It is safe to conclude that the newly introduced legislation has brought a breath of fresh air into the law of business corporations. It leaves entrepreneurs a greater space to consider the various possibilities how to set up their business and prepare it better for future growth.
New types of shares bring new opportunities for businesses
The current law allows you to create a business share with varying degrees of profit based on the share. This means that one shareholder can be entitled to a higher share of the profit, whereas another could have no share of the profit at all. As of 2021, however, it will also be possible to create a share without voting rights or attach a right to appoint a managing director to the share. Such arrangements are typically made under Shareholders’ Agreements at the moment but enshrining these rules in the Articles of Associations significantly increases their transparency and enforceability. The amendment has thus taken a significant step to broaden the potential of limited liability companies for investment projects in the form of joint ventures.
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Relaxing the rules for the distribution of dividend payments
The amendment also confirms an existing decision of the Supreme Court which states that company profits can be distributed throughout the whole year following the financial statements relating to the previous accounting period. Thus, it will be possible to distribute profits during the entire year of 2021 based on the financial statements prepared as of December 31, 2020. Of course, it is still the general meeting who decides on the distribution of profits. The profit payment is then executed by the managing director who must make such a decision with due care to avoid bankrupting the company.