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March-April
2008
Estonia, Latvia, Lithuania, Finland, Sweden |
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RoschierRaidla News
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Inside this Issue:
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Topical |
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Estonia |
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Latvia |
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Lithuania |
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Topical
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RoschierRaidla Baltic Firms Change Their
Name to Raidla Lejins & Norcous |
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The RoschierRaidla Baltic firms (Raidla & Partners, Lejins, Torgans
& Partners and Norcous & Partners) are sharpening their corporate
identity and consolidating their pan-Baltic branding. As of 1 May
2008 these long-term partners within the Nordic-Baltic
RoschierRaidla combine will be operating under the joint name Raidla
Lejins & Norcous, forming one of the largest law firm operations in
the Baltic countries.
The use of a single name reflects an increased focus on
international and cross-border work specifically within the Baltic
States. The consolidation is also a natural step for the Baltic
firms in the close four-year cooperation within RoschierRaidla.
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RoschierRaidla Receives Recognition in PLC
Which Lawyer? Awards 2008 |
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The RoschierRaidla network has been awarded the title Law Firm of
the Year: Northern Europe in the PLC Which Lawyer? Awards 2008. The
nominations for the awards were made among some 6,000 in-house
counsel of companies across the globe.
For further information, please go to:
http://whichlawyer.practicallaw.com/2-381-0421
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Belarus Help Desk |
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Responding to increased
demand for a Belarus advice
Vilnius office launched a
Belarus Help Desk service.
The firm recruited Belarus
qualified lawyers who are
prepared to provide generic
advice and assist clients
considering entering
Belarus. For on-site legal
assistance we cooperate with
leading local law firms
having perfect reputation
and in-depth expertise of
working in Belarus.
Our Belarus Help Desk issued
brief publication Exploring
new markets: DOING BUSINESS
IN BELARUS, which provides
an overview of recent legal
and economic developments in
Belarus.
For more information, please
contact
Irmantas Norkus or
Olga Majitova.
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Estonia
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Law of Succession Act |
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On 17 January 2008, the Estonian Parliament (Riigikogu)
adopted the Law of Succession Act. The new law brings a number of
changes. Most importantly, it changes the system of transfer of rights
through an estate from an “acceptance system” to a “renunciation
system”. Under the prior law a successor had to make a trip to the
notary in order to “accept” the estate before he could claim rights
to estate assets. Pursuant to the change, the transfer is now
automatic unless the successor “renounces” the estate. The successor
still may need a certificate of acceptance from a notary, however,
to prove his status to third parties. In addition to this systemic
change, the new law modifies a number of rights and procedures. The
minimum age for preparing a will is reduced from 18 to 15 years of
age. Obligations of the provisional successor and successor are
clarified, for example, with respect to handling the estate inventory
and to protect the rights of estate creditors. Spouses also have new
rights with respect to common dwellings and co-equal claimants to
the estate. Finally, there the definitions of legacy and testamentary
direction, and regulations pertaining to reciprocal wills and
succession contracts are clarified. Sweeping new provisions relating
to compulsory portion are introduced. The new act enters into force
on 1 January 2009.
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Money Laundering and Terrorist Financing
Prevention Act |
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On 19 December 2007, the Riigikogu passed the Money Laundering
and Terrorist Financing Prevention Act. This act transposes two EU
money laundering directives into Estonian law. The new act
prescribes due diligence measures to prevent money laundering and
terrorist financing, the bases for the activities of the Financial
Intelligence Unit, supervision over compliance with the act and
liability for violations thereof. Of special note, the new act
expands the group of obligated persons, who have to fulfill the
requirements arising from the law. Pursuant to the law, obligated
subjects now include banks, undertakings providing financial
services, organizers of games of chance, real estate agents,
pawnbrokers, auditors and providers of accounting and tax
consultations, as well as trust and company service providers.
Notaries, lawyers, bailiffs, trustees in bankruptcy and other
providers of legal services must take into account the requirements
of this law. Traders who receive payments in cash in excess of
EEK
200 000, or an equivalent sum in another currency, also fall within
the scope of this law. The new law also strengthens due diligence
measures and clarifies the conditions of their application. The
situations where the obligation arises to check and identify a
person are regulated now in more detail. As a rule the Financial
Intelligence Unit must be notified of each cash transaction of
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500 000 or more. As another important development undertakings
providing financial services that are not supervised by the
Financial Supervision Authority now have to register at the register
of economic activities. Standards for persons who may act as members
of management bodies of such undertakings have been specified in
more detail as well. Further amendments pertain to risk management
in connection with money laundering and terrorist financing,
including provisions regulating refusal to carry out a transaction,
termination and transfer of a business relationship. The act entered
into force on 28 January 2008. The provisions regulating
registration in the register of economic activities shall enter into
force on 15 June 2008.
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Other Recent Legislative Developments |
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Export and Import of Cultural Goods Act
On 20 December 2007, the Riigikogu adopted the Export and
Import of Cultural Goods Act. The objective of the act is to protect
cultural goods by imposing restrictions on their export to third
countries or to other member states of the European Union. The act
defines as cultural goods items of historical, archaeological,
ethnographic, artistic or scientific value or of other cultural
value. Pursuant to the new law such export is subject to a permanent
or temporary authorization issued by the National Heritage Board,
and the act sets forth the procedures to obtain this authorization.
Prior to the grant of authorization the relevant item is subjected
to expert analysis and the operations related to export are subject
to tax. State supervision over compliance with the law is carried
out by the National Heritage Board and the Tax and Customs Board.
The law also contains provisions regulating liability for violations
of the law. The act entered into force on 17 February 2008.
Health Services Organization Act Supplemented
On 20 December 2007, the Riigikogu adopted the Health Services
Organization Act and Associated Acts Amendment Act. These amendments
created the legal basis for the establishment of a health
information system. Pursuant to the changes health care providers
must forward information to the information system concerning health
services provided, data necessary for maintaining waiting lists, as
well as for making available medical images and for managing health
care. The new amendments give patients the right to restrict access
to their personal data. Via the health information system a patient
can express his or her intentions concerning the donation of organs
or the entire body after the patient’s death and concerning blood
transfusions. In addition, the new law creates the legal basis for
the foundation of a prescription centre, enabling the introduction
of digital prescriptions. The amendments enter into force on 1
September 2008.
Precious Metal Articles Act Amended
On 20 December 2007, the Riigikogu passed the Precious Metal
Articles Act Amendment Act. The amendments specify the definition of
articles of precious metals, regulations for placing them on the
market, and for marking such articles. The provisions regulating the
sponsor’s mark of an importer and the rules of presenting the weight
of articles of precious metals have been changed. Metal products of
historical or cultural value have been left out of the scope of the
law. Pursuant to the amendments, articles of precious metals may
also be imported by undertakings registered as retailers and can be
sold via pawnbrokers. The old requirement of selling such articles
only by way of non-cash settlement has been modified. Other
amendments pertain to requirements for experts of articles of
precious metal, the competence of the body carrying out state
supervision and liability for violation of the act. The amendments
enter into force on 15 April 2008.
Holidays Act Supplemented
On 12 December 2007, the Riigikogu adopted the Holidays Act
Amendment Act. Pursuant to the amendment a father now has the right
to an additional holiday of ten working days during the pregnancy
leave or maternity leave of a mother, or within two months after the
birth of the child. He will receive holiday pay computed on the
basis of his average salary, which may not exceed average gross
monthly salary for a three month period. The amendment entered into
force on 1 January 2008.
Packaging Act Amended
On 13 December 2007 the Riigikogu passed the Packaging Act
Amendment Act. The amendments introduce new target recovery
indicators for packaging. As of 1 January 2009 packaging
undertakings, except for persons who sell packaged goods, must
guarantee the recovery of the packaging waste generated from the
packaging of the goods packaged thereby and from imported packaged
goods to the following extent: 1) At least 60% annually of the total
mass of packaging waste; 2) By way of recycling, at least 35%
annually of the total mass of packaging waste and at least 15%
annually for the total mass of each type of packaging. The
amendments entered into force on 14 January 2008.
Government Established Minimum Wage for 2008
By Regulation No 254 of 20 December 2007 the Government of the
Republic established, as of 1 January 2008,
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27 as the new minimum hourly wage and
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4350 as the minimum monthly wage. The current minimum wage rates
were repealed. The regulation entered into force on 1 January 2008.
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| For further information please contact
Raino Paron,
Partner at Raidla Lejins &
Norcous in Tallinn. |
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Latvia
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Competition Law Amended |
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On 13 March 2008, Saeima (the Parliament) has adopted a set of material
amendments to the Competition Law of Latvia, changing, inter alia, the legal
definition of a dominant position, merger (concentration) notification
requirements and procedures, eliminating the individual exemption procedures for
anti-competitive agreements and introducing a new concept of abuse of dominant
position in retail markets. In addition to the substantive amendments, a number
of new procedural rules have been introduced as well. The amendments except for
the provisions concerning change in the definition of dominant position,
introduction of the concept of the abuse of dominant position on a retail market
and the related penalty provisions entered in force on 16 April 2008. The
provisions concerning change in the definition of a dominant position and the
concept of abuse of dominant position on a retail market will enter in force on 1 October 2008.
Definition of dominant position
By the new amendments to the Competition Law Saeima has substantially
expanded the scope of definition of dominant position in Latvia. If prior to the
amendments an undertaking would be considered dominant if it had a market share
on the relevant market of at least 40% and had the market power, the amendments
have dropped the market share criterion. Thus, as of 1 October 2008 any
undertaking having a market power on the relevant market would be considered
dominant irrespective of its actual market share.
Abuse of dominant position on a retail market
In addition to the changes in the general definition of dominant position, a
specific concept of dominance in retail markets has been introduced. Thus, an
undertaking would be considered dominant on a retail market, if having regard to
its purchasing power and the dependence of the suppliers in the relevant market
the undertaking has an ability to apply or force, directly or indirectly, on
suppliers unfair or unreasonable terms and conditions or payments, and it may
prevent, restrict or distort competition on any relevant market in Latvia for a
sufficiently long period of time.
A dominant position in a retail market is considered to be abused by the
following behavior:
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applying or forcing unfair or unreasonable conditions in respect of return
of goods, except for return of goods of inferior quality and return of goods
supply of which or the increase of the volumes of supply of which were
initiated by the supplier itself;
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by applying or forcing unfair or unreasonable payments in respect of
placement of goods in retail premises, except if these payments are
justified by introducing in the market a new product not known to
consumers;
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by applying or forcing unfair or unreasonable payments in order to enter
into a contract unless these payments are justified on the grounds that the
contract is entered into with a new supplier which as such requires a
specific appraisal;
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by applying or forcing unfair or unreasonable payments for supplies of goods
to a new retail location;
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by applying or forcing unfair or unreasonable payment settlement deadlines for
the supplied goods;
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by applying or forcing unfair or unreasonable penalties (sanctions) in
respect of violation of the terms of a transaction.
As distinct from the existing concept of abuse of dominant position under the
Latvian Competition Law, the list of abuses of dominant position on a retail
market is an exhaustive list of abuses. Thus, an entity having a dominant
position on a retail market would only be considered abusing its dominant
position if its behavior falls under one of the six abuses specified in the
Competition Law.
An undertaking in breach of prohibition of abuse of dominant position on a
retail market may be subject to a fine in the amount of up to 0.05% of its
turnover of the previous financial year, in respect of its first offence, or in
the amount of up to 0.2% of its turnover for any subsequent offence.
The new concept of abuse of dominant position in retail markets is in addition
to, and not in lieu of the general prohibition of abuse of dominant position.
Therefore, where the relevant behavior would constitute both an abuse of
dominant position in a retail market and breach of the general prohibition of
abuse of dominant position, it will be prosecuted as a breach of the general
prohibition of abuse of dominant position, and as such will be subject to more
substantial penalties.
Self-assessment of anti-competitive agreements
The amendments have removed the existing procedure of individual notification to
the Competition Council of the agreements having as their object or effect the
prevention, restriction or distortion of competition on the relevant market.
This procedure has been replaced by a self-assessment procedure according to
which the market participants are not required to notify these agreements to the
Competition Council provided that they meet the exemption conditions specified
in the Competition Law. However, the law has also retained a discretionary
possibility to seek an individual exemption of the agreement, provided that the
agreement is notified to the Competition Council prior to its signing or the
effective date and there is no undergoing investigation of the transaction by
the Competition Council.
Notification of concentrations
The amendments have revised the legal definition of a concentration, changed the
notification thresholds and introduced an option to file the short-form
concentration notifications in situations where the concentration does not cause
a threat to competition. At the same time the amendments also extended the time
period in which the Competition Council has to review the concentration
notifications from the existing period of 30 days to 45 days from the date a
complete notification is made.
According to the amendments, the concentrations now have to be notified to the
Competition Council if the aggregate turnover of the parties to a concentration
during the previous financial year in the territory Latvia was not less than 25
million years. The former requirement to notify a concentration if at least one
of the participants of the concentration prior to the concentration was in a
dominant position on a relevant market has been deleted.
Short form concentration notifications can be made if the participants to
concentration are not active in the same relevant market or in vertically
related markets, and provided that the aggregate market share of the
participants of concentration on the relevant market does not exceed 15%. The
Competition Council, however, will be entitled to require a full concentration
notification if it determines that additional investigation of the notification
is necessary.
Legal effect of the Competition Council decisions
The amendments have exempted the Competition Council decisions from the general
principle of the Latvian administrative procedure according to which an appeal
of an individual decision by a state institution is suspending the entry in
force and application of the decision until the appeal procedures are completed.
The Competition Law is now explicitly providing that all Competition Council
decisions, except decisions on fines and penalties, are entering in force on the
date they are notified to the addressee and that their appeal does not suspend
their application and enforcement. Thus, the undertakings subject to Competition
Council’s decisions will now need to request the administrative courts to
suspend the Competition Council’s decisions while the appeal of the decision is
pending. In the present practice of the administrative courts these requests are
seldom granted.
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| For further information please contact
Dace Silava-Tomsone
(CV),
Partner at Raidla Lejins
& Norcous in Riga. |
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Lithuania
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Amendments and Supplements to the Law on
the Legal Status of Aliens |
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On 23 February 2008, the amendments and
supplements to the Law on the Legal
Status of Aliens of the Republic of
Lithuania adopted by the Lithuanian
Parliament (Seimas) on 1 February
2008 came into force. The modifications
are aimed at harmonizing national legal
acts regulating legal status of aliens
in Lithuania with the European Union
legislation on visas, migration and
asylum, including Schengen acquis.
The law implements Council Directive
2005/85/EC of 1 December 2005 on minimum
standards on procedures in Member States
for granting and withdrawing refugee
status and Council Directive 2005/71/EC
of 12 October 2005 on a specific
procedure for admitting third-country
nationals for the purposes of scientific
research. Consequently, Regulation (EC)
No 562/2006 of the European Parliament
and of the Council of 15 March 2006
establishing a Community Code on the
rules governing the movement of persons
across borders (Schengen Borders Code)
shall from now be applied to aliens who
arrive to or leave the Republic of
Lithuania, and Schengen Borders Code
shall be applied when establishing
grounds for refusing the alien admission
into the Republic of Lithuania. Among
other provisions of the new regulation,
new term of Schengen visa has been set,
types of Schengen visa indicated and
procedure of cooperation with other
Schengen states provided for, as well as
a new ground for issue and renewal of a
temporary residence permit (a temporary
residence permit is issued to an alien
who intends to carry out the scientific
research) and new grounds for expulsion
from the Republic of Lithuania.
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New Wording of the Law on Legal Protection
of Personal Data |
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On 1 February 2008, the
Seimas adopted a new
wording of the Law on Legal
Protection of Personal Data
of the Republic of
Lithuania. It will come into
force on 1 January 2009. The
law fully implements
Directive 95/46/EC of the
European Parliament and of
the Council of 24 October
1995 on the protection of
individuals with regard to
the processing of personal
data and on the free
movement of such data. The
new wording introduces a new
concept of visual
surveillance, supplements
the law by a new chapter
regulating cases of visual
surveillance, provides for
the conditions of the visual
surveillance at the
workplace, and establishes
requirements regarding the
installation of visual
surveillance devices and
requirements for notifying
the data subject of the
visual surveillance. The law
has also been supplemented
with a new chapter
regulating the submission
and investigation of
complaints about
acts/omissions by a data
controller. Among other
modifications, it has been
set that personal
identification number may
not be made public and may
not be processed for direct
marketing purposes even when
the consent of the data
subject is received.
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New Rules on Exemption of Undertakings
which are Parties to a Prohibited Agreement from Fines and Reduction
of Fines |
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On 9 March 2008, the Rules on
Exemption of Undertakings
which are Parties to a
Prohibited Agreement from
Fines and Reduction of
Fines, passed by the
Lithuanian Competition
Council on 28 February 2008,
came into force. This legal
act regulates the procedure
in accordance to which
undertakings that are
parties to a prohibited
agreement between
competitors (cartel) are
exempted from fines and the
fines are reduced. The rules
determine grounds for
exemption from fines and
reduction of fines,
regulates the submission of
application to the
Competition Council and
investigation of such
application. It is expected
that these rules should
stimulate undertakings’
confessing. This would help
to reduce harm caused by the
prohibited agreements to the
competition and consumers.
Such system should help to
detect existing cartels more
expeditiously and to prevent
possible cartels.
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| For
further information please contact
Irmantas Norkus, (CV),
Managing Partner at
Raidla Lejins & Norcous in Vilnius. |
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Finland
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New
Regulation Relating to Finnish
Disclosure Regime |
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The Finnish disclosure
regime has recently been
subject to new regulation in
the form of guide-lines
issued by the Finnish
Financial Supervision
Authority (the “FFSA”) and a
Government Bill relating to
proposed amendments to the
Finnish Securities Market
Act (the “SMA”). These
amendments relate both to
the regular and ongoing
reporting requirements of
issuers as well as to
obligation to disclose
holdings in issuers.
As regards the regular
reporting requirements of
issuers of listed
securities, the FFSA has
published new guidelines
relating to disclosure of an
issuer’s financial
performance on a regular
basis. The new guidelines
shall be applied to
financial statements and
other financial information
prepared for any financial
year ended 1 May 2008 or
later. The new guidelines
address the contents and
publication of issuers’
financial statements,
reviews by the Board of
Directors, results
announcements, interim
reports, interim management
statements and annual
summaries of published
information.
Further, the proposed
amendments to the SMA would
impose a statutory
obligation on issuers to
publish a report relating to
the corporate governance
regime applied by the
issuer. Such corporate
governance report would be
incorporated in the issuer’s
Board of Directors’ review
or could also be published
as a separate document.
Issuers have already had
such an obligation based on
the Corporate Governance
Recommendation issued by
Helsinki Stock Exchange, the
Central Chamber of Commerce
and the Confederation of
Finnish Industry and
Employers in 2003 but,
following the SMA amendments
the requirement imposed in
the SMA would be subject to
supervision by the FFSA. The
amendments to the SMA are
proposed to come into force
as of 1 September 2008.
In addition to guidelines
relating to regular
reporting requirements, the
FFSA has also issued new
guidelines relating to
ongoing reporting
requirements of listed
companies and disclosure of
holdings. The guidelines
entered into force on 1
March 2008. The purpose of
the renewal was to update
the guidelines based upon
the amendments in Finnish
laws resulting from the
implementation of the
Transparency Directive
(2004/109/EC) in early 2007.
As regards the ongoing
reporting requirements of
issuers of securities, the
main updates in the FFSA
guidelines relate to profit
warnings and future
prospects as well as to a
new recommendation for
issuers to prepare a
disclosure policy containing
rules on how the issuer
should communicate with the
market.
As regards shareholders’
reporting requirements, the
guidelines introduce the
FFSA’s new recommended forms
for reporting by
shareholders. The new forms,
currently available in
Finnish only, are based on
the forms previously issued
by the European Commission
to be used when disclosing
changes in holdings.
Further, the new guidelines
introduce amendments
relating to disclosure of
derivative contracts and
disclosure in connection
with arrangements resulting
into an increase of share
capital, such as issue of
option rights or convertible
bonds.
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Recent
Tax Related Case Law |
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The
Finnish Supreme Administrative Court (“KHO”) upheld the ruling of the Finnish
Central Board of Taxation (“KVL”) in its recent decision (KHO:2008:23) relating
to dividend distribution by a Finnish private company to a non-resident
shareholder. According to applicable tax treaty provisions, Finland had the sole
right to tax the dividend income as the funds were paid to and thereafter kept
on a Finnish bank account. The KHO stated that, pursuant to Articles 18 and 56
of the EC Treaty prohibiting discriminating taxation, the partial tax exemption
applied to dividend paid by a private company to a Finnish resident individual
should also be applied in the circumstances at hand involving a non-resident
recipient. Therefore, the amount of dividend not exceeding 9% annual return on
the current value of the shares was deemed tax-exempt up to EUR 90,000 per
shareholder, with 70% of the remaining amount being subject to 28% withholding
tax.
The
KVL has in its recent ruling KVL:2008/13 (not final) stated that provisions on
transfer pricing adjustment included in the Act on Tax Assessment Procedure were
not applicable in a situation, where shares belonging to the fixed assets of the
company, which could have been transferred tax-exempt under Section 6b of the
Finnish Business Income Tax Act (“BITA”) were transferred for a price below fair
market value. According to the KVL’s reasoning, the taxable profit of the
transferring company was not decreased nor the loss of such company increased as
a result of the underpriced sale in comparison to a situation, where the
transfer would have been carried out using fair market value pricing. Thus, the
KVL found no grounds for adjustment of the purchase price. In its ruling, the
KVL also explicitly stated that provisions on hidden dividend distribution were
not applicable due to that the possible adjustment of the purchase price fell
under the special provisions on transfer pricing adjustment between associated
companies.
In
another ruling KVL:2008/7 (not final), the KVL deemed that a Finnish company that
was fully owned by an international capital fund and the main purpose of which
was to act as a holding company, i.e. acquire and own the shares in a
subsidiary, shall be regarded as a capital investor for Finnish tax purposes.
Subsequently, as the aforesaid provisions on tax-exempt transfers of shares are
not applicable to shares held by a capital investor, the company was entitled to
deduct the possible loss incurred from the dissolution of its subsidiary.
In
its ruling KVL:2007/38 (final), the KVL confirmed that the tax-neutral treatment
of cross-border mergers within the EU shall be extended to a situation, where a
Finnish company is merged into its parent company resident in Iceland, a member
state of the European Economic Area (the “EEA”). KVL stated that though the
domestic tax provisions, which are based on the EC Merger Directive
(1990/434/EC) are, as a rule, applied only within the EU, taking into account
the articles of the EC Treaty and the EEA agreement relating to the right of
establishment, the principles of the said tax pro-visions must be applied also
to a cross-border merger involving an EEA Member State carried out in compliance
with the EC Directive on Cross-border Mergers (2005/56/EC) applicable within the
EEA. The wording of the ruling leaves it unresolved whether or not the same
treatment is to be applied also to other transactions falling under the EC
Merger Directive. Therefore, it is highly probable that this issue shall be
brought to KVL in the near future.
In
addition, the KVL has in its recent praxis taken a stand on the concept of an
independent business unit that may be transferred tax-neutrally in connection
with a partial demerger. The shares in three real estate companies owning
business premises leased mainly for the use of retail sale purposes were
regarded to form a transferable business unit taking into account that said
companies formed regionally and operationally a uniform object of lease
(KVL:2008/6, not final). The demerging company also had other real estate
holdings not transferred in the demerger. The aforesaid ruling differs from
prior praxis, in which the preconditions for transferring only a certain part of
a company’s real estate holdings into a separate company by use of a partial
demerger have been given a significantly more narrow interpretation.
In
another KVL ruling involving a partial demerger, securities trading activities
consisting of an investment portfolio of the value of EUR 2 million was regarded
to form a transferable business unit taking into account that the securities
trading activities differed from the remaining operations of the company and
formed a substantial part of the company’s assets (KVL:2007/37, not final).
Meanwhile, the manufacturing of construction supplies was not regarded to form
an independent business unit taking into ac-count that product design and sales
as well as the machinery and facilities required for manufacturing the supplies
were to remain in the transferring company (KVL:2007/40, final).
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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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Implementation
of the EU
Cross-border Mergers
Directive in Sweden |
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In February
2008, a new set
of harmonized
rules on
cross-border
mergers was
introduced in
Sweden. The new
set of rules is
intended to
facilitate the
procedure
for, in
particular,
small to medium
sized companies
that wish to
complete a
cross-border
merger within
the EEA and aims
at creating the
necessary tools
for the involved
companies to
reduce costs and
legal risks that
historically
have been
associated with
cross-border
mergers.
Directive
2005/56/EC on
cross-border
mergers of
limited
liability
companies (the
“Directive”) was
implemented by
way of amending
and
supplementing
the rules on
national mergers
in the Swedish
companies act.
Furthermore, the
Directive
specific
provisions on
employee
participation
with regard to
cross-border
mergers have
been implemented
partly through a
new act on
employees’
participation in
conjunction with
cross-border
mergers (Sw: lag
om arbetstagares
medverkan vid
gränsöverskridande
fusioner),
partly through
amendments to
existing
provisions on
employee
participation.
The new set of
rules entered
into force on 15
February 2008.
Companies have
been able to
carry out
cross-border
mergers based on
the ECJ
SEVIC-judgment
(C-411/03) since
2003 and the
possibility to
utilize a
European company
(“SE”) since
late 2005.
However, such
mergers were
associated with
substantial
legislative and
administrative
difficulties as
well as almost
prohibitive
costs, which
generally
resulted in
alternative
structures such
as business
transfers
followed by a
winding-up
procedure.
Hence, the
purpose of the
Directive is to
prevent national
laws from
forming such
obstacles,
aiming at
creating a legal
instrument which
enables
companies from
different member
states to carry
out cross-border
mergers under
the most
favorable
conditions.
The basic
principle of the
Directive is
that mergers
shall be
governed in each
member state by
the principles
and rules
applicable to
"domestic"
mergers, except
where there are
other
requirements due
to the
cross-border
nature of the
operation.
Accordingly, the
amended Swedish
acts state that
most of the
current
provisions on
domestic mergers
between
companies in
Sweden (e.g.
rules relating
to the
applicable
decision-making
process and the
protection of
affected
creditors,
shareholders and
employees) apply
also to
cross-border
mergers with the
supplement of a
number of
provisions
specific to
cross-border
mergers.
Moreover, the
Directive states
that
verification of
the pre-merger
procedures of a
cross-border
merger will be
the
responsibility
of the competent
national
authorities,
which in Sweden
would be the
Swedish
companies
registration
office.
The new legal
framework on
cross-border
mergers applies
to both public
and private
limited
liability
companies as
well as to any
type of merger,
whether done by
way of an
acquisition of
one company into
another
(absorption), by
an acquisition
of a wholly
owned subsidiary
by its parent
company
(subsidiary
merger) or by
the creation of
a new company
(combination),
between two or
more companies
within the EEA.
In each case,
there must be a
genuine
cross-border
element to the
merger, i.e. at
least one of the
companies
involved shall
be governed by
the laws of
another member
state.
The cross border
merger procedure
(irrespective of
the type of
merger) could be
divided into
three phases;
phase 1 −
registration of
the merger plan,
phase 2 −
implementation
of the merger
plan and phase 3
− completion of
the cross-border
merger. The
procedure and
regulatory
frame-work in
relation to
phases 1 and 2
of a
cross-border
merger are
essentially the
same as for a
domestic merger,
with only a few
administrate
differences with
regard to the
documentation
requirements
(e.g. the
requirement of
certain minimum
items of
information to
be included in
the common draft
terms of the
merger as well
as of a board
report and an
independent
expert report on
the merger).
Moreover, the
Swedish company
involved in the
cross-border
merger (whether
as acquiring or
acquired
company) is
responsible for
translating any
documentation to
Swedish before
submission to
the Swedish
companies
registration
office for
registration.
The cross-border
element is
apparent in
phase 3. During
this phase,
substantial
contacts between
the Swedish
companies
registration
office and the
relevant foreign
equivalent
competent
authority need
to take place,
e.g. each
competent
authority shall
issue a
pre-merger
certificate,
attesting to the
proper
completion of
all pre-merger
acts and
formalities of
the company
governed by the
laws of its
member state. In
total,
completion of a
cross-border
merger procedure
should, in a
best case
scenario, take
approximately
four months.
Special rules
with regard to
employment
participation
apply to
cross-border
mergers.
Employee
participation
was one of the
main issues at
stake during the
adoption of the
Directive, given
the widely
diverging
systems in force
in member
states. The act
on employees’
participation in
conjunction
with
cross-border
mergers requires
that a process
of employee
participation be
initiated upon
registration of
the common draft
terms of the
merger with the
Swedish
companies
registration
office. The
merging
companies shall
form a special
negotiating body
which is
responsible for
the safeguard of
the employee
participation
right during the
course of the
merger
procedure. The
merging
companies can
decide to
initiate
preparatory
negotiations
with the
negotiating body
aiming at
reaching an
agreement on the
employee
participation.
Should an
agreement not be
reached or
should the
merging
companies decide
to omit
preparatory
negotiations,
the merging
companies shall
apply the
standard rules,
in accordance to
which the
highest level of
participation in
any of the
merging
companies’
jurisdictions
applies.
Naturally, this
requirement does
not apply in
relation to
merging
companies with
no employees,
e.g. holding
companies used
as acquisition
vehicles.
As of today,
only one
cross-border
merger has been
registered with
the Swedish
companies
registration
office. It
remains to be
seen what impact
the new
legislative
framework on
cross-border
mergers will
have on future
restructurings.
While the
European company
statute aims at
providing
companies that
need to
reorganize their
business on a
Europe-wide
scale with the
necessary tools
for cross-border
restructurings,
the new
harmonized rules
on cross-border
mergers will
most likely
benefit small
and medium-sized
companies that
want to operate
in more than one
member state,
but not
throughout
Europe, and thus
are not likely
to seek
incorporation
under the
European company
statute.
For further
information on
cross-border
mergers please
contact
Ola Åhman (CV),
Partner at
Roschier in
Stockholm.
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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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