Interim Dividends Payment Process and Conditions

The Law stipulates that shareholders having more than 1/3 votes of the company (if the Articles of Association of a company do not stipulate higher threshold) may initiate payment of interim dividends. After receiving a shareholders’ application, the management of the company shall ensure that the interim financial statements and interim report of the company would be prepared. Moreover, if the annual financial statements shall be audited according the laws and/or Articles of Association of the company, the interim financial statements shall be also audited.

The Law defines obligations of other management organs too: the Board analyses and evaluates the interim financial statements and the draft decision of shareholders concerning payment of interim dividends and submit it to the Supervisory Board. The Supervisory Board should present its opinion to General Meeting of Shareholders by providing suggestions on the draft decision on the allocation of dividends. Thus the Legislator intends to ensure that there would be adopted reasonable decision which would not threaten to further company’s operations and shareholders’ interests. However, it should be noted that neither the Board’s nor the Supervisory Board’s opinion or recommendation to shareholders may not restrict the shareholders to allocate dividends. Therefore the Law imposes additional conditions which shall be met in order to allocate interim dividends.

The Law stipulates that the beginning of that period of interim dividends would coincide with the beginning of the current financial year of the company. Also the dividend payment decision-making process can not be longer than 3 months. In addition, the repeated interim dividends may be appointed not earlier than after 3 months. With all those limitation the Legislator seeks to prevent abuse of the interim dividends when dividends are paid only for period during which the company was profitable although latest company’s results are negative.

In addition, it is required that the company would be profitable during the interim period. Therefore companies which although have accumulated undistributed profits but operate at a loss during the reporting period, may not pay interim dividends. This provision is essentially designed to prohibit dividend payment for loss-making companies which have accumulated undistributed profits for the previous periods.

Practical issues

The requirements for interim dividend payment procedure are extremely strict and the initiative is reserved only to the shareholders having not less than one third of total votes. The company itself can not initiate the payment of interim dividends and only after shareholders’ request shall ensure that interim financial statements are prepared and General Meeting of Shareholders is properly convened.

Therefore, companies seeking to pay, for example, dividends on a quarterly basis, should not only prepare quarterly (audited) financial statements, but in each case convene a General Meeting of Shareholders and a decision on interim dividends shall be adopted by qualified majority vote, what makes regular payment of interim dividends unattractive. Therefore it is hard to expect that companies in Lithuania will pay regular interim (semi-annual, quarterly) dividends, as it is usual in USA or UK.

Interim dividends, in terms of the Law on Companies of the Republic of Lithuania, are not identical to the interim dividends, which are common in countries like the UK or USA.  Unlike Lithuania or Germany, the USA and UK dividend payment is allocated exclusively to the company’s management, due to this there is no requirement in each case of the payment of dividends to convene a General Meeting of Shareholders and get its approval. This is based on the fact that the company’s management has fiduciary duties to shareholders and it works exclusively for their and the company’s interests; moreover the dividend payout is only one of the alternative ways of investing company funds. Theoretically the dividends should be paid only if the shareholders could use the funds more profitable than the company itself. Therefore, the dividends are usually associated with well-established companies, while newly established and rapidly growing companies do not pay dividends and dedicate all the money to the further development of business.

Since the dividend payout process in the USA and UK is simpler, it allows companies to pay regular interim dividends. Meanwhile it is most likely that in Lithuania companies will use the interim dividends only in those cases, when revenues from a non-primary activity, for instance, the sale of a part of the business, are received  and thus distribution of the profit to shareholders would be done without waiting for the end of the financial year (aka. Special dividends). Meanwhile, it would be rather difficult to expect regular interim dividends in Lithuania.

The general bases and principles of granting the European Union blue card are set forth in the respective EU Directive. According to the Directive all highly qualified employees and their family members should have an easy and quick option to obtain a residence permit – the European Union blue card. However, despite this being a good idea, applying for a blue card is actually somewhat more difficult than one could expect.

Is applying for a blue card easier than applying for an ordinary residence permit?

In short – it is not. Applying for a European Union blue card is actually more difficult and time-consuming than applying for the so-say ordinary residence permit. This is probably the reason why it’s not a very attractive option.

Namely, in order for a potential employee to be able to apply for the European Union blue card, the employer must have entered into an employment contract with the potential employee for at least 1 year or made the potential employee a binding offer to employ him/her for at least a year even before the application is filed. As the job or position that the employer wants to fill by hiring a non-EU national must require a higher qualification, it means that the procedure for recognition of the non-EU national’s professional qualifications must be completed before he/she applies for the permit.

Does the European Union blue card make recruiting non-EU nationals easier?

However, despite the somewhat bureaucratic nuances, the European Union blue card also has some positive sides. Unlike an application for an ordinary residence permit, the application for a European Union blue card can be filed here in Estonia, in the local service unit of the Citizenship and Migration Bureau. Also, the holder of a blue card may be unemployed for a short period of time without their residence permit becoming invalid. It is also positive that if the holder of a blue card has lived in Estonia on the basis of a blue card for at least two years, he/she doesn’t have to apply for a new residence permit when he/she starts working for another employer.

All in all, although applying for a European Union blue card and the application procedure may seem more complicated and bureaucratic, I advise to be more active in using this option with regards to hiring highly qualified potential employees.

Blue card holders do not have to apply for a new residence permit if they change jobs. This is particularly important if the new employer is interested in the non-EU national starting to work for them as soon as possible, which in the usual situation may not be possible due to the lack of a residence permit. I believe that in the long term, it will favour the employment of highly qualified non-EU nationals in Estonia.

However, before you recruit an employee from a non-EU country, make sure that you understand the procedure of employing them and ask for professional advice if necessary. We are happy to help you with this any way we can.

The European Commission and the European Council have already approved ACTA. The European Parliament is still in progress of debates on it. A number of member states have suspended ratification of the treaty due to public protests.

This EC decision means that ACTA’s ratification will be significantly delayed.

The court of first instance imposed a fine on a certain café for the public broadcast of a radio programme without the licence of AKKA/LAA, which represents the interests of authors. The company allegedly had the permit of the Latvian Association of Performers and Producers (LaIPA). The defendant appealed the imposed fine. The court of second instance resolved that, in the case under review, it was the relevant radio programme itself that used the authors’ work and ensured public performance thereof, which means that the user of the author’s work is not café, but rather the radio. The court applied the following argumentation – the café is not scheduling the repertoire broadcasted by the radio and is not in the position to provide information regarding authors or titles of broadcasted works, but it could do it, if it would itself broadcast a certain phonogram on site.

The Copyright Law does not impose an obligation on the user of neighbouring rights to request permit from the representative of copyright holders. The judgment states that the representative of the property rights of neighbouring right-holders is LaIPA (representing performers, phonogram producers and also broadcasting), whereas the operator of public premises (in this case – café) is the user of the neighbouring rights. Subsequently, the court decided that the permit shall be obtained from the representative of the owners of neighbouring rights.

The particular court judgment contributes to the uncertainty prevailing in Latvia with respect to the use of copyright / neighbouring rights and determination of tariffs for the use thereof. There have already been several disputes in the public domain between collective representation organisations of copyright / neighbouring rights, producers of radio / TV programmes and cable tv operators regarding the scope, tariffs and other conditions for the use of rights. Latvian Information and Communications Technology Association has addressed the Ministry of Culture with proposals for amending the Copyright Law.

-    real estate is owned or co-owned abroad
-    real estate or parts thereof are owned in Latvia, ownership to which is not registered according to legislative acts of the Republic of Latvia and the total value of which exceeds 10,000 LVL;
-    transport vehicle (mechanical land or marine transportation vehicle) or aircraft is owned or co-owned abroad;
-   shares with total acquisition value above 10,000 LVL are owned in Latvia;
-    shares are owned abroad;
-    financial instruments with total acquisition value exceeding 10,000 LVL are owned in Latvia;
-    financial instruments are owned abroad;
-    total amount of money savings (cash and non-cash) in Latvia and abroad, or only in Latvia, or only abroad exceeds 10,000 LVL;
-    total amount of financial means accrued in private pension funds or life assurance contracts (with accruals) in Latvia or abroad exceeds 10,000 LVL;
-    has outstanding loans (debt) or other liabilities with unpaid share exceeding 10,000 LVL;
-    a person in Latvia or abroad has issued loans or has other claims with outstanding share exceeding 10,000 LVL;
-    owns other property (object or set of objects) in Latvia or abroad with value exceeding 10,000 LVL in person’s own view;
-    a person is true beneficiary from shares or financial instruments owned or managed by other person, if total acquisition value of such property exceeds 10,000 LVL;

The declaration of financial standing should reflect situation as at 24:00 of 31 December 2011.

When submitting declaration of financial standing, persons can voluntarily declare income tax taxable income gained in the period from 1 January 1999 to 31 December 2007. Reduced individual income tax of 15% is applied to such income.