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March-April 2007
Estonia, Latvia, Lithuania, Finland, Sweden |
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RoschierRaidla News
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Inside this Issue:
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Estonia |
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Latvia |
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Lithuania |
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Estonia
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New Public Procurement Act Adopted |
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On 24 January 2007 the Estonian Parliament (Riigikogu)
adopted a new Public Procurement Act. The new act seeks to modernize
public procurement legislation, introduces new procurement
procedures and simplifies the rules governing public procurements.
The law was adopted in order to bring the Estonian public
procurement legislation into compliance with the EU directives on
public procurement, which entered into force in 2004 (2004/17/EC and
2004/18/EC). The act provides for public procurement procedures, the
rights and obligations of subjects involved in public procurement,
the procedure for the exercise of state supervision and resolving
protests, as well as the liability for violation of the act. The law
brings the procedure of concluding public procurement contracts in
line with the Law of Obligations Act. The value thresholds for
public procurement have been increased in comparison to the current
act. Pursuant to the act the value thresholds for 2007 shall be the
following: 30 000 EUR for goods and services and 190 000 EUR for
construction works. Starting from 2008, the value thresholds for
goods and services shall be 40 000 EUR and for construction works
250 000 EUR. The contracting authority has no obligation to follow
the procurement procedure provided for in the act, if the estimated
value of the procurement contract net of value added tax is lower
than the value threshold for public procurement. In this event the
contracting authority shall proceed from the general principles of
public procurement in concluding a procurement contract and submit a
public procurement report. Competitive dialogue is introduced as a
new type of procurement procedure. Competitive dialogue makes it
possible to negotiate the most suitable solutions with respect to
performance and functional requirements, prior to the submission of
final tenders. Another new element is the dynamic purchasing system,
i.e. an electronic system of concluding procurement contracts, where
tenderers who have joined, can conclude contracts by using a
simplified procedure. As another new development the law allows
framework agreements of up to four years in duration, to be
concluded primarily for determining prices or prices together with
amounts or volumes. During the term and subject to the principal
conditions set forth in the framework agreement, procurement
contracts can be concluded under the simplified procedure.
Contracting authorities involved in networks only need to apply the
procurement procedure, if the estimated value of the procurement
contract is equal to or greater than the international value
threshold. After the procurement procedure the contracting
authorities shall have to submit more detailed reports than before
to the public procurement register. They shall also have the
obligation to submit an annex to the report after termination of the
procurement contract, setting out any amendments to the contract and
any specifications concerning the execution thereof. Resolution of
disputes shall be conducted by a dispute resolution committee to be
established by the Public Procurement Office. After completing the
compulsory pre-trial phase in the dispute resolution committee, the
matter can be taken to court, but this does not prevent continuation
of the procurement procedure or conclusion of a procurement
contract, because only compensation of damage can be claimed in
court. The new Public Procurement Act enters into force on 1 May
2007.
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New Employees’ Representatives Act
Established |
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On 13 December 2006 the Riigikogu passed the Employees’
Representatives Act, as a result transposing Directive 2002/14/EC of
the European Parliament and of the Council establishing a general
framework for informing and consulting employees in the European
Community. The law regulates the activities of employees’
representatives in representing the employees, provides for the
general principles of electing representatives, as well as the
rights and obligations of representatives and employers. The law
sets forth the obligations of employers employing at least 30
employees in informing and consulting the employees. An employer
shall inform and consult the representatives or, in his or her
absence, the employees in matters concerning the structure of the
employer, the staff, substantial changes concerning organization of
work, planned decisions concerning the employment contract
relationships of employees, the annual report, etc. Election of
representatives continues to be voluntary. Pursuant to the law,
representatives of trade unions enjoy equal rights with the
employees’ representatives in informing and consulting employees.
The act entered into force on 1 February 2007.
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Insurance Activities Act Specified |
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On 21 December 2006 the Riigikogu adopted the Insurance
Activities Act Amendment Act. The amendment brings the required
solvency margins and the limitations used for calculating the
required available solvency margins of insurance undertakings in
line with the EU requirements. At the same time the connection
between the required solvency margin and share capital of insurance
undertakings has been abolished by the new provisions. Some of the
amendments derive from the application of the IFRS 4 (the
International Financial Reporting Standard on insurance contracts).
The new provisions specify the requirements applicable to branches
of third country insurance undertakings in Estonia, as well as to
responsible actuaries, management board members and employees. In
addition the amendments prescribe the obligation of insurance
brokers and insurance agents to disclose to the customer the amount
of the brokerage, including the amount of the brokerage received by
them from insurance undertakings. Insurance agents also have the
obligation to determine, on the basis of information provided by the
customer, on which terms and conditions the customer wishes to
conclude the insurance contract and make an offer to the customer
for concluding such contract, justifying the advice and
recommendations provided to the customer with a thoroughness which
corresponds to the complexity of the insurance contract. Language
requirements applicable upon founding a branch and providing
cross-border services were amended as well. Most of the amendments
entered into force on 20 January 2007, with some provisions becoming
effective on 1 July 2007.
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Integrated Pollution Prevention and Control
Act Amended |
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On 13 December 2006 the Riigikogu passed the Act Amending the
Integrated Pollution Prevention and Control Act. The amendments aim
at simplifying the proceedings concerning the application and grant
of integrated environmental permits. The integrated permit
application form and the integrated permit form are combined into
one form and applications can now also be submitted electronically.
Additions concern the provisions regulating the grounds and
proceedings of amending integrated permits, as well as the
disclosure of integrated permits. The grounds of determining
emission limit values were amended as well. From now on the limit
values provided for in legislation are deemed as minimum
requirements, and more stringent emission limit values may be
required for achieving a high level of environmental protection.
Under a further amendment, as a rule, no limit value is determined
for greenhouse gas emissions in the integrated permit of
installations involved in the greenhouse gas emissions trading
scheme, instead and if necessary, such installations are prescribed
energy efficiency requirements. Technical specifications were added
to the law in order to fully transpose the EU directives. The
amendments entered into force on 14 January 2007.
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Electronic Communications Act and
Broadcasting Act Amended |
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On 21 December 2006 the Riigikogu adopted the Act Amending
the Electronic Communications Act and the Broadcasting Act. The
amendments create a basis for transition to digital television in
Estonia. In the Electronic Communications Act a number of new terms
were defined (multiplexer, multiplexing service, etc) and
requirements were set forth for the provision of multiplexing
services and for transition to digital broadcasting. Under the
amended law the Communications Board is to issue the first three
national frequency authorizations for transmitting digital
broadcasts to undertakings, who develop three national digital
broadcasting networks by 2010. By way of exception, this will be
done without organizing a public competition. Amendments to the
Broadcasting Act introduced new terms and separated the owner of the
broadcasting licence (licencee) and the owner of the transmitter’s
network. No broadcasting licence is required from now on for
retransmitting programs and program services. Under the amendments
the transmission of television programs and program services in the
analogue television network will come to an end by 1 February 2012
at the latest. The amendments entered into force on 17 January 2007.
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Additions to Occupational Health and Safety
Act |
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On 20 December 2006 the Riigikogu adopted the Act Amending
the Occupational Health and Safety Act. These amendments introduce
sweeping, fundamental changes in the law. Among the most important
developments is the extension of the scope of the law to include
sole proprietors. Other amendments include specification of
definitions and issues pertaining to supervision, as well as
introduction of new obligations for employers. The new obligations
for employers include the need to register dangerous situations in
the enterprise, notify minors and legal representatives of minors
under the age of 15 of the risks related to the work of the minors
and in certain cases grant employees breaks during the working day,
which are included in working time. Most of the amendments entered
into force on 1 March 2007.
On 21 December 2006 the Government of the Republic adopted
regulation No 273, which established as the minimum hourly wage
21.50 EEK and as the minimum monthly salary 3 600 EEK in the case of
full-time work. The regulation entered into force on 1 January 2007.
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| For further information please contact
Raino Paron,
Partner at Raidla &
Partners in Tallinn. |
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Latvia
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Law on Legalization of Foreign Documents
Passed |
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On 22 March 2007 the Latvian Parliament
(Saeima) passed a new Documents
Legalization Law. The law enters in
force on 18 April 2007. The law
incorporates the existing document
legalization practice which so far did
not have an explicit statutory basis.
The Documents Legalization Law will
apply both to legalization of public
documents issued in Latvia and to
legalization of foreign documents for
use in Latvia. The law will not apply if
a different legalization procedure is
provided for in an international treaty
to which Latvia is a party or in the
European Union law.
The Documents Legalization Law
reconfirms and formulates for the first
time in the form of a law the basic
state administration principle that any
public document issued abroad may be
enforceable in Latvia only if that
foreign document has been duly
legalized, and that all governmental,
judicial and legislative bodies, as well
as other entities and persons when
exercising their functions of state
public administration may only accept
public documents issued abroad if they
have been duly legalized in Latvia. This
confirms the long existing practice of
various state institutions drawing a
distinction between the form of
documents issued by foreign authorities
and the form of documents issued by
foreign private persons.
For the purposes of the law, the concept
of “public document” has the same
meaning as in the 5 October 1961 Hague
Convention Abolishing the Requirement
for Legalization of Foreign Public
Documents (the “Hague Convention”), i.e.
it includes all documents emanating from
an authority or an official connected
with the courts or tribunals of the
State, including those emanating from a
public prosecutor, a clerk of a court or
a process-server, administrative
documents, notarial acts, official
certificates which are placed on
documents signed by persons in their
private capacity, such as official
certificates recording the registration
of a document or the fact that it was in
existence on a certain date and official
and notarial authentications of
signatures, excluding, however,
documents executed by diplomatic or
consular agents and administrative
documents dealing directly with
commercial or customs operations.
If the Latvian public document is
intended to be used in a country which
is a member state of the Hague
Convention, the Hague Convention will
apply. If the Latvian public documents
are to be used in a country which is not
a member state of the Hague Convention,
the documents will be deemed to have
been legalized in Latvia, if the
Consular Department of the Ministry of
Foreign Affairs has confirmed the
authenticity and status of its signatory
and, if necessary, the authenticity of
the stamp (seal) affixed to the
document.
The law will also allow legalization of
electronic documents provided that the
document requested to be legalized
complies with all legal requirements
applicable to the form and circulation
of electronic documents. Documents in
paper form will not be legalized if they
are not in compliance with the Latvian
rules on form of documents.
The public documents issued in the
member states of the Hague Convention
can now be legalized only in accordance
with the Hague Convention, i.e. these
documents will be deemed to be duly
legalized for use in Latvia only if they
have an Apostille affixed in accordance
with the Hague Convention.
The law does not regulate the
legalization procedures of public
documents issued in countries which are
not member states of the Hague
Convention. This authority has been
delegated to the Cabinet of Ministers of
Latvia which is to issue respective
regulations by 18 August 2007.
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Amount of Guaranteed Deposits Under Deposit
Guarantee Scheme Increased |
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On 27 March 2007 the Saeima
amended the Law on Deposit Guarantees
increasing the guaranteed amount of the
deposits covered by the Latvian deposit
guarantee scheme. The amendments entered
into force on 10 April 2007.
Pursuant to the amendments, in the
period until 31 December 2007 the
guaranteed amount of the deposits
covered by the scheme will be equal to
the equivalent of 15 000
EUR
at the exchange rate of the Bank of
Latvia on the date when the deposit
guarantee obligation was triggered. As
of 1 January 2008 the guaranteed amount
will be increased to the equivalent of
20 000
EUR.
Prior to the amendments the guaranteed
amounts were limited to 9 000
LVL
(approximately 12 800
EUR)
and 13 000
LVL
(approximately 18 500
EUR)
respectively. Irrespective of the
currency of the deposit, the guaranteed
amounts will be payable in Latvian lats
only.
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Duties for Registration of Real Estate
Transfers Increased |
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On 6 March 2007 the Cabinet of Ministers
amended its regulations on the duties
payable in respect of notarial actions
and registration of title and security
interests in the Land Register
increasing the amounts of registration
duties payable in respect of certain
real estate transactions. The increased
duties are applicable as of 16 April
2007. These amendments constitute one of
the measures intended to be taken by the
Latvian Government in combating
inflation in Latvia.
The amendments are primarily targeted to
individual persons presumed to be
involved in real estate speculation, and
the amendments will not affect legal
entities. As of the effective date of
the amendments the amount of the
registration duties for the individuals
will now be based not only on the
transaction amount as previously but
also on such additional factors as the
number of properties owned by the
individual, purpose of the loan and
number of mortgages already provided by
the individual.
Thus, purchase by an individual of the
third or any following properties will
be subject to a registration duty of 4%
of the transaction value, or to 6%, if
the title to the third or any following
real estate is transferred as a gift.
While the registration duty payable in
respect of acquisition of the first and
second real estate owned by an
individual is limited to maximum 30 000
LVL
(or 50 000
LVL,
if the title is transferred as a gift),
duties payable in respect of acquisition
of the third and following real estate
will not be subject to any maximum
amount.
Similarly, perfection of the third or
any following mortgage by an individual
will be subject to a registration duty
of 3% of the loan amount, unless the
mortgage is provided to secure a third
party loan taken by a legal entity or
individual entrepreneur for its business
purposes.
The duties payable by legal entities in
respect of acquisition of real estate
and perfection of mortgages will remain
unchanged, i.e. 2% of the transaction
value but not more than 30 000
LVL
(approximately 42 686
EUR)
in case of acquisition of title by sale,
or 3% of the transaction value but not
more than 50 000
LVL
(approximately 71 145
EUR)
in case of acquisition of title by way
of a gift, and 0.1% of the loan amount
but not more than 1 000
LVL
(approximately 1 423
EUR)
in respect of perfection of mortgages.
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Regulations on Application of Double Taxation
Treaties Amended |
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On 9 March 2007 the Cabinet of Ministers
of Latvia amended its regulations No.
178 of 30 April 2001 on the application
of tax relief under the international
treaties on elimination of double
taxation and tax avoidance. The purpose
of this regulation is to specify the
form and substance of documents which
need to be submitted by foreign
nationals in order to benefit under the
double taxation treaties entered into by
Latvia.
The new amendments have introduced a
specific procedure for the confirmation
of foreign tax residency by persons
which are not able to obtain in their
home country the tax residency
certificates in the form prescribed by
the regulation. According to this
procedure the foreign nationals will
still be able to avail themselves to the
benefits of the respective double
taxation treaty if they can produce a
statement of the competent authority of
their tax residence country explaining
why the tax residence certificate cannot
be issued by the competent authority in
the required form and are able to
provide a substitute document which
contains all necessary information as
required by the regulations.
A new procedure has been introduced in
respect of application of the tax relief
which is subject to the foreign national
having no permanent establishment in
Latvia. In the situation when the
respective double taxation treaty
provides that the tax relief under the
treaty is available only if the
respective commercial activity that has
generated taxable income does not
constitute a permanent establishment in
Latvia, the foreign tax resident will be
required to submit to the State Revenue
Service a certificate certified by the
competent authority of its tax residence
country confirming that the commercial
activity does not constitute a permanent
establishment in Latvia.
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| For further information please contact
Dace Silava-Tomsone
(CV),
Partner at Lejins, Torgans
& Partners in Riga. |
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Lithuania
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New Law on Securities |
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On 18 January 2007 the Lithuanian
Parliament (Seimas) adopted a new
Law on Securities, which regulates the
procedure of preparation, approval and
publication of prospectuses, disclosure
and keeping of regular and current
information, submission of offers to the
public, as well as establishes the
rights and obligations of the Securities
Commission. This law was adopted in
order to bring Lithuanian securities
market legislation in line with EU law
and to ensure effective protection of
investors’ interests. Under the
provisions of the said law a legal
entity, established in Lithuania, shall
be regarded as an issuer (i) if it has
permission to sell its securities on the
regulated market in Lithuania or another
EU member state, or (ii) if its
prospectus was approved by the
Securities Commission on or after 12
January 2005 and its securities issued
on the basis of the prospectus were
offered to the public or admitted to
trading on a regulated market, or (iii)
other entity, if its securities are
offered to the public. It should be
noted that, according to the law,
securities are offered to the public if
an issuer issued at least one issue of
securities to public trading as of 1
January 2002 and its general meeting of
shareholders adopts a decision to
continue offering securities to the
public within 6 months after the
adoption of this law. However, if the
decision is not adopted and relevant
documents are not submitted to the
Securities Commission within 6 months, a
legal entity established in Lithuania
will no longer be regarded as an issuer.
In addition, the new law obliges an
issuer, which has permission to trade
its securities on the regulated market
in one or several EU member states or
other person who submits a request to
admit securities to trading on a
regulated market without the permission
of an issuer, to make available to the
public information required under the
law in Lithuania and other EU member
states. The issuers shall also prepare,
make available to the public and submit
to the Securities Commission regular
information consisting of annual and
interim information, as well as publish
interim information every 3, 6, 9 and 12
months. Moreover, a person who acquires
5%, 10%, 15%, 20%, 25%, 30%, 50%, 75%
and 95% of votes in the issuer’s general
meeting of shareholders, is under an
obligation to notify the Securities
Commission and issuer about the number
of votes held.
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New Law on Markets in Financial
Instruments |
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On 18 January 2007 the
Lithuanian Parliament (Seimas)
adopted a new Law on Markets
in Financial Instruments.
The law aims at ensuring
fair, transparent and
effective functioning of
financial markets,
protection of investors’
interests and limitation of
systematic risks. This law
also transposes the
provisions of the European
Parliament and Council
Directive of 21 April 2004
on Markets in Financial
Instruments into national
law. According to the law,
professional investment
services may be provided
only by (i) financial
brokerage companies which
hold a financial brokerage
company license issued by
the Securities Commission or
supervisory body of another
EU member state, (ii) credit
institutions licensed in
Lithuania or another EU
member state which hold a
license to provide
investment services, as well
as (iii) financial
consulting companies which
hold a financial consulting
company license issued by
the Securities Commission.
Noteworthy is that the said
provisions are not
applicable to market
operators managing
multilateral trade systems
and which do not intend to
provide other investment
services. In such case a
market operator does not
need to obtain a license,
however, it may manage
multilateral trade systems
only when the Securities
Commission recognizes that a
market operator complies
with established
requirements. The law also
lays down additional
requirements for financial
brokerage companies and
market operators managing
multilateral trade systems.
In addition, the law
provides for customers’
protection according to the
type of investment services
provided and their status.
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New Law on Consumer Protection |
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On 12 January 2007 the
Lithuanian Parliament (Seimas)
adopted a new Law on
Consumer Protection which
came into force on 1 March
2007. The law seeks to
reinforce consumer
protection. The new law
clarifies the fields of
consumer protection and
competence of consumer
protection authorities. The
main institution charged
with the protection of
consumer rights is the State
Consumer Rights Protection
Authority. It ensures a high
protection level of
consumers in Lithuania by
aligning the consumer rights
protection system with EU
law. Importantly, the law
establishes a new
presumption under which the
defects of goods which
appear within 6 months from
delivery of the commodity to
the consumer shall be
regarded to have been at the
moment of transfer to the
consumer, unless it can be
proved otherwise or it does
not cohere with the nature
of a particular commodity or
defect. Another significant
novelty is the possibility
to lodge complaints using
extrajudicial procedures.
The law establishes the
detailed procedure and terms
for examining consumers’
complaints, the rights and
obligations of authorities
examining the complaints, as
well as the validity of
decisions adopted. It should
be noted that the law gives
priority to the peaceful
settlement of disputes, thus
it firstly recommends filing
a complaint directly to the
seller or service provider.
The law also contains
provisions applicable to the
principle of good business
practice, competence of
consumer associations,
consumer education,
protection of public
interest, rendering
financial services in
accordance with the
agreements concluded by
electronic means and
liability for consumer
protection laws’
infringements.
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| For
further information please contact
Irmantas Norkus, (CV),
Managing Partner at
Norcous & Partners in Vilnius. |
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Finland
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Implementation of the
Transparency Directive
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The EU Transparency
Directive (2004/109/EC) was
implemented into Finnish law
on 15 February 2007. As a
result of the
implementation, among other
things, certain provisions
of the Finnish Securities
Market Act (495/1989) (the “SMA”)
were amended as well as two
regulations issued by the
Finnish Ministry of Finance
updated. The new provisions
regulate listed companies’
regular reporting
requirements, the
publication and availability
of company-specific
information as well as the
shareholder’s duty of
disclosure.
The requirements relating to
regular reporting by listed
companies were amended in
connection with the
implementation of the
Transparency Directive.
Interim reports must be
prepared in accordance with
the IFRS standards. The main
rule is that interim reports
must be prepared for the
first three, six and nine
months of a financial year.
However, companies may
decide not to publish
interim reports for the
first three and nine months
of the financial year
provided that they meet
certain criteria relating,
inter alia, to the
company’s market value and
the nature of the company’s
line of business.
Nevertheless, an issuer of
securities deciding to rely
on this exemption is obliged
to publish interim
management statements during
the first and second
half-year period. In
addition, companies listed
on the Helsinki Stock
Exchange are required to
keep the published
information available on the
company’s website for a
period of five years.
In connection with the
implementation of the new
requirements of the SMA, the
Ministry of Finance has
issued two regulations
specifying regular reporting
requirements and
shareholder’s duty of
disclosure, both effective
as of 15 February 2007. Most
of the provisions relating
to the shareholder’s duty of
disclosure, such as the
current thresholds
triggering the disclosure
obligation, remain
unchanged. However, certain
amendments, such as new
exemptions from the flagging
obligations, have been
introduced. For instance, in
accordance with the new
provisions, parent companies
of fund management companies
and investment firms
carrying on individual
portfolio management are
exempted from aggregating
their shareholdings with the
shareholdings of their
subsidiaries, provided that
they meet certain
requirements specified in
the regulation.
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New Credit Institutions Act |
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The new Finnish Credit
Institutions Act (121/2007)
entered into force on 15
February 2007. In addition,
amendments to other laws
relating to operations of
entities similar to credit
institutions (jointly, an
“Institution”), such as
investment firms, were
adopted. The new legislation
implements the latest EU
Directives regulating
operations of Institutions
(among other things based
upon the Revised Framework
published by the Basel
Committee on Banking
Supervision in 2004) and
introduces significant
changes in the capital
adequacy requirements
imposed on Institutions.
Provisions not relating to
the financial status of
Institutions remain mainly
the same as before. However,
the renewal of the Credit
Institutions Act clarifies
the structure compared to
the previous act.
As a result of the
promulgation of the new
legislation, the previous
capital adequacy
requirements were replaced
by new requirements
according to which the
amount of funds held by an
Institution is calculated by
a standard mechanism or,
subject to the approval of
the Finnish Financial
Supervision Authority, by
mechanisms internally
applied by the Institution,
provided that such internal
mechanisms enable the
capital adequacy
requirements to be
calculated more accurately
than before. While the
solvency thresholds have
remained on the same level
as before, Institutions are
also required to have
sufficient funds – generally
15% of the Institution’s
annual profit – to cover
their operational risks. The
adopted amendments are
expected to improve the
allocation and pricing of
financing and costs of
financing and ultimately the
efficiency of the financial
system in Finland.
Further, the new legislation
contains requirements
governing the monitoring of
the solvency of an
Institution. According to
such provisions, an
Institution should have – in
addition to the previous
general requirements
regarding internal controls
and risk management –
sufficient internal
guidelines on the
identification, calculation
and reporting of risks
relating to the
Institution’s solvency, on
the taking and limiting of
risks as well as on covering
the risks with the
Institution’s own funds. An
Institution is required to
publish detailed information
on its solvency in its
financial statements or in a
similar way.
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| For further information please contact
Dimitrios Himonas
(CV),
Partner at Roschier in Helsinki. |
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Sweden
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Increased
Insight in Private
Companies: For the
Ease of the Market
or just Curiosity? |
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The demand for
increased
insight in
private
companies is
growing as the
Swedish media
reports on the
profit results
for investors in
private
companies.
In the Swedish
media the
question has
been raised
whether private
and public
companies should
be subject to,
more or less,
the same
regulations, in
order to prevent
an unfair
business market,
i.e. a market in
favor of private
companies. Some
media sources
even go so far
as to proclaim
that certain
private
companies should
be forced to
list on the
stock exchange
in order to
subject them to
the relevant
regulation for
publicly listed
companies.
Those in favor
of increased
regulation note
that large
return on
investments to
the private
companies’
investors may
harm confidence
in the market.
Concern about
the confidence
in the market
has been debated
before in
Sweden, namely
when
implementing
stricter rules
for resolutions
involving
remuneration of
the company
management in
publicly listed
companies.
Some years ago,
business
scandals in the
USA affected not
only the stock
markets all over
the world, but
also confidence
in the Swedish
business sector.
In order to
prevent a
similar
development in
Sweden the
Swedish Code of
Corporate
Governance (the
“Code”) was
implemented.
Since 1 July
2005, all
Swedish
companies that
are registered
at the Stock
Exchange and all
other listed
companies with a
market
capitalization
exceeding 3
billion SEK
(approximately
325 000 000 EUR)
must apply the
Code, which
inter alia
stipulates rules
for resolutions
involving
remuneration.
The Code was,
thus, a first
step towards a
more transparent
market, which
also made public
the remuneration
to the company
management in
publicly listed
companies.
The next step in
the Swedish
government’s
desire to
legislate
towards
increased
transparency
regarding a
company’s
decisions and
the
decision-making
process was
presented in a
bill less than
one year after
the Code had
entered into
force. The
proposal, which
was implemented
in Swedish law
on 1 July 2006,
resulted in
stricter rules
for resolutions
involving
remuneration for
management
employees within
all publicly
listed
companies.
According to
this legislation
all publicly
listed companies
must disclose
the top
management’s
entire
remuneration
package, such as
ordinary salary,
pension
benefits,
severance pay,
bonuses, etc.
Another,
somewhat
dramatic, change
was that the
remuneration to
the top
management must
be decided by
the shareholders
at the general
meeting, not by
the board of
directors.
The publicly
listed
companies, to
which the Code
applies, often
have a wide
spectrum of
owners. Each
owner in a
publicly listed
company, whether
private or
institutional,
has an interest
in how the
company is
managed. The
purpose of the
Code inter
alia is to
ensure that the
company is
governed in a
way that
fulfills the
shareholders’
expectations for
return on their
investment. By
providing the
shareholders
with deeper insight
into the
company’s
business, the
intention is
that this will
result in more
effective
control.
The situation in
a privately
owned company is
rather
different.
Privately owned
companies
traditionally
have a limited
number of owners
and, thus, offer
the shareholders
possibilities to
secure their
influence in the
company, for
example through
management or
board positions.
In the opinion
of certain
Swedish media,
the next step
towards further
transparency
regarding a
company’s
decisions and
decision-making
process would be
to apply the
regulations for
publicly listed
companies to
certain private
companies. The
question is,
though, what
purpose would be
fulfilled by
increasing the
insight in the
affairs of
private
companies. It
seems that the
shareholders
would not
necessarily
benefit from
such
regulations.
Since the
shareholders
themselves have
not raised this
issue, it
appears only to
be a way to feed
media and the
public
curiosity.
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| For further information please contact
Axel Calissendorff
(CV),
Partner at Roschier
in Stockholm. |
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| This Newsletter is a
periodic publication of RoschierRaidla and
should not be construed as legal advice or legal opinion on any specific
facts or circumstances. We have used reasonable efforts in collecting,
preparing and providing the information in this newsletter, but we do
not warrant or guarantee the accuracy, completeness, adequacy or
currency of the information contained herein. The contents are for
general informational purposes only, and you are urged to consult a
lawyer concerning your situation and any specific legal questions you
might have. |
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