Financing of the company by the founders through loan

Contracting and implementation of the loan to the company from the founders is almost entirely governed by the provisions of the Law on Contracts and Torts.

The Companies Act in the part Additional Payments and Loan to the Company (Articles from 178 to 181) prescribes manner of esblishing the additional payment obligation, consequences of failure to make addititonal payment and return of the additonal payments, but does not provide specific rules relating to the loan. Provisions of the Companies Act which regulate payment limitations to the company’s founders, approval of a transaction in which there is personal interest and company’s share capital increase contain norms that are important for the contracting and implementation of loan.

The Law on Cotract and Torts doesn’t impose restrictions when it comes to the conclusion of the loan contract and the lender can be both as a business entity and natural person. According to the provisions of Article 557 of the Law on Contract and Torts by a loan contract the lender shall assume the obligation to transfer ownership to the borrower of a specific amount of money or other interchangeable objects, while the borrower shall assume the obligation to restitute after a certain time to him the same amount of money, or same quantity of objects of the same kind and quality. Continue reading Financing of the company by the founders through loan

Company’s legal form change

Company may change its legal form under the conditions and procedure which have been prescribed by the provisions of Articles 478 to 482 of the Companies Act.

Concept of a Legal Form Change

By changing the legal form, a company converses from one legal form into another legal form, in accordance with Companies Act.

The change of the company’s legal form does not affect the legal personality of that company.

The provisions of the Companies Act governing establishment of a form of a company apply mutatis mutandis to the change of a legal form of the relevant company, unless this Act stipulates otherwise. Continue reading Company’s legal form change

Status changes according to the Law on Business companies – concept and types

Concept of a Status change:
A company in a status change – the transferring company reorganizes itself to the effect that it transfers assets and obligations to another company – the recipient company, while its members acquire shares, i.e. stocks in that company.

The essence of the status change is manifested in the following two important elements:

  • transfer of assets and obligations – without the transfer of assets and obligations from one company to another status change does not exist. This is achieved by universal or singular succession.
  • proportional conversion of stocks and shares – All members of the transferring company acquire shares, i.e. stocks in the recipient company pro rata to their shares, i.e. stocks in the transferring company, unless:
    – each member of the transferring company agrees that the status change establishes a different ratio for such conversion of shares, i.e. stocks, or
    – a member of the transferring company who dissented from the decision on status change exercises his right to payment instead of the acquisition of shares, i.e. stocks in the recipient company, whereas the buy-back price of his stocks is determined by the decision on status change Continue reading Status changes according to the Law on Business companies – concept and types