During the development of the draft law, SIA “Possessor”, supervised by the Ministry of Economy, has agreed to take on the functions of such a manager.
However, the procedures for managing the seized capital shares and what the manager’s responsibility would be, including in cases where the managed companies lose value, have not yet been developed. It is also not clear whether and how the “Possessor” could change the officials of the companies transferred to its management.
At the same time, the draft amendment envisages that the state could sell the seized capital shares if the manager felt that the capital shares could lose their value. This would also require the consent of the owner of capital shares.
Work on the amendments began at the beginning of 2022, when the government examined the report in a closed session on the management and evaluation of the property seized in the case of the former Ventspils mayor Aivars Lembergs (“For Latvia and Ventspils”). At that time, the police had started criminal proceedings for the conduct of Rudolf Meroni in managing Lemberg’s property.
However, over several years, TM has not succeeded in achieving inter-institutional agreement on the developed regulatory act, so that it could be examined in the Cabinet of Ministers and forwarded to the Saeima in the usual order. Therefore, TM has called on Saeima Legal Commissions to advance the amendments as their proposal, and to do so as a matter of urgency.
The Legal Commission will decide on the direction of the amendments in the Saeima on Tuesday, October 29.
TM explains that the amendments are necessary to eliminate gaps in the laws related to the seizure of capital (shares) or shares. Currently, the law allows the initiator of the process, imposing a seizure on capital shares, to demand that the company or cooperative transfer all funds to the specified account. It also prohibits the alienation or encumbrance of the seized equity.
However, in the absence of a way to manage the seized capital shares, which can lead to a decrease or loss of their value, explains TM. In the future, this may make it difficult to recover procedural costs and compensation for damage, return of criminally obtained property to the owner, confiscation of criminally obtained property, and confiscation of property as an additional penalty.
Therefore, it is proposed to introduce a new article in the Criminal Procedure Law, which will determine that the seized capital shares (shares) or shares will be transferred to management in order to monitor them and preserve their value.
The new article provides that the initiator of the process, by imposing a seizure on capital shares, can transfer them to the manager appointed by the Cabinet of Ministers for management. Before making this decision, the promoter of the process can consult with the manager about the usefulness of the decision. In the pre-trial process, this decision would be approved by the investigating judge.
It is intended to establish that the manager of the seized capital shares must inform the initiator of the process about the risk that the shares could lose their value. On the other hand, the initiator of the process, upon receiving such information, with the consent of the owner or legal possessor of the seized capital shares, will be able to make a decision on the sale of the capital shares in accordance with the procedures established by the Cabinet of Ministers.
The Cabinet of Ministers will also have to determine the procedure for managing seized capital shares and the procedure for calculating and covering management expenses, as well as the extent of the manager’s responsibility.
The amendments are also intended to determine the cases when capital shares are not transferred to management. These cases are said to be intended to avoid situations where management costs would exceed the value of the seized capital shares.
It is proposed to establish that capital shares are not transferred for management if the company or cooperative was created or used for criminal purposes and does not carry out real economic activity. This point applies to cases where the company is created, for example, to launder the proceeds of crime. The criteria are cumulative, that is, the company must be both related to criminal activity and not perform real economic activity.
During the development of the draft law, negotiations have been held with the “Possessor”, which has conceptually agreed to undertake the task of managing the seized capital shares.