, resolutions are adopted with the affirmative vote of the majority of attending members and in event of tie the chairman has the casting vote. As meetings are recorded in minutes, any inaccuracies of such minutes do not affect the validity thereof.

What are the main duties of the BoA members and Administrators?

BoA’s members and Administrators have general fiduciary duties arising out of Articles 14, 15, 16, 17 and 18 of Company Law which are the same fiduciary duties applicable to shareholders, administrators, representatives etc. In addition, special fiduciary duties apply for members of BoA and Administrators according to Article 163 (1) and (2) of Company Law. Failing to comply with these fiduciary duties, entitles the company to claim in court indemnification against the BoA member or Administrator. These duties are listed as follows:

  • Duty of skill and care, whereby members shall exercise their power with due care and skill, consider the best interest of the company, act in good faith and not abuse with their power and the legal form of the company for obtaining personal gains;
  • Avoid conflict of interest, whether actual or potential;
  • Duty of loyalty, whereby members shall not disclose company’s business secretes, neither compete against the company without a permission given by the General Meeting (the latter if provided in the articles of association).

What are the minimum and the maximum number of Administrators of a joint-stock company prescribed by law?

Subject to articles of association determination, there may be one or more Administrators. There is no upper limit to the number of Administrators provided by law.

How are Administrators appointed and removed?

In a one-tier model administrators are appointed and removed at any time by the BoA. On the contrary, in a two-tier model there is no default rule in this regard: Company Law provides that, subject to the articles of association’s choice, Administrators may be appointed and dismissed either by the SB or General Meeting by simple majority.

What is the term of Administrators?

Administrators’ mandate is established in the articles of association, but it is legally provided that it shall not be longer than three (3) years, with right of re-election. An appointment shall produce legal effects once it is registered with the NRC.

How are SB members appointed and removed and what is their term?

Similar to members of BoA, members of SB in a two-tier model company are appointed and removed by resolution of the General Meeting, by simple majority. The articles of association establishes the number of SB’s members which shall be least three (3) but not more than twenty-one (21) individuals.

What are the issues for which the General Meeting of Shareholders is exclusively competent to decide?

In addition to the powers aforementioned, General Meeting has the competence to resolve on the following matters:

  • setting the business policies;
  • amending the articles of association;
  • electing, removing liquidators and auditors;
  • setting remuneration schemes for members of BoA, Administrators, members of SB, liquidators and auditors;
  • adopting financial statements and performance reports;
  • distributing annual profits;
  • dividing and annulling shares;
  • changing rights attached to certain classes of shares;
  • representing the company in litigations against administrative bodies of the company;
  • restructuring and winding up the company;
  • adopting bylaws on its meeting procedures; ? other matters provided by law or articles of association.

Under what conditions is a decision of the General Meeting of the Shareholders valid?

General Meeting may adopt valid (i) ordinary resolutions with a quorum established by shareholders (or represented by proxy) who represent more than thirty percent of voting shares and/or (ii) resolutions which require qualified majority with a quorum established by shareholders (or represented by proxy) who represent more than half of voting shares. Unless the articles of association provides a higher majority, amendments to the articles of association, increase or decrease of capital, distribution of profits and winding up the company are resolved with the affirmative vote of a qualified majority of at least three quarter (3/4) of attending shareholders. Ordinary resolutions are passed by simple majority of attending shareholders unless otherwise provided by law or articles of association. The voting method is established in the articles of association, which may include, voting by telephone, e-mail and any other electronic mean, provided safety measures and identification of the shareholder is guaranteed. Validity of a decision which assigns additional duties to or restricts rights of shareholders is dependent upon the consent of the affected shareholders.

What is the internal liability of BoA members and Administrators?

A member of BoA or Administrator is liable towards the company for breaching their fiduciary duties and shall indemnify the latter by returning any personal gains obtained as a result thereof, either personally or jointly and severally. The onus of proving in court that duties have been performed in compliance with the required standards is on the member of BoA or Administrator. The court will determine the indemnification also based on Civil Code’s principles.

What is the statutory limitation applicable to the company’s claims against BoA members and Administrators for damages?

This indemnification may be sought in court within three (3) years from the breach or verification of the breach.

Under which circumstances can BoA members and Administrators be released from their (internal liability)?

Discharge from liability is possible if the action (i) has been committed in good faith and (ii) is related reasonably to the purpose of the company.

What is the external liability of BoA members, SB members and Administrators?

These persons may be held liable for damages caused to third parties in certain circumstances. Pursuant to Article 620 of the Civil Code, Administrators are jointly and severally liable with the company if their representation has caused faulty damages to third parties. In addition, criminal liability pursuant to the Criminal Code may arise for Administrators or SB members for (i) misusing their duties for personal gains or favoring a third company (Article 164); (ii) passive corruption (Article 164§b); and (iii) distributing non-complying prospectus or inserting false statements therein when issuing company’s securities (Article 143§a§4). Also, under Article 16 of Bankruptcy Law, any member of the governing body of a legal person is obliged to file immediately for bankruptcy, within 21 days from the date of insolvency that is when the company is overloaded with debts otherwise they are held personally liable towards the creditors of the company only to the extent of the damage caused to them as a result of failing to file for bankruptcy within the 21-day-period, but not beyond that.

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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