As entrepreneurs, its lawyers point out that such amendments create a fertile ground for potential cases of company raiding, and also express concern that the said amendments to the law can be used to push a company or even the entire business out of the market.
On Tuesday, October 29, the Legal Commission of the Saeima decided to review the amendments to the law proposed by TM, which provide for the management of capital shares of seized companies to be entrusted to a manager authorized by the government, on Tuesday, October 29, in three readings, and not as a matter of urgency, as TM wanted. Andrejs Yudins (JV), head of the Legal Commission of the Saeima, stated during the session that the amendments prepared by the Ministry of Justice to the “Criminal Procedure Law” and “Enforcement of the Confiscation of Criminally Obtained Property” should not be considered as a matter of urgency, as certain objections were received against it, including from the Council of Sworn Advocates of Latvia.
LZAP points out that the current version of the amendments shows significant shortcomings, which in the course of applying the proposed norms could lead to an unjustified violation of the fundamental rights of persons involved in criminal proceedings. “The Bar Council submitted its proposals and in fact they are based on the fact that there should be supervision, not takeover,” says LZAP member, sworn lawyer Saulvedis Vārpiņš. “The company is not protected from the fact that it will not be taken over in this way – raiding. Because the competition is strong enough, the business spheres are divided and, by artificially achieving the initiation of criminal proceedings, the company in question, even the entire business, can actually be pushed out of the market.
LDDK president Andris Bite also stated to the LETA agency that LDDK superficially sees potential threats in this regulation. “In a situation where it is quite easy to initiate criminal proceedings or criminal cases against individuals, an unspoken, unclear and uncoordinated system poses a threat to future patterns of raiding. [..] Someone can come, file a fictitious case and take over the management of the company, because no one in this world is safe from criminal proceedings. Therefore, in order to prevent the risk of the amendments being used to take over the company and destroy it or hand it over to others, a very clear system must be in place,” emphasizes Bite.
“The manager of seized capital shares (shares) or shares takes the place of a member (shareholder) of a capital company or a member of a cooperative society with all his rights and obligations provided for by law, except for the right to receive dividends,” the amendments provide. On the other hand, LZAP states that in this way the manager appointed by the promoter of the process would have the right, using the voting rights of the shareholder or participant, to make decisions on amending the statutes, reducing or increasing the share capital, electing and removing members of the board and council from office, on the reorganization of the company’s operations, on concluding the group agreement , amendment or termination.
The former head of the Register of Enterprises, Ringolds Balodis, says: “You have to be a naive vientie or a sophisticated crocheter of raiding schemes to believe that the “improvements” of such a criminal process are not a threat to any economically active citizen of Latvia. Especially knowing how easily criminal proceedings can be initiated in our country…”
On the other hand, Saulvedis Vārpiņš emphasizes how extremely big a problem the long terms of investigation and trial create. “Taking over a company’s business for, say, three, five or even ten years effectively destroys that business. This is too great a restriction of the right to property.”
Interview between Time.news Editor and Legal Expert Saulvedis Vārpiņš
Editor: Good morning, Saulvedis. Thank you for joining us today at Time.news to discuss the recent amendments to the law proposed by the Ministry of Justice.
Saulvedis Vārpiņš: Good morning! Thank you for having me. It’s an important topic, and I’m glad we can address it.
Editor: The amendments suggest that the management of capital shares from seized companies be turned over to a government-authorized manager. Why has this raised concerns among legal professionals and business leaders?
Saulvedis Vārpiņš: This proposal is concerning for several reasons. Foremost, it introduces a framework that might lead to what we could label “company raiding.” If an individual can initiate criminal proceedings against a company or its executives, they could effectively gain control of the company’s management through these newly crafted provisions. We are in a competitive market; such an action could potentially push companies out of business through artificial means.
Editor: That’s a significant concern. Can you explain what specific shortcomings are noted in the current version of the amendments that might facilitate this company raiding?
Saulvedis Vārpiņš: Certainly. Currently, the amendments allow a manager of seized shares to act as a member of the company and exercise all related rights, except for receiving dividends. This doesn’t offer sufficient protection for the involved parties. Without stringent supervision mechanisms, a nefarious actor could exploit the system by initiating frivolous or fictitious criminal proceedings, allowing them to take over a company while bypassing its legal protections.
Editor: It sounds highly precarious. The president of LDDK, Andris Bite, echoed similar sentiments, suggesting that the lack of clarity in the system raises the risk of raiding. Do you agree with his assessment?
Saulvedis Vārpiņš: Absolutely. The absence of a clear, coordinated framework renders companies vulnerable. We need a well-defined process that protects businesses from being grabbed by those who might misuse the legal system. If a clear system isn’t mandated, there’s nothing stopping someone from leveraging these legal amendments to their advantage.
Editor: So, in your opinion, what should be done to mitigate the risks you’re describing?
Saulvedis Vārpiņš: The amendments should focus on establishing oversight rather than giving control to potentially unverified managers. Involving regulatory bodies to oversee this process would help ensure fair practices and protect the integrity of businesses. Additionally, there needs to be a clear delineation of what constitutes misuse of the legal claim to prevent exploitation.
Editor: It seems like a careful balancing act between enforcement and protection of business rights. As the Legal Commission of the Saeima has decided to review these amendments further, what do you hope to see from this discussion?
Saulvedis Vārpiņš: I hope to see a thorough examination of the proposed measures and the concerns raised by the legal community, including the Bar Council. The focus should remain on the rights of the individual and the businesses involved. Legislators must consider the ramifications of these amendments before they can be enacted, ensuring they protect rather than endanger the business environment.
Editor: Thank you, Saulvedis. That’s a critical insight into navigating legal implications versus business integrity. We appreciate your expertise and look forward to following this discussion as it develops.
Saulvedis Vārpiņš: Thank you for the opportunity. It’s crucial to keep the conversation going and raise awareness of these issues.
Editor: And that’s a wrap on today’s interview. We encourage our readers to stay informed about these important issues affecting the business landscape. Thank you for tuning in to Time.news.