At the session of 20 August 2009 Saeima adopted the amendments to the law “On State and Municipal Shares and Capital Companies” in the final reading. The amendments provide for updates in the range of applicability of the law establishing that the law regulates operations of the state and municipal capital companies which are established in order to ensure commercial activities of a public entity in the sphere of private law.

The draft law stipulates establishing a uniform procedure, how the state and municipal shares are managed in a private capital company, where a hundred per cent of the shares or stocks are jointly owned by several municipalities or the state and by a municipality or several municipalities. Further the capital companies, where hundred per cent of shares or stocks are jointly owned by public entities, will be subject to uniform provisions in respect to forming a supervisory board and a board of directors, as well as legal norms concerning setting remuneration.

The amendments update the regulation included in the law in respect to reorganization of state and municipal capital companies providing for an opportunity that state and municipal capital companies can become private capital companies by way of reorganization. Until now the laws and regulations stipulated that reorganization can be conducted by incorporating a private capital company, by acceding to a private capital company, merging with a private capital company, splitting the capital company, if the acquiring capital company is already a private capital company. In their turn, the amendments stipulate that reorganization is also conducted by incorporating, acceding, merging with a state or municipal capital company, as well as by splitting the state or municipal capital company, if the acquiring company is a state or municipal capital company.

Among proposals included during the second reading of the draft law a new chapter of the law was supported regarding organizational structure of those state and municipal capital companies, which are operating as a credit institution or an investment management company. This chapter stipulates that in the state and municipal capital companies, which are operating as a credit institutions or investment management company, management shall be conducted by a shareholder, shareholder meeting, supervisory board and board of directors. The amendments involve regulation on competence of the shareholder meeting, convocation thereof, process and decision making, as well as functions of the supervisory board and the board of directors, board members and meetings.

As regards to establishment of a profit ratio the proposals included during the second meeting provides for an assignment of the Cabinet of Ministers to establish minimum profit ratio to be disbursed in dividends for the state capital companies and capital companies under decisive influence of the state. The profit ratio is established in percentage from the net profit of the company. Similar assignment is provided also to municipal councils concerning municipal capital companies and capital companies under decisive influence of municipalities. In cases, when a state and municipal capital company has acquired a decisive influence in another capital company, the amendments stipulate that the profit ratio to be disbursed shall not be less than the minimum established by the Cabinet of Ministers of the municipal council. This provision shall not be applied to the state and municipal capital companies, which are credit institutions or investment management companies, as well as the credit institutions or investment management companies, which are under decisive influence of state or municipal capital companies.

The amendments to the law have come into effect as of 1 September 2009.