Chapter 7-4

Page 2: Limited Liability Company

Basic Structure

• Composed of two or more persons.

• Registration can be granted for a single-person Limited Liability Company (L.L.C.).

Page 3: Liability

Company vs. Shareholder Liability

• Company’s liability is independent of the shareholders.

• Company’s assets cover its debts; shareholder liability is limited to their share.

Page 4: Company Capital

Capital Restrictions

• L.L.C. cannot offer shares for public subscription.

• Cannot increase capital or borrow via subscription.

Page 5: Company Title

Naming Regulations

• Name must reflect objectives; must include "Limited Liability Company" or "L.L.C."

• Company name, capital, and registration number required on all materials.

• Existing partnership names can be retained upon conversion to L.L.C.

Page 6: Registration Procedures

Application Submission

• Must include Articles and Memorandum of Association, signed before authorized individuals (Controller, Notary, or licensed lawyer).

Page 7: Memorandum of Association Requirements

Essential Inclusions

• MCompany Management:
  The rules outline how the company is managed, the number of people on the Management Committee, and their responsibilities. This includes limits on borrowing money, using company assets as collateral, and guaranteeing others, ensuring all actions align with the company’s goals.

• Transferring Shares:
  There are specific conditions and steps for transferring shares, including how the transfer should be documented and completed.

• Profit and Loss Distribution:
  The guidelines explain how profits and losses will be shared among shareholders, ensuring clarity and fairness.

• Meetings:
  The rules describe how meetings for shareholders (General Assembly) and the Management Committee will be held, the number of participants needed to make decisions (quorum), and the process for organizing and inviting attendees.

• Company Liquidation:
  If the company needs to close down, there are rules and procedures in place to guide the process.

• Additional Information:
  Shareholders can provide extra details, or the Controller may request additional information, which must be included as part of the rules.

Page 8: Capital Contributions

• In kind shares Article 58:

• Registration of contributions as capital noted in Article 59.

Page 9: Company Management

Management Structure

• Managed by a committee of 2 to 7 members, including shareholders.

• Must abide by the Memorandum of Association for 4 years.

• Election of chairman and managerial authority.

Page 10: Manager Responsibilities

Management Powers

• Manager's Authority:
  The manager or management committee can fully manage the company as long as they follow the rules in the Memorandum of Association.

• Binding Decisions:
  Any decisions or actions by the manager or management committee are legally binding on the company when dealing with people who act in good faith, even if there are restrictions in the company’s rules.

• Good Faith Rule:
  People dealing with the company are assumed to be acting in good faith unless proven otherwise. They don’t need to check if the manager’s authority has any restrictions.

Page 11: Manager Accountability

Responsibilities

• Managers must comply with laws, regulations, and internal agreements.

• Accountable to shareholders and the company for violations.

Page 12: Managerial Duties

Financial Oversight

• Prepare annual financial statements, including balance sheets and cash flow statements, audited per international standards.

Page 13: Prohibitions for Managers

Conflict of Interest

• Cannot hold competitive positions or manage competing businesses without General Assembly approval.

• Requires a 75% majority vote for participation.

Page 14: General Assembly Overview

Structure

• Comprises all shareholders.

Page 15: General Assembly Meetings

Annual Meetings

• Must hold one annual meeting upon the invitation of the management committee in a specified date and place; shareholders can attend and vote.

• Delegation of voting rights allowed.

Page 16: Extraordinary Meetings

Conditions for Calling Meetings

• Shareholders' Request:
  If shareholders owning at least 25% of the company’s capital request a meeting, and a copy of the request is sent to the Controller.

• Controller's Request:
  If the Controller receives a request from shareholders owning at least 15% of the company’s capital.

Page 17: Meeting Notifications

Invitation Requirements

• Shareholders notified 15 days prior to meetings via registered mail or hand delivery with required documentation.

Page 18: General Assembly Quorum

Quorum for Ordinary Meetings

• First Meeting Quorum:
  An ordinary meeting is valid if shareholders representing more than 50% of the company’s capital (50% + 1 share) attend, either in person or by proxy.

• If Quorum is Not Met:
  If this quorum is not reached within one hour of the scheduled time, the meeting is postponed to another date within 15 days. Absent shareholders must be notified.

• Second Meeting Quorum:
  At the second meeting, the quorum is valid regardless of the number of shareholders present or the percentage of shares they own.

Page 19: Quorum for Extraordinary Meetings

Quorum Rules

• First Meeting Quorum:
  An extraordinary meeting is valid if shareholders holding at least 75% of the company’s capital attend, either in person or by proxy, unless the Memorandum of Association requires a higher percentage.

• If Quorum is Not Met:
  If this quorum is not reached within one hour, the meeting is postponed to another date within 10 days. Absent shareholders must be notified.

• Second Meeting Quorum:
  The second meeting is valid if shareholders holding at least 50% of the company’s capital attend, either in person or by proxy, unless a higher percentage is required by the Articles of Association.

• If Second Quorum is Not Met:
  If the second meeting does not meet the required quorum, the meeting will be canceled regardless of the reason for calling it.

Page 20: Ordinary Assembly Agenda

Standard Agenda Items

• Discuss manager reports, approve financial statements, and elect managerial positions.

Page 21: Extraordinary Assembly Agenda

Special Agenda Items

• Includes amendments, capital adjustments, liquidation, and discharge of managers.

Page 22: Decision-Making Process

Voting Requirements

• Ordinary decisions are made by a majority of participating shares unless Comapny Memorandum of Association provides a greater majority (50+1 share of attendees)

• Extraordinary decisions require at least 75% of the time unless the Company Memorandum of Association provides for a greater majority.

Page 23: Reserves

Profit Deduction Regulations

• Statutory Reserve:
  The company must set aside 10% of its annual net profits each year for a statutory reserve. This continues until the reserve equals the company’s total capital.

• Voluntary Reserve:
  The General Assembly may decide to set aside up to 20% of the annual net profits for a voluntary reserve. This reserve can be used for the company’s purposes or distributed as profit among shareholders if not used.

Page 24: Share Transfers

Right of First Refusal

• Selling Shares:
  If a shareholder wants to sell shares, they must tell the manager or Management Committee the price and number of shares they want to sell.

• Notifying Other Shareholders:
  The manager or Management Committee must notify the other shareholders within a week about the sale, either by hand or by registered mail.

• Right to Buy:
  Other shareholders have the first chance to buy the shares at the offered price.

• Informing the Controller:
  The manager or chairman must inform the Controller about notifying the shareholders. If they don't, they are responsible for any harm caused.

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Page 25: Applicability of Public Company Laws

Compliance

• Public Shareholding Company regulations apply to L.L.C.s where no specific L.L.C. provision exists.