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LAW ON BUSINESS COMPANIES

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L A W O N B U S I N E S S C O M P A N I E S (Published in the Official Gazette of the Republic of Serbia No. 125/04.) (Table of contents provided – not part of published law) PART ONE GENERAL PROVISIONS (Articles 1-47) PART TWO ENTREPRENEUR (Articles 48-52) PART THREE LEGAL FORMS OF BUSINESS COMPANIES (Artic les 53-346) General Partnership (Articles 53-89) Limited Partnership (Articles 90-103) Limited Liability Company (Articles 104-83) Joint Stock Company (Articles 184-346) PART FOUR LIQUIDATION OF BUSINESS COMPANIES (Articl es 347-65) PART FIVE LINKED BUSINESS COMPANIES (Articles 366-7 6) PART SIX REORGANIZATION OF BUSINESS COMPANIES (Articles 377-451) Status Change (Merger, Division or Separation) (Art icles 377-425) Change of Legal Form (Articles 426-41) PART SEVEN ACQUISITION AND DISPOSAL OF MAJOR ASSETS (Articles 442-43) PART EIGHT SPECIFIC RIGHTS OF SHAREHOLDERS AND MEMBERS TO DISSENT (Articles 444-49) PART NINE PENALTY PROVISIONS (Articles 450-5 1) PART TEN TRANSITIONAL AND FINAL PROVISIONS (Article s 452-57) L A W O N B U S I N E S S C O M P A N I E S (Official Gazette, Republic of Serbia, No. 125/2004) PART ONE GENERAL PROVISIONS Chapter 1 Basic Principles Article 1 Scope of This Law This Law shall regulate the founding of business co mpanies and entrepreneurs, the managing of business companies, the rights and obli gations of founders, partners, members and shareholders of business companies, the linking and reorganization (status changes and changes of legal form, reorganization) of business companies, the cessation of business of entrepreneurs, and the liquidation of business comp anies. Article 2 Definition and Legal Forms of Business Companies (1) A business company is a legal entity which is found ed by legal entities and/or natural persons by Articles of Association for the purpose of conducting activities with the aim of gaining profit. (2) The legal forms of business companies under this La w are general partnership, limited partnership, limited liability company and joint st ock company (open and closed). (3) In addition to the legal forms of business companie s stated in paragraph (2) of this Article, specific other laws may prescribe other fo rms of companies or enterprises. Article 3 Branches of a Company (1) A business company, domestic or foreign, may es tablish one or more branchA branch is an organizational part of a company which does not have the capacity of a legal entity. A branch has a business location and authorized repre sentatives, and conducts business with third parties in the name of and on behalf of the c ompany. (2) A branch of a company must be registered as require d by the law which regulates registration of business entities. Article 4 Duration of a Business Company A business company is founded for an unlimited dura tion, unless the Articles of Association states that the company will exist for a limited period of time or until the occurrence of a particular event or accomplishment of a particular purpose. Article 5 Activities of a Company (1) A business company may engage in any lawful activit y. (2) In cases where a law prescribes that specific activ ities may be carried out only with approval, permit or other document issued by a stat e body, such activities may be conducted upon obtaining such approval, permit or o ther document. (3) In cases where a law prescribes that specific activ ities may be carried out only by a particular form of business company, such activitie s may not be conducted in another form of company. Article 6 Requirements for Performing Business Activities (1) A business company may perform business activities in premises which meet requirements for technical equipment, work safety a nd environmental protection and improvement, as well as other prescribed requiremen ts. (2) Fulfillment of the requirements referred to in para graph (1) of this Article will be verified by the body which regularly inspects the p remises. (3) A business company may start performance of busines s activities consisting of production, trade, distribution, preparation or war ehousing material which is hazardous or harmful to persons or the environment, if the appro priate state body certifies that the requirements referred to in paragraph (1) are met. Chapter 2 Founding of a Company Article 7 Articles of Association and Other Documents (1) A business company is founded by its Articles of As sociation which is a contract among the founders or a decision of a sole founder (when there is only one founder). (2) The persons who are responsible for founding a busi ness company are herein called the company’s “founders.” All of the founders of a company must sign its initial Articles of Association. (3) The signatures of the founders on the Articles of A ssociation must be certified. (4) A company’s Articles of Association must include th e contents which are required by this Law for the form of that company. (5) In addition to the Articles of Association, a gener al partnership or limited partnership may have a partnership agreement among the partners , a limited liability company may have a company agreement among the members, and a j oint stock company may have by- laws. (6) Founders and other persons who under this Law join a general partnership upon its founding are called “partners”; such persons in a l imited partnership are called “general partners” or “limited partners”; such persons in a limited liability company are called “members”; and such persons in a joint stock compan y are called “shareholders.” Chapter 3 Registration and Publication Article 8 Beginning of Existence as a Legal Entity A business company begins its existence as a legal entity upon its registration in the registry (hereinafter called the “Registry”) as pre scribed in the law which regulates registration of business entities. Article 9 Registration and Publication Registration of information regarding companies and publication of registration shall be carried out in accordance with the law which regula tes registration of business entities. Article 10 Effects of Registration and Publication Against Thi rd Parties (1) Third parties shall be deemed to have knowledge of registered documents and information regarding the company after such docume nts or information has been published either in full or partial text or by mean s of a reference to the registered document. (2) Third parties shall also be deemed to have such kno wledge whenever they have actual knowledge thereof or whenever under the circumstanc es they should have knowledge thereof, and shall be deemed to have such knowledge before publication thereof if the company proves that they have knowledge. (3) If information published by a company is inconsiste nt with information filed by the company in the Registry, the latter shall govern in relations with a third party so that a company cannot use published information, if the th ird party relied on information from the Registry. Article 11 Action for Nullity of Founding (1) The registration of founding of a business may be n ullified in cases prescribed by this Law and the law which regulates registration of bus iness entities. (2) Registration of founding and registration of other information regarding a business company will be nullified if: 1) the Articles of Association are not in prescribed f orm; 2) the registered scope of activities of the company i s illegal or contrary to public order; 3) the Articles of Association do not state the regist ered name of the company, the amount and type of the share of each founder or the amount the of the company’s basic capital that is required by this Law or the business purpose of the company; 4) the minimum capital contribution was not made in ac cordance with this Law; 5) all of the founders were without legal and business capacity; 6) the number of the founders is less than is prescrib ed by this Law. (3) If the basis for requesting nullity can be remedied , the competent court may set a deadline for such remedying which shall be not late r than 90 days after the complaint is filed and suspend the procedure during that period. (4) Nullity of a company’s registration shall have no a dverse effect on transactions of the company concluded with conscientious third parties. (5) In case of nullity of a company’s registration, mem bers and shareholders shall be jointly liable for payment of company creditors’ cl aims. Chapter 4 Liability of Founders and Other Persons Article 12 Liability for Obligations Incurred Before Registrat ion (1) If action is taken by founders or other persons bef ore a company’s legal existence has begun, the persons who acted shall be liable jointl y therefor with all of their assets unless otherwise agreed with third parties who have a clai m for such obligations. (2) A company shall be jointly and severally liable wit h such persons for such obligations if it assumes them after registration in accordance with this Law. Article 13 Contributions, Capital, Basic Capital and Liability for Contributions (1) A partner, member or shareholder of a company is ob ligated to the company to pay in full all agreed contributions to capital as require d by this Law, the company’s Articles of Association or any other agreement of that person. (2) For the contributions referred in paragraph (1) of this Article, a partner, member or shareholder shall receive a partnership interest or share in the company. (3) A person referred to in paragraph (1) of this Artic le who fails to comply with his obligations to a company with respect to the compan y’s founding or submits false information on contributions to capital shall be li able to the company for any damages resulting from such failure. (4) Failure to comply with obligations to make a contri bution to the company shall be subject to the Law on Obligations as well as this L aw. (5) If a person referred to in paragraph (1) of this Ar ticle does not make a contribution that is to be made in kind, he is obligated at the compa ny’s option to contribute cash equal to the value of the contribution in kind that has not been made. (6) All contributions which have been made to a company are the property of the company and may not be used by partners, members or shareho lders as their personal property. (7) A company may not release or reduce the obligations under this Article of persons referred to in paragraph (1) of this Article. (8) A person referred to in paragraph (1) of this Artic le shall not be entitled to refund of or payment of interest on a contribution that has been made. A company’s payment based on withdrawal or cancellation of shares or acquisition of its own shares, as well as other payments in accordance with this Law shall not be c onsidered a refund or a payment of interest for this purpose. (9) In case of a transfer of interest in a company to a nother person, the transferor and the transferee shall be jointly and severally liable fo r the transferor’s obligations prior to the time of transfer to make contributions, unless prov ided otherwise in this Law. (10) A claim by or on behalf of a company under paragrap hs (1) through (9) of this Article may be brought by a company or partners i.e. member s or shareholders who represent 5% or more of the company’s capital. (11) A company’s assets under this Law consist of the to tal value of real and other property and rights that the company has acquired through co ntributions and activities. (12) The basic capital of a company is the difference be tween the total value of its assets minus its liabilities, i.e., the total value of the contributions to the company and of the shares of the company. A r t i c l e 1 4 V a l u a t i o n o f C o n t r i b u t i o n s i n K i n d (1) As used in this Law, “contributions in kind” means non-monetary contributions to a company’s capital, including contributions which co nsist of property, rights, work or services and shares of another company. (2) The value of contributions in kind to a general par tnership, a limited partnership, a limited liability company or a closed joint stock c ompany shall be determined by agreement of the partners, members or shareholders in accordance with any applicable provisions of the Articles of Association. (3) If partners, members or shareholders referred to in paragraph (2) of this Article do not agree on the value of a contribution in kind they m ay appoint an authorized appraiser for that purpose or may request the court to appoint an appraiser in non-contentious proceeding. (4) The value of contributions in kind to an open joint stock company shall be determined by an authorized appraiser appointed by the founder s i.e. board of directors from the list of authorized appraisers. Founders or board of directo rs may request a court to appoint the appraiser in a non-contentious proceeding. (5) Valuation of contributions in kind shall be determi ned in accordance with any applicable provisions of the law which regulates ac counting and audit. Article 15 Wrongful Abuse of Legal Form (1) A limited partner of a limited partnership, a membe r of a limited liability company, and a shareholder of a joint stock company may be h eld personally liable for obligations of the company if he wrongfully abuses the company for m for illegal or fraudulent purposes or treats the assets of the company as though they were his personal assets and as though the company did not exist. (2) In cases referred to in paragraph (1) of this Artic le, such person shall be jointly and severally liable with the company. (3) Liability referred to in paragraphs (1) and (2) of this Article shall be determined by a competent court taking into consideration of all th e circumstances related to the wrongful abuse and particularly considering that the general principle of limited liability shall not apply in cases referred to in paragraph (1) of this Article. Chapter 5 Registered Office and Name Article 16 Registered Office (1) The “registered office” of a company is the pri ncipal location from which the company’s business is conducted. (2) The registered office of a company shall be sta ted in the company’s Articles of Association and registered in accordance with the l aw which regulates registration of business entities. Article 17 Registered Name (1) The registered name of a company is the name under which the company conducts its business. (2) A companys registered name must be clearly distingu ishable from the name of any other company and may not contain any information c apable of misleading the public with respect to the business of the company. Article 18 Required Contents of Name (1) The registered name of a general partnership must i nclude the word “partnership” or the abbreviations “o.d.” or “od”. (2) The registered name of a limited partnership must i nclude the words “limited partnership” or the abbreviations “k.d.” or “kd”. (3) The registered name of a limited liability company must include the words “limited liability company” or the abbreviations “d.o.o.” or “doo”. (4) The registered name of a joint stock company must i nclude the words "limited liability company” or the abbreviations “a.d.” or “ad”. (5) The registered name of a company in liquidation mus t include the words “in liquidation”. Article 19 Abbreviated or Modified Name As company may do business using one or more abbrev iated or modified versions of its name only if such abbreviated or modified name is s tated in its Articles of Association and also complies with the requirements of this Law tha t apply to the registered names. Article 20 Restrictions on Use of National and Official Names and Symbols (1) The registered name of a company may include a name of a home country or territorial unit or its coat of arms, flag or other state logo or mark, but only with any required consent of the competent governmental auth ority of that country or territorial unit. (2) The registered name of a company may include the na me or symbols of a foreign state or an international organisation only if permitted under the laws or regulations of that foreign state or organisation. (3) The registered name of a company may not include or imitate official marks used for quality control or product warranty. Article 21 Restrictions on Use of Personal Names (1) The registered name of a company may include the na me of a natural person only with his consent or, in the case of a deceased person, o nly with the consent of all heirs in the first degree of such person. (2) If a persons name is used in violation of respect a nd honor of that person, that persons name shall be deleted from the companys name in the Registry upon the request of that person or, if applicable, his heirs. Article 22 Use of Registered Name and Other Details in Documen ts (1) Letters and forms addressed to third parties by a c ompany, including those in electronic form, shall provide the following inform ation: registered name of the company, legal form of the company, registered office of the company, Registry where the company is registered and number of the companys registrati on, registered name and registered office of an institution where the company has its principal bank account, and bank account number and tax identification number. (2) Such letters and forms of a limited liability compa ny and of a closed or open joint stock company shall also state the amount of subscr ibed and paid-in capital of the company. (3) Such letters and forms of a single-member limited l iability company and joint stock company shall also state the fact that it is a sing le-member company. Article 23 Language and Alphabet of a Registered Name (1) The registered name of a company shall be in the Se rbian language and in the alphabet officially used. (2) Notwithstanding the foregoing, the registered name of a company may include foreign words if they are in the company’s trade or service mark registered in Serbia, or if it is a name commonly used in the Serbian language, if ther e is no adequate word for it in Serbian language, or in the case of a word from a dead lang uage. Article 24 Restriction on Transfer of Registered Name (1) The registered name of a company may be transferred to another person only if that person is also a legal successor to its business. (2) If a member of a company whose name is used in the company’s registered name ceases to be a member, the company may continue to use his name only with his consent. (3) If a company’s business is transferred to another p arty, that other party may continue to use a previously-used name of a person in the compa ny’s registered name only with the consent of that person or, if he is deceased, the c onsent of his heirs to the third degree in a vertical line. (4) A decision to change a company’s registered name sh all be made consistently with the company’s Articles of Association. Chapter 6 Representatives and Representation Article 25 Representatives and Their Authority (1) A representative of a company has a duty to the com pany to observe and act in compliance with any limitations on his authority wh ich are stated in the company’s Articles of Association, company agreement, by-laws or any d ecision of the company. (2) A representative of a company who exceeds such limi tations shall be personally liable for damages caused thereby to the company and to an y third party with whom he has dealt. (3) A limitation of authority referred to in paragraph (1) of this Article, published or not published, may not be relied on by a company agains t a third party. A limitation of authority of two or more representatives may be rel ied on by a company in accordance with Article 10 of this Law. (4) An act of a representative of a company shall be bi nding on the company even if the act is outside the business purpose of the company stated in its Articles of Association, unless the company proves that the third party clai mant knew, or under the circumstances should have known, that the act was outside the bus iness purpose of the company. Publishing of the business purpose of a company sha ll not in itself constitute sufficient proof for such purpose. (5) Publication by a company that a person has authorit y to represent the company shall constitute a bar to any irregularity in their appoi ntment being relied on by the company as against third parties, unless the company proves th at the third parties knew or should have known of the irregularity. Article 26 General Provisions Concerning Procura (1) Procura is a legal form of power of attorney in whi ch a company authorizes one or more named persons to conduct legal transactions on behalf of the company. (2) If the procura does not state explicitly that it is issued for a particular branch of a company, it shall be deemed issued for the entire c ompany. (3) A procura shall not authorize the entering into of contracts for the transfer or charging of immovables. The grant of authority in a procura may not be limited in scope, or to a particular period of time, or to particular types o f transactions. (4) Limitation of a procura has no legal effect as agai nst third parties. Article 27 Issuance and Types of Procura (1) A procura may be issued by a company, to one person , to two or more persons separately, or to two or more persons jointly. (2) If a procura is issued to two or more persons separ ately, each procurator shall have all authority of the procura in accordance with this La w. (3) If a procura is issued to two or more persons joint ly, the transactions pursuant to the procura shall be valid only if agreed by all procur ators. Declarations of third parties made to one of the procurators shall be deemed made to a ll procurators. (4) A procura must be in written form. (5) A procura may be granted only to natural persons. (6) A procura is not transferable. Article 28 Procurator's Signature A procurator shall sign for the company under his n ame and surname, with an indication which clearly states his positions as a procura or by the mark "p.p.”. Article 29 Termination of Procura (1) A procura may be revoked by a company at any time. (2) A company cannot waive its right to revoke a procur a and cannot limit that right by imposing conditions or terms on its exercise. (3) If a procura is revoked, the procurator may exercis e towards the company those rights which stem from the legal relationship on the basis of which procura was issued. (4) A procura shall not be terminated by death or loss of capacity to act of a member or shareholder who issued the procura. Article 30 Registration of Procura (1) An authorized representative of a company must repo rt issuance or revocation of procura in the Register. (2) When applying for registration, a procurator shall deposit with the Registry his signature and his position with the company. Chapter 7 Persons Owing Duties to a Company Article 31 Basic Principles (1) Duties to a company under this Law are owed by: 1) general partners and limited partners in a general or limited partnership; 2) persons who under this Law are controlling members of a limited liability company or controlling shareholders of a joint stock company; 3) authorized representatives of a company; 4) members of a board of directors, members of an mana gement body, members of a supervisory board, members of an audit committee, a nd internal auditors of a limited liability company or a joint stock company; 5) persons who are authorized by contract to exercise management authority in a company; and 6) liquidators of a company. (2) Persons named in paragraph (1) of this Article are obligated to act in the interest of the company. Article 32 Duty of Care and Business Judgment Rule (1) Persons named in paragraph (1) of Article 31 have a duty to perform their functions in the named capacity good faith, with the care of a g ood businessman, and in the reasonable belief that they are acting in the company’s best i nterests. (2) Persons referred to in paragraph (1) of this Articl e may in performing their duties rely on information or opinions of persons in particular areas who the persons referred to in paragraph (1) believe are reliable and competent. (3) A person who has acted in accordance with paragraph s (1) and (2) of this Article in making a business judgment will not be liable for d amages to the company which may arise from such judgment. Article 33 Duty of Loyalty (1) Persons referred to in paragraph (1) of Article 31 of this Law have a duty to act fairly and loyally to the company. (2) Persons referred to in paragraph (1) of this Articl e who have a personal interest in a matter have a duty particularly not to use property of the company for their own needs, not to use confidential information of the company for the purpose of gaining personal profit, not to abuse their position in the company for the purpose of personal enrichment to the damage of the company, and not to take business opp ortunities of the company for personal purposes (hereinafter called the “duty of loyalty”) . Article 34 Personal Interest and Related Persons (1) A personal interest for purposes of Article 33 of t his Law exists if a person referred to in paragraph (1) of Article 31 of this Law or a fam ily member of such person: 1) is a party to a transaction with the company; 2) has a financial relationship with a party to a tran saction with the company, a personal interest in activities which lead to concluding a t ransaction with the company, a financial interest in a transaction with the company, or enga ges in activities that could reasonably be expected to affect his judgment contrary to the int erests of the company; or 3) is under the controlling influence of a party to th e transaction, or of a person who has a financial interest in the transaction that could re asonably be expected to affect his judgment adversely to the company. (2) A “family member” of a person referred to in paragr aph (1) of this Article includes: 1) the person’s spouse, or/and parents, brother or sis ter of the person’s spouse; 2) the persons child, parent, brother, sister, grandch ild or a spouse of any of the foregoing; 3) a relative of direct vertical lineage and horizonta l lineage to the second level of kinship, adopter and adoptee, a spouses relative to the firs t level of kinship; and 4) an individual having the same home as the person. (3) Persons referred to in paragraph (1) 2) and 3) and paragraph (2) of this Article shall be considered to be related persons under this Law (he reinafter called “related persons”). Article 35 Authorization of Transactions Involving Conflict of Interest (1) A person who enters into a transaction with the com pany shall not be deemed to have violated the principles relating to conflict of int erest in stated Article 34 of this Law, and shall not be liable for damages arising from his co nflict of interest, if the transaction is authorized in good faith by either: 1) all partners who do not have a personal interest (i n the case of a general partnership) or all limited partners who do not have a personal int erest (in the case of a limited partnership), except that the authorization may be given by a majority of such partners if the Articles of Association provides for such autho rization to be given by a majority of such partners; 2) a majority vote of the members who do not have a pe rsonal interest, given at a membersmeeting (in the case of a limited liability company); or 3) a majority vote of the members of the board of dire ctors who do not have a personal interest (or, if such a majority does not exist, a majority vote of shareholders who do not have a personal interest) (in the case of a joint s tock company). (2) The authorization of a transaction referred to in p aragraph (1) of this Article will be effective if all material facts regarding the perso nal interest are known or have been disclosed to the partners, members of the company, members of the board of directors or shareholders who grant the authorization. (3) In the case of any such authorization of a transact ion with a joint stock company by the board of directors, the matter shall be reported to the first shareholdersassembly next following. (4) A person who enters into a contract or transaction with the company shall not be deemed to have violated Article 34 of this Law, and will not be liable for damages arising from his conflict of interest, if he proves that th e transaction was in the interest of the company at the time it was entered into. (5) A transaction which under Article 34 of this Law in volves a conflict of interest, and which is not authorized in accordance with paragrap hs (1) and (2) of this Article or for which proof is not made in accordance with paragrap h (4) of this Article, shall be null and void. (6) If a company does not authorize a transaction which involves a conflict of interest, persons referred to in paragraph (10) of Article 13 of this Law may exercise the rights referred to therein. Article 36 Competition Prohibited (1) Persons referred to in paragraph (1) of Article 31 of this Law may not directly or indirectly engage in competition with the company u nless the competition is authorized in accordance with Article 35 of this Law. (2) Such prohibited competition shall be deemed to include but not be limited to acting in the following capacities for a competing business: 1) employee; 2) entrepreneur; 3) general partner or limited partner; 4) controlling member or shareholder; 5) member of a company body referred to in paragraph ( 1) 4) of Article 31 of this Law; 6) representative of a company; 7) liquidator of a company; and 8) person authorized by contract to manage a company. (3) A company’s Articles of Association may provide that the prohibition referred to in paragraphs (1) and (2) of this Article shall remain in force after the loss of the status referred to in those paragraphs, but for no longer than two years. Article 37 Legal Effects of Violation of Conflict of Interest Principles and Competition Prohibition (1) Violation of conflict of interest and competiti on prohibition provisions of this Law shall entitle a company to recover damages and the right to: 1) accept the transaction in question as being transac tions made on account of the company; 2) transfer to the company any benefits resulting from the transactions in question; or 3) transfer to the company any claims stemming from th e transactions in question. (2) Claims to enforce the rights of a company for v iolation of conflict of interest or competition prohibition provisions of this Law may be brought by the company, a general partner, a member, or shareholders who have or repr esent at least 5% of the basic capital of the company, and must be brought within 60 days aft er discovery of the violation or three years after the date of the violation. Article 38 Duty to Keep Business Secrets (1) Information on operations of a company determined b y company’s Articles of Association, company agreement or by-laws, which wo uld obviously result in significant damage to a company if known by a third party are c onsidered to be business secrets. (2) Information which is required to be disclosed by la w or relates to violation of laws, good business practices and principles of business ethics, including information which is grounds for suspicion of corruption, will not be re garded as business secrets. Disclosure of such information is legal if its purpose is to prot ect the public interests. (3) Persons referred to in Article 31 of this Law shall be liable for damages caused to the company by unlawful disclosure of business secrets. (4) A company has a duty to provide full protection of a person who acts in good faith to bring the existence of corruption to the attention of a public body. Article 39 Changes in Duties Owed to a Company (1) A general partnership, limited partnership, limited liability company or closed joint stock company may establish duties to the company i n addition to those stated in Articles 32, 34, 36 and 38 of this Law. (2) A company referred to in paragraph (1) of this Arti cle may, in its Articles of Association, partnership agreement, company agreeme nt or by-laws (as the case may be), identify specific activities, types and manner of c onducting activities which shall not violate the duty not to compete with the company. Chapter 8 Individual and Derivative Court Action Individual Court Action by a Partner, Member or Sha reholder Article 40 (1) A partner, member or shareholder of a company has t he right to file a lawsuit in court in his own name against any person referred to in p aragraph (1) of Article 31 of this Law to recover damages caused by violation of duties by th at person under this Law. (2) In the case of a general partnership, duties which are owed to the company shall be considered as duties owed to the partners directly, unless the Articles of Association or partnership agreement provides otherwise. (3) A lawsuit under paragraph (1) of this Article may b e brought by one person in his own name or by more persons in their names acting toget her. Article 41 Derivative Court Action by a Limited Partner, Membe r or Shareholder (1) A limited partner in a limited partnership, member in a limited liability company, or shareholder in a joint stock company has the right to file a lawsuit in court in his name and on the company’s behalf against any person referred to in paragraph (1) of Article 31, to enforce or to recover damages to the company caused by violation of duties owed to the company under this Law (hereinafter called a “deriv ative court action”). (2) A derivative court action may be brought by a limit ed partner, member or shareholder only if the following conditions are met: 1) the limited partner, member or shareholder had that status at the time of filing the lawsuit, or acquired that status as a result of tra nsfer from a person who had that status at the time of filing of the lawsuit. 2) the limited partner, member or shareholder holds su ch interests or shares in the company representing at least 5% of the basic capit al of the company. If two or more persons bring the action together the holdings of a ll of them shall be counted together for this purpose; and 3) the limited partner, member or shareholder, before filing the lawsuit, had requested the company in writing to bring the lawsuit and that re quest was refused or not responded to by the company within 30 days of the date of its submi ssion. (3) The request referred to in subparagraph 3) paragrap h (2) of this Article shall be made to all general partners in the case of a limited pa rtnership, to all directors or other persons who have authority to bring the complaint in the ca se of a limited liability company, and to the board of directors in the case of a joint stock company. (4) A complaint under this Article must include evidenc e that the actions referred to in paragraph (2) subparagraph 3) of this Article were taken. (5) A derivative case may not be settled out of court. (6) All damages received in a derivative case shall be the property of the company, except that the plaintiffs who filed the complaint shall b e entitled to recover their expenses. (7) The provisions this Article shall not be applicable to a general partnership unless its Articles of Association or partnership agreement so provides. Article 42 Simultaneous Individual and Derivative Actions In case of simultaneous individual and derivative l awsuits, the person complaining may maintain both court cases simultaneously, in which case the special restrictions referred to in Article 41 hereof shall not apply to the individ ual case. Title 9 Information, Publication and Time Limitation Article 43 Right to Information and Access (1) Every company shall keep its general partners, memb ers or shareholders informed regarding the company’s performance and financial c ondition and it shall make available information and documents required to be made avail able in this Law, the Articles of Association or by-laws. (2) If a competent body or authorized person of the com pany fails to act as required under paragraph (1) of this Article, they shall be held l iable for damages to partners, members or shareholders. (3) If the competent body fails to carry out the duties referred to in paragraph (1) of this Article, the partners, members and shareholders may request the competent court in a non- contentious proceeding to issue an order to act as required in paragraph (1) of this Article. Article 44 Submission of Information to Registry and Publicati on (1) A company which offers securities by public offerin g shall submit to the Registry, for publishing, all information contained in the offeri ng documents that is required by the law which regulates securities markets. (2) Such a company shall also publish the information r eferred to in paragraph (1) of this Article in the mass media in accordance with the la w which regulates securities markets and regulations of the Securities Commission. Article 45 Disqualifications from Election (1) A person who has been convicted of criminal offense s related to performance of his duties under a special law relating to the economy or business, as well as a person who violates provisions of this Law on restrictions of distributions, may not be an authorized representative, member of the board of directors, p rocurator or liquidator of a company until the legal consequences thereof have lapsed un der the law. (2) A member of a supervisory board of a company, and a related person to such person as described in this Law, may not be a person with aut hority to represent or conduct management of the company. Article 46 Settlement of Disputes (1) The commercial court in the territory where a compa ny’s registered office is located is competent to decide all disputes arising under this Law, unless this Law provides otherwise. (2) The court shall decide in non-contentious proceedin gs in cases specified in this Law or in matters arising under this Law. (3) In matters referred to in provision in paragraph (2 ) of this Article, an emergency procedure must be available and a court of first in stance is obligated to decide within 60 days from the date of receiving the request unless provided otherwise in this Law. An appeal may be submitted within eight days. A court of second instance is obligated to make a decision in respect of the appeal within thirty d ays from the date of receipt of the request. (4) An appeal of a court decision in respect of matters arising under paragraph (2) of this Article shall not stay execution of the decision. Article 47 Statute of Limitations (1) General partners, members and shareholders of a com pany must bring a claim against the company based on that status not later than 180 days after the date of becoming aware of the basis for the claim but not in any event lat er than three years from the date of the maturity of the claim, unless provided otherwise by law for particular claims. (2) Claims of a company’s creditors as against general partners, members and shareholders must be brought not later than 180 days after the d ate of becoming aware of the basis for the claim but not in any event later than three yea rs from the date of dissolution of the company or from the date of termination of their st atus as partners, members or shareholders, unless provided otherwise by law for particular claims. (3) The provisions of paragraphs (1) and (2) of this Ar ticle shall also apply to a companys claims against partners, members, shareholders, mem bers of company bodies representatives and liquidators in such capacity. PART TWO ENTREPRENEUR Article 48 Definition and Registration (1) An entrepreneur in this Law is a natural person who is registered and who conducts lawful activities for profit as his profession, inc luding art, old trades and domestic work. (2) Art, old trades and domestic work particularly incl ude filigree, shoemaking, pottery and production of crafts with national symbols. (3) The Minister who deals with matters of economy shal l define the scope of work, which in this Law shall be considered to include art, old trades and domestic work. (4) An entrepreneur shall be registered in accordance w ith the law which regulates registration of business entities. (5) A natural person who is registered and conducts act ivity of a free profession which is regulated under special regulations shall be consid ered an entrepreneur under this Law, if it is so provided by the special regulation. (6) An individual farmer is not an entrepreneur und er this Law unless provided otherwise in a special law. Article 49 Liability of Entrepreneur An entrepreneur is liable with all of his assets fo r all of his obligations that result from his undertaking business. Article 50 Characteristics (1) An entrepreneur may conduct business under his own name, the name of another person or a separate business name in accordance wi th this Law. (2) The name referred to in paragraph (1) of this Artic le shall be registered with the word ”entrepreneur” (preduzetnik) or the abbreviation ”p r.” Article 51 Applicability of Other Articles Provisions of this Law relating to business name, r egistered office, business activity, representation, liquidation and time limitations in connection with a company, shall also apply to an entrepreneur unless provided otherwise in a special law. Article 52 Termination An entrepreneur shall terminate conducting business in case of: 1) his own decision; 2) death or loss of capacity to conduct business; 3) not conducting business for a continuous period of one year; 4) the duration of the business has expired if the bus iness was registered with a stated duration; 5) conducting the business when it has been temporaril y interrupted by decision of an authorized body; 6) when penalized more than three times for conducting business activity that does not fulfil prescribed conditions; 7) an order is issued forbidding the person from condu cting the business because necessary conditions are not met for conducting the business and the person fails to fulfil such conditions within the period stated in the ord er or does not change the business activity; or 8) change in legal form in accordance with this Law; 9) bankruptcy and liquidation. PART THREE LEGAL FORMS OF BUSINESS COMPANIES Title I GENERAL PARTNERSHIP Chapter 1 Form and Founding Article 53 Definition and Liability (1) A general partnership is a company organized by two or more legal entities and/or natural persons, as general partners of the company , who undertake to conduct business under a common registered name. (2) A general partnership is liable for all of its obli gations with all of its assets. (3) All partners of a general partnership are jointly a nd severally liable for all obligations of the partnership with all of their assets, unless otherwise agreed with the creditor. (4) Agreements among partners contrary to paragraph (3) of this Article are ineffective as against third parties. Article 54 Freedom to Contract Principle The partners of a general partnership may regulate freely their relations among themselves and with the partnership except as provided otherwi se by this Law and other laws. Article 55 Articles of Association (1) The Articles of Association of a general partne rship must contain: 1) the full name and place of residence of all natural -person partners and the registered name and registered office of all legal entity part ners; 2) the registered name and registered office of the pa rtnership; 3) the business purpose of the partnership; and 4) a statement of the kind and value of the contributi on of each partner. (2) The Articles of Association may contain other m atters relating to the partnership and the partners. (3) The Articles of Association may be amended only with the agreement of all partners, unless provided otherwise by the Articles of Associ ation. Article 56 Partnership Agreement (1) Apart from the Articles of Association a partnershi p may have a partnership agreement regulating the partnership’s business and governance. (2) A partnership agreement is not required to be submi tted to the Registry. (3) A partnership agreement must be in writing and must be signed by every partner. (4) A partnership agreement and any amendments thereto shall have legal effect among partners as of the moment of signing of the agreeme nt by all partners unless provided otherwise in the partnership agreement. Article 57 Relationship of Articles of Association and Partner ship Agreement In the event of any inconsistency between a partnership’s Articles of Association and partnership agreement, the Articles of Association shall control. Chapter 2 Legal Relations Among the Partners and the Partners hip Article 58 Articles of Association and Partnership Agreement M ay Govern Legal relations of partners among themselves and with the partnership shall be governed by the partnership’s Articles of Association and partn ership agreement if it has a partnership agreement. Article 59 Contributions (1) The contribution of a partner to a general partners hip may be in money or in kind, including past or future work or services. (2) All partners’ contributions shall be equal in value . Article 60 Delay in Payment of Contribution (1) A partner who fails to pay his contribution when du e in cash or in kind as required by the Articles of Association, or fails to timely tra nsfer to the partnership any amount of cash or other property he has received at any time on be half of the partnership, or takes for himself cash or other property from the partnership without authorization, shall pay interest on the amount from the day on which his contributio n or the transfer were due or from the day on which he took the cash or other property. (2) The provisions of paragraph (1) of this Article sha ll not exclude any other compensation or damages available to a partnership. Article 61 Increase or Reduction of Contribution (1) No partner is obligated to increase his contributio n above the amount agreed in the Articles of Association, even for covering losses o f the partnership. (2) No partner may reduce his contribution without the approval of all the other partners. Article 62 Transfer of Interests Among Partners Transfer of interests among partners shall be unrestricted. Article 63 Decision Making by Partners (1) A decision in the ordinary course of a partnership’ s business shall be made by a majority of the total number of partners. The conse nt of all partners shall be required for a decision on a matter outside the ordinary course of the partnership’s business and for admission of a new partner. (2) In the case of decisions involving a conflict of in terest as referred to in Articles 34 and 35 of this Law, partners who have the conflict shal l not participate in the decision. (3) Partners shall make decisions for the partnership d uring a meeting of partners. The same applies as to partners engaged in management. Article 64 Management of a Partnership (1) Each partner shall have the right to manage the bus iness of the partnership (herein called “management”). (2) If the Articles of Association or partnership agree ment of a partnership has assigned management authority to one or more particular part ners, the other partners shall be excluded from management. Article 65 Management by More than One Partner (1) If two or more partners are vested with management authority, each of them shall have the right to act independently, unless one of them contests such right. (2) If the Articles of Association or partnership agree ment provides that managing partners may act only jointly, the approval of all managing partners shall be required for each act or transaction, except when this would req uire deferment of a decision and the deferment would harm the partnership’s interests. (3) If the Articles of Association or partnership agree ment provides that the management shall be by more than one partner, every managing p artner shall follow advice given by the other managing partners, and every managing partner shall keep the other managing partners informed for the purpose of making joint d ecisions. (4) If a managing partner is bound to follow instructio ns of another managing partner and the first managing director considers instructions given to be inappropriate under the circumstances, he shall notify the other managing p artners for the purpose of deciding jointly, unless this would require deferment of a d ecision and the deferment would harm the partnership’s interests. Article 66 Scope of Management Authority (1) Management authority shall apply to all matters in the ordinary course of the partnership’s business. (2) Management authority as to matters which are outsid e the ordinary course of the partnership’s business as referred to in paragraph (1) of this Article shall require consent of all partners. Article 67 Transfer of Management Authority (1) No partner may transfer his management authority to a third party unless all other partners approve. (2) A partner who transfers his management authority to a person who is not a partner is liable for the choice of that person and for the ac ts of that person in exercising those management rights. Article 68 Resignation of Management Authority (1) A managing partner may resign from management respo nsibilities within a time frame stated in the Articles of Association or partnershi p agreement (if any), and on grounds which are reasonable in the judgment of the other p artners. (2) Any provisions in the Articles of Association or pa rtnership agreement which would allow a managing partner to surrender such right to resign, shall be null and void. (3) If there are reasonable grounds for a managing part ner to resign sooner than the time frame referred to in paragraph (1) of this Article, he may do so. (4) A managing partner must give notice of resignation in writing to all the partners and the partnership in time to allow for continuation o f pending transactions by other managing partners, unless there are reasonable grounds for s horter notice. (5) If a managing partner resigns contrary to paragraph s (1) and (3) of this Article, he is obligated to compensate any damage to the partnersh ip caused thereby. Article 69 Revocation of Management Authority The management authority of a partner may be revoke d by decision of a competent court upon request of the other partners made on reasonab le grounds which may include incapacity to perform managerial duties regularly o r gross violation of duties. Article 70 Right to Reimbursement of Expenses (1) A partner shall be entitled to reimbursement of exp enses which he has incurred in conducting the partnership’s business and which wer e necessary in view of the circumstances. (2) Expenses referred to in paragraph (1) of this Artic le shall be paid by the partnership. Article 71 Profit and Loss (1) At the end of each business year an annual stat ement of account for the partnership shall be prepared stating profits or losses of the partne rship and each partner’s share thereof. (2) Each partner shall be entitled to an equal share of any profits of the partnership. (3) Each partner shall bear equally any losses of the p artnership. (4) The interest of each partner in the profit of the p artnership shall be paid to him not later than three months from the date of the adoption of the financial statement. (5) If the Articles of Association contains a provision which differs from the provisions of paragraphs (2) and (3) of this Article such provisi on shall be considered to relate both to profits and losses. Article 72 Applicability of Articles 59-71 The provisions of Articles 59-7 1 of this Law shall apply to a partnership unless the partnership’s Articles of Association or partnershi p agreement provides otherwise. Chapter 3 Relationship of a Partnership and Partners to Third Parties Article 73 Representation of a Partnership (1) Each partner shall have authority to represent the partnership, unless the Articles of Association provides otherwise. (2) If two or more partners have authority to represent a partnership, they may do so independently unless the Articles of Association pr ovides otherwise. (3) The Articles of Association may determine that all or some of the partners may represent the company only jointly. (4) Partners who are entitled to represent the company jointly may authorize one or more of them to carry out specific transactions or speci fic kinds of transactions. A communication from a third party may be delivered t o any one of the partners entitled to participate in the representation of the partnershi p, and such delivery will constitute delivery to the partnership. (5) The Articles of Association may determine that the partners may represent the partnership only jointly with a procurator. In this case, paragraph (4) of this Article shall apply accordingly. (6) The exclusion of a partner from authority to repres ent the partnership, a decision on joint representation, a decision of the kind descri bed in paragraph (3) of this Article, and as any change in a partner’s authority to represent th e partnership shall be registered in accordance with the law which regulates registratio n of business entities. Article 74 Resignation of Representation Authority (1) A partner authorized to represent a partnership may resign within a time frame stated in the Articles of Association or partnership agree ment (if any), and on grounds which are reasonable in the judgment of the other partners. (2) Any provisions in the Articles of Association or pa rtnership agreement which would allow a partner to surrender such right to resign, shall be null and void. (3) If there are reasonable grounds for a partner to re sign representation authority sooner than the time frame referred to in paragraph (1) of this Article, he may do so. (4) A partner must give notice of resignation of repres entation authority in writing to all the partners and the partnership in time to allow f or continuation of pending transactions by other partners. (5) If a partner resigns contrary to paragraphs (1) and (3) of this Article, he is obligated to compensate any damage to the partnership caused the reby. Article 75 Revocation of Representation Authority Authority to represent a partnership may be revoked by decision of a competent court unless provided otherwise in the Articles of Associ ation, or revoked based on a lawsuit filed by the partnership or upon request made by th e other partners if it is determined that the partner is incapable of representing the partne rship or is in gross violation of his duties to represent the partnership. Article 76 Complaint and Compensation (1) A partner may file a personal complaint, as well as a complaint on behalf of the partnership, against a third party. (2) A claim of a third party against a partner may be c ompensated from claims of the partner against the partnership. Article 77 Liability of a New Partner (1) A person who becomes a partner in an existing gener al partnership assumes the liabilities of the partnership, including pre-exist ing liabilities, equally with all existing partners. (2) Agreements contrary to paragraph (1) of this Articl e are ineffective as against third parties unless the third parties agree. Chapter 4 Partnership Interests Article 78 Transfer of Partnership Interests to Third Parties (1) A partner may transfer his interest in a partnershi p to a third party only with the consent of all the other partners. (2) In case of a proposed transfer of interest to a thi rd party, the other partners shall have a preemptive right to purchase that interest. (3) If the other partners do not give such consent and do not exercise such preemptive right, the partner who wishes to transfer his inter est may do so freely to any third party. (4) A pledge of an interest shall be considered a trans fer of the interest for the purposes of paragraphs (1), (2) and (3) of this Article. (5) Transfer of an interest at death to heirs and legal successors shall not be a transfer of interest to a third party for purposes of paragraph s (1), (2) and (3) of this Article. (6) The Articles of Association or partnership agreemen t may contain provisions regarding transfer which are different from those i n paragraphs (1)-(4) of this Article. Article 79 Liability Relating to Transfer of Interest (1) In case of any transfer of interest, the transferor and the transferee shall be jointly and severally liable to the partnership for all of the transferor’s obligations to the partnership at the moment of the transfer, unless all of the partn ers agree otherwise. (2) A claim by or on behalf of a partnership with respe ct to paragraph (1) of this Article must be brought within three years after from the r egistration of the transfer of interest. (3) Paragraph (2) of this Article shall also apply acco rdingly to all other claims by or on behalf of a partnership against a person who has ce ased to be a partner. Chapter 5 Dissolution of a General Partnership and Exit of Pa rtners Article 80 Events Causing Dissolution of a Partnership (1) A general partnership shall dissolve upon occurrenc e of any of the following events: 1) expiration of the term or completion of the task fo r which the partnership was established; 2) a decision of the partners to dissolve; 3) opening of a bankruptcy procedure against the partn ership; 4) the date as of which the partnership has not carrie d out any business activities for two years in continuous succession; 5) a court decision that the partnership is dissolved; 6) any event agreed to in the Articles of Association or partnership agreement that results in dissolution. (2) A partner shall cease to be a partner upon the occu rrence of any of the following events unless the Articles of Association or partne rship agreement provides otherwise: 1) death of the partner; 2) opening of a bankruptcy proceeding against the part ner; 3) notice of withdrawal as a partner given by the part ner; 4) a decision of the partners made in accordance with the Articles of Association or the partnership agreement and this Law; 5) Any other cases stated in the Articles of Associati on or partnership agreement as causing the partner to cease to be a partner. Article 81 Tacit Extension of Duration If a partnership has been established for a definit e term or for the fulfillment of a specific purpose and continues operating after the expiratio n of that term or the achievement of that purpose, the partnership shall be considered to hav e received the tacit consent of all partners to exist for an indefinite period of time. Article 82 Resignation and Withdrawal of a Partner by Giving N otice (1) A partner may withdraw voluntarily from a partnersh ip by giving notice of his withdrawal to the partnership. (2) A partner may withdraw as provided in paragraph (1) of this Article only by giving written notice of withdrawal to the other partners not less than six months before the end of the partnership’s business year, unless the Article s of Association provides otherwise. (3) A partner’s right referred to in paragraph (1) of t his Article may not be reduced or eliminated. Article 83 Dissolution of a Partnership by Court Decision (1) Pursuant to a lawsuit filed by a partner, a partner ship may be dissolved by court decision for justifiable reasons. (2) A justifiable important reason under paragraph (1) of this Article shall exist if the court finds that another partner has deliberately o r by gross negligence his duties under this Law, the Articles of Association or the partnership agreement, or if the performance of such duties has become impossible, or that it is not oth erwise possible to continue the partnership’s business in conformity with this Law, the Articles of Association or the partnership agreement. (3) Any reduction or elimination a partner’s right to f ile a lawsuit referred to in paragraph (1) of this Article shall be null and void. (4) A claim under this Article shall be brought against the partnership and all other partners in the competent court. (5) In a case referred to in this Article the court may , instead of ordering dissolution of the partnership, reverse the claim and order the expuls ion of a partner under Article 84 of this Law. Article 84 Expulsion of a Partner (1) The provisions of this Law relating to expulsion of a member of a limited liability company shall apply mutatis mutandis with respect t o expulsion of a partner of a partnership. (2) A decision to expel a partner shall be made by the remaining partners in accordance with Article 63 of this Law. Article 85 Consequences of Exit of a Partner (1) The interest of a partner who exits the partnership shall be distributed among the remaining partners equally. (2) The remaining partners shall be obligated to pay th e departing partner the amount he would have received if the partnership had been dis solved at the time of his exit without taking account of then-outstanding transactions. (3) If the value of the assets of the partnership is no t sufficient to cover the partnerships commitments, the exiting partner shall pay a part o f the missing amount proportionate to his share in bearing losses of the partnership. (4) Paragraphs (1)-(3) of this Article shall apply unle ss provided otherwise by the Articles of Association or partnership agreement. Article 86 Treatment of Outstanding Transactions on Exit of a Partner The share of a partner leaving a partnership in profits and losses of pending transactions shall be valued as of the date of his exit, unless the Articles of Association or partnership agreement provides otherwise. Article 87 Procedure in Case of One Remaining Partner (1) If for any reason only one partner remains, he is obligated to take all necessary measures to adapt the company under this Law within three months after the date that he became the only partner, or continue the business a s an entrepreneur. (2) If within the time limit referred to in paragra ph (1) of this Article the sole partner fails to conform the status with the requirements of this Law, the partnership shall be liquidated. Article 88 Continuation of Partnership with Heirs (1) A general partnership shall continue with the heirs to a deceased partner, if that is in accordance with the Articles of Association and con sented to by the heirs. (2) The heirs may exercise the right referred to in par agraph (1) of this Article from the date they knew of the succession or the date of the appointment of the representative of an heir who has no legal capacity, as the case may be. Article 89 Registration of Dissolution (1) The partners with authority to represent a partners hip shall report a dissolution of the partnership and the exit of any partner from the pa rtnership to the Registry for registration and publication. (2) In case of dissolution by court decision, the court shall report the dissolution to the Registry ex officio. Title II LIMITED PARTNERSHIP Chapter 1 Definition and Founding Article 90 Definition and Liability (1) A limited partnership is a partnership organized by two or more legal entities and/or natural persons who undertake to conduct business u nder a common registered name, and in which at least one partner’s liability is unlimi ted (a “general partner”) and at least one partner’s liability is limited to the loss of his a greed contribution (a “limited partner”). (2) A limited partnership is liable for all of its obli gations with all of its assets. (3) The liability of a limited partner and a general pa rtner for the obligations of the partnership shall be as stated in paragraph (1) of this Article. Article 91 Application of General Partnership Provisions to Li mited Partnerships (1) Unless this Law provides otherwise, the provisions of this Law on general partnerships shall also apply, mutatis mutandis, to limited partnerships. (2) A general partner in a limited partnership has the same status as a partner in a general partnership unless provided otherwise by this Law. Article 92 Articles of Association (1) The Articles of Association of a limited partnershi p must contain: 1) the full name and place of residence of each natura l-person partner and the registered name and registered office of each legal-entity par tner and a statement of which type of partner each is; 2) the registered name and registered office of the pa rtnership; 3) the registration of the type and value of each foun der’s contribution; 4) the business purpose of the partnership. (2) The Articles of Association may contain other matte rs as considered relevant by the limited partnership and the partners. Article 93 Amendment of Articles of Association (1) The Articles of Association of a limited partnershi p may be amended only with the agreement of all general and limited partners, unle ss the Articles of Association provide otherwise. (2) An amendment of the Articles of Association of a li mited partnership which increases the obligations of a particular partner or imposes new liabilities on a particular partner shall require the consent of that partner. Article 94 Limited Partnership Agreement (1) Apart from the Articles of Association a limited pa rtnership may have a limited partnership agreement regulating the partnership’s business and governance. (2) A limited partnership agreement is not required to be submitted to the Registry. (3) A limited partnership agreement must be in writing and must be signed by every partner. (4) A limited partnership agreement and any amendments thereto shall have legal effect among partners as of the moment of signing of the a greement by all partners unless provided otherwise in the partnership agreement. Article 95 Relationship of Articles of Association and Partnership Agreement In the event of any inconsistency between a limited partnership’s Articles of Association and limited partnership agreement, the Articles of Association shall control. Chapter 2 Relationships Among Partners and the Partnership Article 96 Contributions (1) The contribution of a limited partner to a limited partnership may be in money or in kind including work that is done and services to th e company. (2) A limited partner must pay in all of his contributi ons to the limited partnership prior to his becoming a limited partner. Article 97 Transfer of Interests (1) A general partner of a limited partnership may not transfer all or any part of his partnership interest without the consent of all lim ited and general partners. (2) A limited partner of a limited partnership may tran sfer all or any part of his partnership interest by sale, gift, pledge, inherit ance or otherwise. Article 98 Profit and Loss Each general and limited partner shall be entitled to distributions of profit and shall be liable for losses from the partnership in proportio n to his percentage share of the contributions of all partners actually paid in. Article 99 Applicability of Other Articles The provisions of Articles 96-98 of this Law shall apply to a limited partnership unless the Articles of Association or partnership agreement pr ovides otherwise. Article 100 Management of a Limited Partnership (1) One or more general partners shall manage the busin ess of a limited partnership (hereinafter called “management”). (2) A limited partner may not participate in management of a limited partnership. Chapter 3 Relationships of Partnership and Partners With Third Parties Article 101 Representation A limited partner may not represent a limited partn ership in dealings with third parties. Article 102 Liability of a Limited Partner as a General Partner in Certain Cases (1) A limited partner shall be liable as a general part ner if his name is included in the registered name of the limited partnership with his consent. (2) A limited partner shall be liable as a general part ner if he acts contrary to paragraph (2) of Article 100 of this Law. Chapter 4 Changes in Membership and Status of a Company Article 103 Termination of Partner Status and Changes of Legal Form (1) A limited partnership shall not dissolve upon the d eath of a limited partner who is a natural person or upon dissolution of a limited par tner which is a legal entity. (2) If a limited partnership has no general partners an d new general partners are not admitted within three months after the date on whic h such event occurs, the limited partners may unanimously decide within such three months cha nge the legal form to a limited liability company or joint-stock company in accorda nce with this Law. (3) If the limited partners do not comply with the acti on and time frame stated in paragraph (2) of this Article, the limited partners hip shall be terminated by liquidation in accordance with this Law. (4) If all limited partners withdraw from a limited par tnership, the company may continue as a general partnership or as the business of an e ntrepreneur. (5) Any events referred to in paragraphs (1)-(4) of thi s Article must be reported to the Registry and published in accordance with the law w hich regulates registration of business entities. Title III LIMITED LIABILITY COMPANY Chapter 1 Basic Principles Article 104 Definition and Liability (1) A limited liability company is a company organized by one or more legal entities and/or natural persons, as members of the company, to conduct business under a common registered name. (2) A limited liability company is liable for all of it s obligations with all of its assets. (3) A member of a limited liability company is not liab le for obligations of the company solely by reason of being a member, except that a m ember shall be liable up to the amount of any agreed but unpaid contribution of the member to the company. (4) A limited liability company may have a maximum 50 m embers. (5) If the number of members of a limited liability com pany exceeds the number stated in paragraph (4) of this Article but is not more than 100, and if such situation continues for more than one year, the company shall change its fo rm to a closed joint stock company. Article 105 Freedom to Contract Principle The members of a limited liability company may regu late freely their relations among themselves and with the company except as provided otherwise in this Law. Chapter 2 Articles of Association and Company Agreement Article 106 Articles of Association (1) The Articles of Association of a limited liabil ity company must contain: 1) the full name and place of residence of each natura l person member and the registered name and registered office of each legal entity mem ber; 2) the registered name and registered office of the co mpany; 3) the business purpose of the company; 4) the amount of the company’s basic capital, the amou nt of each initial member’s contribution, and a description of the nature and v aluation of any such contributions which are in kind; 5) the manner and time of making contributions in cash and kind; 6) the total amount, or at least an estimate, of all t he costs payable by the company or chargeable to it by reason of its formation and, wh ere appropriate, before the company is authorized to commence business; and 7) any special advantage granted, at the time the c ompany is founded or up to the time it receives authorization to commence business, to any one who has taken part in the founding of the company or in transactions leading to the gr ant of such authorization. (2) The Articles of Association of a limited liabil ity company may also contain other provisions including provisions that may be contain ed in a company agreement. Article 107 Company Agreement (1) Apart from the Articles of Association a limited li ability company may have a company agreement regulating the company’s business and governance. A company agreement shall be in writing and particularly may contain provisions which: 1) impose obligations on members to make contributions to the company in addition to their initial contributions, and prescribe specific payments and other consequences for their failure to meet such obligations; 2) state conditions for and the manner of transfer of shares by members in ways different from those stated in this Law; 3) state that members’ votes or entitlement to dividen ds will be equal or will be according to capital contributions, or will be according to s ome other method; or 4) prescribe detailed procedures for decision-making i ncluding a method for settling disputes in case of deadlock among members. (2) A company agreement is not required to be submitted to the Registry. (3) A company agreement and any amendments thereto shal l have legal effect among members as of the moment of the signing of the agre ement by all members, unless provided otherwise in the company agreement. Article 108 Relationship of Articles of Association and Company Agreement In the event of any inconsistency between a company’s Articles of Association and company agreement, the Articles of Association shal l control. Chapter 3 Costs Article 109 Founding Costs (1) The Articles of Association of a limited liability company may provide that the cost of founding a company shall be borne by the company or by its founders. (2) If not provided otherwise in the Articles of Associ ation, the founders shall bear the cost of founding the company. (3) If the Articles of Association provides that the co st of founding shall be borne by the company, the cost shall be reimbursed by the compan y to the founders up to the amount stated in the Articles of Association. Chapter 4 Members' Basic Obligations Section 1 Obligation Concerning Contributions Article 110 Form of Contributions (1) A member’s contribution to a limited liability comp any may be monetary or nonmonetary including performed work or services. (2) Contributions of members to a limited liablity comp any need not be equal in value. (3) Contributions to a limited liability company, in mo ney or in kind, shall be paid in to the company as provided in the company’s Articles o f Association. Section 2 Additional Contributions Article 111 Calls for Additional Contributions (1) Members of a limited liability company may call for additional contributions if so provided by the company’s Articles of Association o r company agreement. (2) Unless provided otherwise in the Articles or Associ ation or company agreement, such additional contributions shall be made by the membe rs in proportion to their respective percentage shares. (3) If a member of a limited liability company does not pay the additional contribution referred to above in this Article, the remaining me mbers shall be obligated to pay such uncollected amount in proportion to their shares un less previded otherwise in the Articles of Association or company agreement. (4) A companys Articles of Association may provide that a member who does not meet his obligations referred to in paragraphs (1) and ( 2) of this Article shall be liable to other members and the company for the damage caused. Chapter 5 Basic Capital Article 112 Minimum Basic Capital (1) The monetary value of the basic capital of a limite d liability company may not be less than 500 Euros in the dinar countervalue calculated per mean exchange rate at the time of being paid in, of which sum at least one half shall be deposited in an interim account until the registration of the company, while the remainde r shall be transferred to the companys account within two years from the date of registrat ion. (2) A higher amount of minimum basic capital may be req uired by a separate law for the founding of financial and insurance companies, as w ell as other companies that conduct certain business as limited liability companies. Article 113 Increase and Decrease of Capital (1) A company’s basic capital may be increased by decis ion of its members, and an increase may be by additional contributions by memb ers or by conversion of any reserves available for that purpose. (2) A companys basic capital may be decreased on one ba sis by a decision of its members, but not below the amount required by this Law. (3) A decrease of a companys basic capital on one basis can be conducted simultaneously with an increase of its basic capital on another ba sis, in accordance with this Law. (4) Registration of an increase or decrease of a compan ys basic capital is done, as a rule, once a year within thirty days from the day of the membersannual assembly. Article 114 Applicability of Other Articles Provisions of this Law that regulate the maintenanc e, increase and decrease of basic capital and convening of shareholder meetings of an open jo int stock company in that connection, shall apply to the maintenance, increase and decrea se of basic capital and convening of member meetings of a limited liability company when the company’s losses exceed 50% of the company’s basic capital. Chapter 6 Shares Article 115 One Share Per Member (1) A member of a limited liability company shall acqui re a share in the initial capital of the company in proportion to the percentage of his contribution. (2) A member of a limited liability company shall have one single share in the company. (3) If a member acquires one or more additional shares, they will be combined with his existing share and all will constitute a single sha re. Article 116 Voting and Distribution Rights of Shares Unless provided otherwise in a company’s Articles o f Association, the members’ voting power in decisions of the company and the members’ rights to dividends and distributions on liquidation of the company shall be in proportio n to their then-current percentages of the total contributions of all members paid in. Article 117 Legal Nature of Shares (1) Shares in a limited liability company are not secur ities. (2) Shares in a limited liability company may not be ac quired or offered through public invitation. (3) Unless provided otherwise in a company’s Articles o f Association or company agreement, a limited liability company shall issue a certificate to each member identifying his membership and evidencing his share. Article 118 Co-Ownership of a Share (1) A share may have more than one owner (herinafter ca lled co-owners of the share). Co- owners of a share shall be considered to be one sin gle member of the company and each co- owners full name and address shall be kept in the c ompany’s book of shares. (2) Unless provided otherwise in a company’s Articles o f Association or company agreement, co-owners of a share shall exercise thei r voting and other rights in the company only through a single joint representative. In ever y such case the co-owners must identify that representative to the company to be kept in th e company’s book of shares. (3) Any notice given by the company to such a designate d representative shall be deemed given to all of the co-owners. If the co-owners of a share fail to appoint and identify to the company such a representative, a notice given by th e company to any co-owner shall be deemed given to all co-owners. (4) Co-owners of a share shall be jointly and severally liable to the company for all obligations to the company respecting the share. (5) Legal action by a company against one co-owner for such obligations shall have binding effect against all co-owners. Article 119 Book of Shares (1) A limited liability company must keep a book of sha res at its registered office. (2) The book of shares must contain: the personal name or registered name, the place of residence or registered office and the tax referenc e number of every company member, every co-owner of a share, and every representative of co-owners of a share; the amount of all contracted and paid-in contributions of each me mber; any secondary obligations and additional contributions beyond the initial contrib utions; all pledges of shares; the number of votes or the percentage voting power of each sha re; all transfers of shares including the date and the name of the transferor and the transfe ree; and all changes in any of the foregoing. (3) A limited liability company shall submit applicatio n and documents for changes in data entered into the book of shares to the Registry for registration and publication in accordance with the law which regulates registratio n of business entities. (4) A member of the company shall have the right to exa mine and make a copy of the book of shares. (5) The directors of a company shall be responsible for the correctness of data in the book of shares in compliance with this Law. Article 120 Registration of Shares (1) In relation to a limited liability company, a compa ny member is a person who is registered as such in the company’s book of shares, whereas in relation to third parties a company member is a person registered as such in th e Registry. (2) The date on which a company has received an applica tion for registration shall be considered to be the date of a member’s registratio n in the book of shares if all the information required for such registration has been provided, regardless of actual time of registration. Article 121 Acquisition of Own Shares (1) As used in this Law, “own shares” of a limited liability company means shares acquired by the company from members. (2) A limited liability company may not subscribe to it s own shares directly or indirectly through third parties who would acquire them on its behalf. (3) A limited liability company may acquire its own sha res from members, including shares that are partly paid. (4) Shares referred to in paragraph (3) of this Article may be acquired by purchase from a member, by reason of involuntary termination of a m ember’s membership, or otherwise. (5) A limited liability company may not acquire its own shares in violation of the provisions of this Law restricting distributions to shareholders. (6) A limited liability company may not vote its own sh ares, such shares shall not be counted in calculating a quorum for voting, and suc h shares shall not carry the right to receive distributions. (7) Shares of a company which have been owned by a limi ted liability company for a year from the date of their acquisition shall be cancell ed by the company. Article 122 Pledge of Shares (1) A limited liability company may pledge shares in th e company only if the amounts of debt claims secured by the pledge are less than the value of the shares, i.e. the paid value of the shares. (2) A pledge by a member of his share to the company or to a person who acts in the name and on behalf of the company shall be subject to th e provisions of this Law relating to acquisition of own shares. Article 123 Loans by a Company to Acquire its Shares (1) A limited liability company may not directly or ind irectly provide any financial support for acquisition of its shares. (2) Paragraph (1) of this Article shall not apply to tr ansactions by financial institutions in the normal course of business or to transactions fo r acquisition of shares by employees or the company or a related company. (3) Dispositions referred to in paragraph (2) of this A rticle shall be carried out only in accordance with provisions of this Law restricting distributions. Article 124 Withdrawal and Cancellation of Shares (1) A limited liability company may withdraw and cancel its own shares in cases foreseen by the Articles of Association or company agreement . (2) A withdrawal or cancellation of shares may be effec ted only by decision of the company’s members, unless provided otherwise in the company’s Articles of Association or company agreement. (3) A decision of members to withdraw and cancel shares shall state the grounds for cancellation, the amount paid to the member-owner o f the shares in question, and the effect on the company’s capital of the cancellation. (4) A decision referred to in paragraph (4) of this Art icle shall be entered into the companys book of decisions. (5) All rights and obligations arising from a share sha ll terminate upon cancellation of that share. Chapter 7 Basic Rights of Company Members Section 1 Transfer of Shares Article 125 Free Transfer in Certain Cases Unless provided otherwise in this Law or the Articl es of Association or company agreement, a share may be freely transferred: 1) to another member of the company or to the company; 2) to the transferring member’s spouse, brother, siste r, lineal ancestor, lineal descendant, or spouse of a lineal descendant; 3) to a member’s legal representative or heir upon his death; or 4) by a status change of the company under this Law. Article 126 Right of First Refusal on Transfer to Third Parties (1) Before offering to transfer his share or a part the reof to a person who is not then a member and is not a person referred to in Article 1 25, a transferring member must first offer it to the company. (2) If the company does not accept such offer within th e period stated therefor in the companys Articles of Association or company agreeme nt, the decision on which is to be made by the membersmeeting, the offer shall be sent to the other members of the company, in accordance with the Articles of Association or c ompany agreement. (3) If the other members do not advise the transferring member on a decision within the period stated in the Articles of Association or com pany agrement, the offer shall be deemed refused. (4) The company or the other members may make a counter offer to the transferring member, in which case the transferring member shall give a response in writing within 10 days of receipt of the counteroffer. If the transfe rring member does not do so within such period the counteroffer shall be deemed refused. (5) A company accepting an offer may allocate some or a ll of the purchased share or part thereof to one or more of its members if all the me mbers who voted in favor of the purchase approve the allocation. If the company is unable to buy the share because of the restrictions on distributions in this Law, the members who voted for the purchase shall be obligated to do so in proportion to their contributions to the c ompany. (6) If the offering members offer is rejected, the offe ring member may, during a period of 60 days after the rejection, transfer his share to a third party at the price and on other terms offered to the company or a higher price. Article 127 Transfer in Court Enforcement Proceedings A company and its members shall have the rights sta ted in in Article 126 in the case of a transfer of a share in enforcement court proceeding s against a member. Any such proceedings shall also be subject to laws regulatin g enforecment proceedings. Article 128 Requirements and Consequences of Transfer (1) A share may be transferred voluntarily only by written contract with duly certified signatures of the transferor and the transferee. A company’s Articles of Association need not be amended to reflect a transfer, unless the co mpany’s Articles of Association provides otherwise. (2) A transferor and a transferee of a share shall be o bligated to notify the company immediately of the transfer, change of membership a nd the time of the transfer, for entry into the companys book of shares. A company shall g ive effect to a transfer when it has received notice of the transfer. (3) A transferee of a share will become a member of the company only when he has agreed in writing to be a party to and bound by the company’s Articles of Association and company agreement by signing it and he is registere d in the company’s book of shares. (4) A share transfer to heirs shall become effective as of the date the decision on succession becomes valid. Article 129 Division and Transfer in Part of a Share (1) A share may be divided in case of inheritance, lega l succession, and transfer to two or more persons. (2) A company’s Articles of Association or company agre ement may prohibit division of a share or may permit it only in certain cases such a s the case of a transfer by a member to two or more other members. (3) The provisions of this Law on share transfer shall apply to transfers of shares in whole or in part. Article 130 Pledge of a Share by a Member (1) A member of a limited liability company may pledge his share as security for a loan or other obligation of the member, unless the company’ s Articles of Association or company agreement provides otherwise. (2) Any pledge shall be entered into the company’s book of shares and the Registry. (3) Unless the company’s Articles of Association or com pany agreement provides otherwise, a pledgee shall not have any voting or m anagement rights in the company until and unless he has become a member of the company. (4) An approval of a pledge shall not imply approva l for transfer of ownership or membership to the pledgee or any other third party unless the approval so states and the approval is not contrary to the companys Article of Association or company agreement. Section 2 Distributions to Members Article 131 Financial Reports (1) A company’s directors shall submit annual financial reports and business reports, together with any related auditor’s report, to an a nnual meeting of members to be adopted by them. (2) Any approval by the membersmeeting of a companys an nual or other financial statements shall not affect any right available to the members if such statements are later found to be incorrect or misleading. Article 132 General Provisions Regarding Distributions (1) A limited liability company may make distributions to its members at any time, unless provided otherwise in the company’s Articles of Ass ociation or company agreement and except as provided in the provisions of this Law re stricting distributions. (2) Unless provided otherwise in a company’s Articles o f Association or company agreement, any distributions to members shall be ma de to them in proportion to their then- current percentages of the initial capital of all m embers actually paid in to the company at the point in time when the company’s decision to ma ke the distribution is made. (3) A company agreement may contain other provisions re garding distributions, including but not limited to provisions specifying times and amounts for distributions, delegating authority to declare and pay distributions to a spe cified majority of members or to directors, providing for a record date to determine the identi ty of members who are entitled to a distribution, or imposing limitations on distributi ons in addition to those in the provisions of this Law restricting distributions. (4) When a member becomes entitled to receive a distrib ution, he becomes a creditor of the company with respect to the distribution. Article 133 Restrictions on Distributions (1) A limited liability company may not make a dist ribution to its members if, after payment of the distribution, either: 1) the company’s net assets would be less than its ini tial capital, increased by the amount of any reserves that may be used for distributions to members in compliance with this Law and the law which regulates accounting and audit, a nd decreased by any amount that the company is required to enter into reserves for the year of distributions; or 2) the company would be incapable of paying its debts as they become due in the ordinary course of the company’s business. (2) As an exception to paragraph (1) of this Articl e, a company may make a distribution to its members if its financial statements prepared in accordance with the law which regulates accounting and auditing show that the distribution is reasonable in the circumstances. A company’s Articles of Association or company agreem ent may require that certain specified financial statements, accounting practice s or valuation methods be used for such a determination. Article 134 Personal Liability for Prohibited Distributions (1) A member who receives a distribution prohibited by Article 133 of this Law, and who knew, or who under the circumstances must have know n, at the time that the distribution was thus prohibited, shall be personally liable to the company for the return of the amount of the distribution. (2) A member, director or other person who causes such a prohibited distribution to be made, and who knew at the time that the distributio n was thus prohibited, shall be personally liable to the company for the return of the amount of the distribution. (3) If more than one person has liability under paragra phs (1) and (2) of this Article with respect to a particular prohibited distribution, th eir liability shall be joint and several. (4) A company’s Articles of Association or company agre ement may provide that members must replenish the company’s basic capital if the persons referred to in paragraph (2) of this Article do not reimburse the company fo r such prohibited distributions. Article 135 Loans for Capital to be Subordinated (1) If a member of a limited liability company has gran ted the company a loan at a time when the members acting as orderly merchants would instead have made capital contributions (such as at a time of financial crisi s), the member shall be a subordinated creditor under the Law on Bankruptcy for repayment of the loan in a bankruptcy proceeding against the company. (2) If a third party has granted the company a loan des cribed in paragraph (1) of this Article and a company member has provided the third party with collateral or guarantees for repayment of the loan, then in a bankruptcy pro ceeding against the company the third party may assert a claim for repayment only of amou nts that remain unpaid. (3) The provisions of paragraphs (1) and (2) of this Ar ticle shall apply mutatis mutandis to other actions of a company member or a third par ty that are commercially equivalent to the granting of loans as described in paragraphs (1 ) and (2) of this Article. (4) The foregoing rules shall not apply with respect to a member or director of the company who holds shares representing less than 10% of the company’s capital. (5) If the company has repaid a loan or other amounts r eferred to in paragraphs (1) - (3) of this Article within a year preceding the commencing of bankruptcy proceedings against the company, then the member who gave the security shal l reimburse the company the amount that was repaid. (6) The obligation referred to in paragraph (5) of this Article shall, however, exist only up to the amount of the value of the security given by him at the time of the repayment of the loan. (7) A member shall be discharged from the liability ref erred to in paragraph (5) hereof if he makes available to the company, for satisfaction of the obligation, the assets which were granted as security. (8) Paragraphs (1)–(7) of this Article shall apply muta tis mutandis to other legal transactions which are the commercial equivalent of a loan. Chapter 8 Assembly Section 1 Definition and Competence Article 136 General Provisions (1) The members of a limited liabilty company shall act through members’ meetings. (2) In a single-member limited liability company the de cisions of the members’ meeting shall be made by the single member or another perso n authorized by the member. (3) Immediately after the adoption of a decision of a s ingle-member company, the member shall record and sign the minutes and enter the dec ision in writing in the company’s book of decisions. (4) Decisions in a single-member company referred to in paragraphs (2) and (3) of this Article need not be in writing or entered in the co mpanys book of decisions if they concern current operations in the normal course of the comp anys business. Article 137 Competence of the Members’ Meeting Unless provided otherwise in this Law or in a compa ny’s Articles of Association or company agreement, the members’ meeting shall make decisions on: 1) approving business operations concluded relating to founding of the company prior to registration of the company in the Registry; 2) appointment and removal of directors and fixing the ir remuneration; 3) adopting financial reports and deciding the time an d amount of distributions to members; 4) appointing internal auditors or independent auditor s, approval of their findings and opinions, and determining their remuneration and ot her conditions of their engagement; 5) appointing liquidators and confirming of the liquid ation balance sheet; 6) increasing or decreasing the basic capital of the c ompany, acquiring, withdrawing or canceling own shares, and issuing any securities; 7) granting procuration and other business powers-of-a ttorney for the company and any company branches; 8) deciding on any additional capital contributions to be required from members; 9) expulsion of members, admission of new members, and approval of transfer of shares to third parties when company approval is required; 10) changes in status, changes in legal form and termin ation of existence of the company; 11) approving transactions of the company with director s and other persons contemplated by Article 35 of this Law; 12) acquisition, sale, lease, pledge, and other disposi tions of major assets as provided in this Law; 13) amending the company’s Articles of Association or c ompany agreement; 14) establishing branches; 15) adopting a book of rules for members’ meetings; and 16) any other matters which the Articles of Association of company agreement states shall be within the exclusive competence of the members’ meeting. Section 2 Convening a Meeting and Agenda Article 138 Convening a Meeting (1) A members’ meeting shall be convened when necessary but always in cases prescribed by this Law or the company’s Articles of Association or company agreement. (2) A members’ meeting shall be convened by the company ’s single director or board of directors unless the company’s Articles of Associat ion or company agreement provides otherwise. The place of each meeting shall be the c ompany’s registered office, unless the Articles of Association or company agreement prescr ibes differently or the members decide differently. Article 139 Regular and Extraordinary Meetings (1) A regular annual meeting shall be held no later tha n six months after the end of the company’s business year with an aim of adopting the financial reports and making decisions on distributions. (2) Members’ meetings held between the annual meetings shall be known as extraordinary meetings. (3) A request to convene a meeting may be submitted to the directors by any member or director at any time. (4) An extraordinary meeting shall be convened if reque sted in writing by members with at least 10% of the voting power of all members, unles s the Articles of Association or company agreement prescribes that this right belong s to members who represent a smaller percentage of the voting power. (5) A request referred to in paragraph (4) of this Arti cle shall be made to the directors of the company. (6) If the directors do not, within 15 days after recei ving the request, grant the request and convene an extraordinary meeting, the request submi tters may convene the meeting themselves, stating the agenda. In this case the me eting shall determine the person to bear the costs of the thus convened session. (7) If an extraordinary meeting convened by minority me mbers is not held or lacks a quorum, the minority members may convene an additio nal meeting not less than seven days later, and if the thus convened meeting is not held or lacks a quorum they shall have the right to ask the court, in noncontentious proceedin gs, to appoint a person who shall convene the meeting and state the agenda in the capacity of interim legal representative. (8) The court shall be obligated to decide on a minorit y members’ request referred to in paragraph (7) of this Article within 48 hours after receiving it. Article 140 Notice and Agenda (1) A members’ meeting shall be convened by sending an invitations in writing to each member at the addresses stated in the company’s boo k of shares. An invitation may be sent to a member by email if the member has consented th ereto in writing. (2) The invitations shall be thus delivered to each mem ber not later than seven nor more than 15 days prior to the meeting. (3) The invitation shall contain the registered name an d registered office of the company, the time and place of the meeting, the proposed age nda, and any other matters required in the company’s Articles of Association or company ag reement. If a decision on amending the Articles of Association or company agreement is proposed the full proposed amendment must be enclosed. The invitation must als o include drafts of proposed decisions relating to the agenda, drafts or descriptions of c ontracts the meeting is to approve, and, when appropriate, financial reports, managing board reports, supervisory board reports and auditors’ reports. (4) The meeting shall make decisions on the issues stat ed in the agenda and also on issues proposed by any member who has informed the other m embers of his proposal not later than three days prior to the meeting. Matters that are not listed in the invitation or of which members have not been informed can be added to the agenda only if all members are present and do not object to discussing and voting on them. Decisions on such added issues are effective if no absent member expresses disagre ement therewith, in accordance with the Articles of Association or company agreement. Article 141 Waiver of Objection to Procedure A member who attends a members’ meeting, in person or through an authorized representative, may not object to the procedure for convening or conducting the meeting unless he does so at the meeting or in writing with in three days following the meeting. Article 142 Action Without a Formally-Convened Meeting Unless provided otherwise in a company’s Articles o f Association or company agreement, a members’ meeting may also be held without complyi ng with the procedures prescribed in Article 140 if all the attending members agree to t his and if all the non-attending members waive any objection in writing. Section 3 Procedure for Decision Making Article 143 Voting by Proxy (1) Unless provided otherwise in a company’s Articl es of Association or company agreement, a member may appoint any other person (a proxy) to vote for him by signing a written power of attorney to that effect. (2) A member of a company may not be represented at a m eeting under circumstances where the representative has only part of the votin g power of the member’s share, and may not grant a proxy to more than one person. (3) A properly appointed legal representative of an ent ity shall represent and vote for that entity and shall not be considered a proxy subject to paragraph (1) of this Article. (4) A proxy agreement may be valid for only one members ’ meeting including any reconvening of that meeting. (5) A director of a company may not vote or act as a vo ting representative of an employee of the company or a related person to an employee. Article 144 Quorum (1) At a members’ meeting a simple majority of the voti ng power on a matter shall constitute a quorum for action of the members on th at matter, unless the Articles of Association or company agreement requires a larger majority. (2) If a meeting is not held due to lack of the quorum prescribed in paragraph (1) of this Article, it may be reconvened with the same propose d agenda at a date not less than 10 nor more than 30 days from the date of the first meetin g in the manner prescribed in Article 140. (3) At the reconvened meeting one-third of the voting p ower on a matter shall constitute a quorum for action on that matter, unless the Articl es of Association or company agreement requires a larger quorum. Article 145 Conduct of a Members’ Meeting (1) A members’ meeting may adopt detailed procedural ru les for the conduct of a meeting which are consistent with this Law, the Articles of Association and company agreement. (2) A members’ meeting shall be presided over by a chai rman who shall be elected at the beginning of the meeting, unless the Articles of As sociation, company agreement or rules adopted by the meeting provide otherwise. (3) The authority, obligations and liabilities of the c hairman of a meeting may be specified in a company’s Articles of Association, c ompany agreement or rules adopted by a meeting. (4) The chairman at a meeting shall appoint a person to keep minutes of the meeting, two persons to certify the minutes as being accurate, a nd a person to count votes, unless the Articles of Association, company agreement or rules adopted at a meeting provide otherwise. (5) All directors of a company shall attend each member s’ meeting if possible. Article 146 Decision Making (1) The decision of a simple majority of the voting pow er of a quorum prescribed in paragraphs (1) and (2) of Article 144 shall control on all matters unless a company’s Articles of Association or company agreement requir es a higher vote, and except as provided in paragraph (2) of this Article. (2) Unanimous agreement of all members shall be require d for the following matters, unless the Articles of Association or company agree ment provides for a lower vote (but not less than a simple majority of the voting power of all members): amendment of the company’s Articles of Association or company agreem ent, increasing or decreasing the company’s basic capital except by additional contri butions of members required in the company’s Articles of Association or company agreem ent; legal status changes of the company by merger, division, change of legal form, termination or liquidation of the company; making of distributions to members; acquis ition by the company of its own shares; or the disposition of major assets as provi ded in this Law. (3) A decision that reduces or eliminates the rights as a member of one or more members in relation to the rights as a member of any other member shall require the agreement of the affected member or members, unless otherwise provid ed in this Law. Article 147 Meetings, Meetings by Telephone, Voting by Mail, an d Actions Without a Meeting (1) A members’ meeting of a company with not more than 10 members may be held through conference telephone or other audio or visu al communication equipment if all of the participants can listen and talk to each other. The persons participating in such a meeting shall be considered to be personally presen t at the meeting. (2) A member may vote at a meeting by mail or other mea ns of document delivery, unless the Articles of Association or company agreement pr ovides otherwise. The Articles of Association or company agreement may contained deta iled rules for such voting, including rules specifying the issues which may be thus voted on. (3) If a company’s Articles of Association or company a greement requires that action of the members must be taken at a meeting, any action which may be taken at a meeting may be taken without a meeting if consent in writing, s tating the action so taken, is signed by all of the members entitled to vote on such matter. Article 148 Open and Secret Ballot (1) Voting at a members’ meeting shall be open -- by sh ow of hands. (2) Voting on any matter shall be by secret ballot if r equested by members who are present and have or represent at least 10% of the voting po wer on the matter in question. Article 149 Disqualification to Vote (1) A member may not vote at a meeting on decisions tha t would: 1) eliminate or reduce his obligations to the company; 2) initiate or terminate a lawsuit against him; or 3) approve transactions between him and the company re ferred to in Article 35 of this Law. (2) References in paragraph (1) of this Article to a me mber include related persons as defined in this Law. (3) A member shall not be disqualified from voting on d ecisions to appoint or remove him as director or liquidator of the company or to appo int or remove another person related to him. (4) The voting power of a member whose vote is disquali fied shall not be taken into consideration in establishing the quorum or the num ber of votes necessary for making a decision. Article 150 Minutes (1) Decisions at a members’ meeting shall be recorded i n minutes. (2) The minutes shall include particularly the name of the person presiding and any persons appointed to certify the minutes or count v otes, the issues that were subject to voting, the results of voting for and against and a bstained, any objections of members against the holding of the meeting, any dissenting opinions of members, and any objections by directors to decisions made. (3) The list of members present and the documents relat ing to convening the meeting session shall be filed in the company’s records wit h the minutes. (4) The minutes shall be signed by the meeting’s chairm an and the recording clerk. (5) Failure to comply with this Article shall not in it self affect otherwise valid company action, if there is other evidence of its validity. Article 151 Book of Decisions (1) Decisions adopted at a members’ meeting shall be en tered into a book of decisions without delay. (2) The decisions shall be valid from the moment of ado ption, unless provided otherwise in the Articles of Association or company agreement . Section 4 Declaration of Nullity of a Meeting Decision Article 152 Applicability of Similar Articles Provisions of this Law relating to general and spec ial bases for declaration of nullity of a decision of a shareholdersmeeting, exceptions from a declaration of nullity and procedure of nullity referring to a joint stock company shall apply mutatis mutandis to a limited liability company. Chapter 9 Director or Board of Directors Section 1 Status and Method of Work Article 153 General Provisions Concerning Directors (1) A limited liability company may have a single direc tor or a board of directors. (2) A companys Articles of Association shall state whet her the the company shall have a single director or a board of directors. (3) A single director or member of a bord of directors of a limited liability company may be a member of the company or may be a person who i s not a member. (4) If a company has a board of directors, the board ma y consist of all members of the company or it may consist of other persons. Article 154 Election of Directors (1) All directors of a company shall be elected by the members of the company at a members’ meeting, except that the initial directors may be appointed in the Articles of Association. (2) A company’s Articles of Association or company agre ement may provide for election of directors by cumulative voting as described in t his Law. Article 155 Number of Directors and Vacancies (1) A company’s Articles of Association or company agre ement shall state the number of directors on the companys board of directors. (2) In such case, if the number of directors falls belo w that number the remaining directors may fill the vacancy. (3) In such a case, the remaining directors shall conve ne a members’ meeting without delay to fill the vacancy, and the remaining member s shall perform only ugent tasks before the vacancy is filled, unless the company’s Articles of Association or company agreement provides otherwise. Article 156 Chairman of the Board (1) Unless a company’s Articles of Association or compa ny agreement provides otherwise, the company’s board of directors shall have a chair man who shall be elected by the majority of members. (2) A chairman shall authority to represent the company . (3) The chairman shall convene and preside at meetings of the board and shall be responsible for the taking of minutes of meetings o f the board. (4) The Articles of Association or company agreement ma y provide that the chairman shall preside at members’ meetings and shall be res ponsible for the taking of minutes of membersmeetings. Section 2 Activities of the Single Director or Board of Direc tors Article 157 Competence (1) Unless provided otherwise in a company’s Articl es of Association, a single director or board of directors shall have the following compete nce: 1) representation of the company and managing operatio ns of the company in accordance with this Law, the Article of Association and the c ompany agreement; 2) establishing a business plan; 3) convening members’ meetings and establishing the pr oposed agenda for those meetings; 4) implementing decisions of the members’ meetings; 5) establishing record dates and payment dates as of w hich the company determines the identity of its members for entitlement to dividend s, voting and other purposes; 6) concluding loan agreements; 7) establishing the date as of which members acquire t he right to participate in profit and the date of payment of participation in profit, as well as the date of acquiring the right to vote of other members of the company; 8) granting or revoking procura; and 9) any other matters provided for in the Articles of A ssociation or company agreement. (2) If so stated in the Articles of Association or comp any agreement, a single director or board of directors shall have the following respons ibilities: 1) implementing the acquisition, withdrawal and cancel lation of company shares when authorized; 2) determining the amount of dividends; 3) issuing bonds and other securities. (3) A director or board of directors may transfer activ ities relating to matters referred to in paragraphs (1) and (2) of this Article unless the c ompanys Articles of Association provides otherwise. Article 158 Liability for Business Books A single director or board of directors of a compan y shall be responsible for appropriate business book keeping and internal surveillance of the business in compliance with this Law. Section 3 Method of Work of the Board of Directors Article 159 Individual or Joint Action by Directors (1) If a company has two or more directors, each of the m shall have the right to act and bind the company independently, unless the company’ s Articles of Association provides otherwise. (2) If the Articles of Association or company agreement provides that directors may act only jointly, the approval of all directors shall b e required for each act or transaction, except when this would require deferment of a decis ion and the deferment would harm the company’s interests. (3) If the Articles of Association or company agreement provides that a director is bound to follow instructions of another director and the first director considers instructions given to be inappropriate, he shall notify the other dire ctors for the purpose of deciding jointly on the transaction, unless this would require defermen t of a decision and the deferment would harm the company’s interests. (4) In the case of dispute between directors directors referred to in paragraph (3) of this Article, an extraordinary members’ meeting shall be convened in accordance with this Law. A r t i c l e 1 6 0 M e e t i n g s o f t h e B o a r d (1) The board of directors of a limited liability compa ny shall hold at least four regular meetings each year, one of which shall be held imme diately prior to the annual members’ meeting. (2) Apart from the meetings referred to in paragraph (1 ) of this Article, the board may hold extraordinary sessions which may be convened b y the chairman at his own initiative or at the request of any member of the board. If the p resident fails to convene a meeting at the written request of one of the members, the meeting may be convened by the member himself. (3) The convening of extraordinary sessions of the boar d shall be done in writing, stating the reasons, the time and the place of the meeting, which shall be given to all the members of the board. (4) A meeting of the board may be held through conferen ce telephone or other audio or visual communication equipment if all of the partic ipants can listen and talk to each other. The persons attending a meeting in this way shall b e considered to be personally present at the meeting. (5) A meeting of the board may be held without the proc edures prescribed in paragraphs (2)-(4) of this Article if it is attended by all of the directors and none of them objects to this or, if it is not attended by all of the directors, the non-attending directors waive any objection in writing in accordance with the Article s of Association and company agreement. (6) The board may adopt procedural rules which further govern their procedures so long as those rules are not inconsistent with the compan y’s Articles of Association or company agreement. (7) Paragraphs (1)-(6) of this Article shall apply to a company unless the company’s Articles of Association or company agreement provid es otherwise. Article 161 Action Without a Meeting Unless provided otherwise in a company’s Articles o f Association or company agreement, any decision which may be taken by the board at a m eeting, may be taken by the board without a meeting if a consent in writing is signed by all of the members of the board entitled to vote on that matter. Article 162 Quorum and Majority (1) The quorum for decision making by the board shall b e a majority of the total number of members of the board. (2) The decision of a majority of all of the directors shall be the decision of the board. (3) Decisions of the board shall become effective at th e moment of their adoption. Decisions of the board shall be entered in the comp anys book of decisions. (4) If the votes of the directors result in a draw, the deciding vote shall be that of the chairman, who shall vote last. (5) Paragraphs (1)-(4) of this Article shall apply to a company unless the company’s Articles of Association or company agreement provid es otherwise. Article 163 Disqualification to Vote The provisions of this Law relating to disqualifica taion to vote shall be applied mutatis mutandis with respect to voting by directors or mem bers of a limted liability company. Article 164 Committees (1) The board of a company may form one or more committ ees comprised of members of the board or other persons. (2) The conditions and the manner of work for such comm ittees may be defined by the board in a manner consistent with the company’s Art icles of Association or company agreement. (3) Unless provided otherwise in the company’s Arti cles of Association or company agreement, all actions and decisions of a committee shall be subject to the board’s approval. Article 165 Minutes (1) Minutes shall be kept of each meeting of a company’ s board or committee of a board and shall be presented for approval at the next-fol lowing meeting of the board or committee. The minutes shall be signed by the perso n presiding at the meeting and the person who took the minutes. (2) The minutes of a meeting shall be written within 10 days after the meeting. (3) The minutes shall state the time and place of the m eeting, the directors present, the agenda of the meeting, a summary of the discussions , the issues subject to voting, and the results of voting including identification of those who voted in favor, against or abstained. (4) A failure to comply with paragraphs (1)-(3) of this Article shall not affect otherwise valid action by the board or committee. Section 4 Status Liability Article 166 Resignation of a Director The provisions of this Law relating to resignation of a director of a joint stock company shall apply mutatis mutandis with respect to resign ation of a director of a limited liability company. Article 167 Removal of a Director (1) The members of a company at a members’ meeting may remove one or more directors of the company with or without stated cause. (2) Any such removal shall be without prejudice to a di rector’s rights to compensation under any separate contract with the company but su ch a contract may not eliminate the company’s right stated in paragraph (1) of this Art icle. Chapter 10 Supervision Article 168 Internal Auditor or Audit Committee (1) The Articles of Association or company agreement of a limited liability company may provide that the company shall have an internal aud itor or an audit committee. (2) An audit committee shall have at least three member s and its total number of members shall be odd. An internal auditor shall be a natura l person. Article 169 Election and Removal (1) An internal auditor or member of an audit committee shall be elected by the members’ meeting from among independent directors if the com pany has independent directors, and from among other independent persons, except that t he initial internal auditor or members may be appointed in the initial Articles of Associa tion or by decision of the founders of the company. (2) An internal auditor or member of an audit committee may be removed by decision of a members’ meeting with or without a stated reason for removal. (3) Any such removal shall not in itself prejudice any right to compensation which the person may have under a contract with the company. Such a contract may not eliminate the company’s rights under paragraph (2) of this Articl e. Article 170 Competence and Method of Work (1) An internal auditor and members of an audit com mittee of a limited liability company shall report to the members’ meeting on the followi ng: 1) the accounting, reporting and financial operations of the company and any related companies; 2) the company’s compliance with legal and regulatory requirements; and 3) the qualifications, independence and performance of the company’s outside auditor, if there is one. (2) In performing its functions the internal auditor or audit committee shall control y the following: 1) the selection and compensation of the outside audit or; 2) the adequacy and completeness of the annual and oth er financial statements of the company and the basis for proposals for distributio n of profit and other distributions to members; 3) the adequacy and completeness of the company’s disc losure of financial and other information to the members; 4) compliance of the company’s business and transactio ns with the provisions of this law relating to financial matters and conflict of inter est transactions; and 5) procedures for handling any complaints from members , or other persons relating to matters referred to in subparagraphs 1)-4) above. (3) The internal auditor or audit committee shall prese nt a report to the members on the foregoing at each annual members’ meeting and at an y extraordinary members’ meeting when it considers a report to be appropriate or nec essary and when so requested by the company’s board of directors. (4) In carrying out their duties the internal auditor o r audit committee may inspect all documents of the company, request statements and ex planations of members of the board of directors or employees and inspect the state of the company’s assets. (5) The internal auditor and the audit committee shall submit a separate report to the members’ meeting on contracts between the company a nd a director or related persons as defined in this Law. (6) In performing their duties the internal auditor or audit committee may engage other persons competent in their fields and pay reasonabl e remuneration to them. (7) The internal auditor or audit committee shall perfo rm its activities including those referred to in paragraphs (1)-(6) of this Article i n compliance with the law which regulates accounting and audit and the company’s Articles of Association and company agreement. A r t i c l e 1 7 1 A u d i t o r (1) A limited liability company may have an auditor with supervisory authority in accordance with the law which regulates accounting and audit. (2) A company’s auditor shall be notified of the ho lding of members’ meetings simultaneously with the members, so that he can par ticipate in the meeting in accordance with the law. Article 172 Fiduciary Agent-Expert The provisions of this Law relating to the appointm ent of a fiduciary agent-expert and his competences and reports in a joint stock company sh all apply mutatis mutandis to a limited liability company, unless provided otherwise in the Articles of Association or company agreement. Chapter 11 Amendment of Articles of Association and Company Ag reement Article 173 Method of Amendment (1) A company’s Articles of Association may be amended only by unanimous agreement of all members of the company, unless provided othe rwise in the Articles of Association. (2) The Articles of Association may permit amendment of the Articles of Association by fewer members than all, but not by less than a simp le majority of the company’s voting power. (3) A company’s company agreement may be amended only b y unanimous agreement of all members of the company, unless provided otherwi se in the company agreement. (4) The company agreement may permit amendment of the c ompany agreement by fewer members than all, but not by less than a simple maj ority of the company’s voting power. (5) Notwithstanding paragraphs (1)-(4) of this Article, any amendment of a company’s Articles of Association or company agreement which changes a member’s rights shall require that member’s consent. (6) The signatures of company members on amendments to the company’s Articles of Association or company agreement shall be certified in accordance with law. Chapter 12 Company Documents and Information Article 174 Retention of Company Documents and Information (1) Every company must at all times keep and mainta in the following: 1) its Articles of Association including all amendment s thereto; 2) its company agreement and all amendments thereto; 3) the decision on registration; 4) internal documents approved by its membersmeeting a nd board of directors; 5) its book of decisions 6) foundation documents of every branch and representa tive office of the company; 7) documents proving the ownership and other rights of the company over its assets; 8) minutes and decisions of all membersmeetings and bo ard of directorsmeetings; 9) minutes of any audit committee meeting and their de cisions; 10) financial reports, reports on business operations a nd auditorsreports; 11) accounting files and documents; 12) documents on financial and operations reports submi tted to authorized bodies; 13) a list of all related companies with information sh owing the share or other rights in those companies; 14) the book of shares; 15) a list of full names and addresses of all members o f the board of directors and all persons authorized to represent the company, as wel l as information whether the latter represent the company collectively or individually; 16) the full name and address of the internal auditor a nd members of the audit committee; 17) a list of all transfers of shares including pledges or any other transfer to a person who does not thus become a member of the company; and 18) a list of contracts between the company and directo rs or related persons. (2) A limited liability company shall keep the document s and information referred to in pararaph (1) of this Article foregoing at its regis tered office or another place known to and accessible to all of the companys members. (3) A limited liability company shall keep its Articles of Association and company agreement permanently. It shall keep the other docu ments above for at least five years, and shall then deliver them to the archives in accordan ce with applicable laws and regulations. Article 175 Access to Records and Information The provisions of this Law relating to access to co mpany records and information of a joint stock company and access thereto by court order sha ll apply mutatis mutandis to access to company records and information on a limited liabil ity company and access thereto by court order. Chapter 13 Rights Based on Termination of a Member's Membershi p in a Company and Termination of Company Section 1 Termination of a Member’s Membership in a Company Article 176 Events Causing Termination of Membership A member of a company shall cease to be a member up on the occurrence of any of the following events: 1) his death in the case of a natural person; 2) termination of existence as a legal entity in the c ase of a legal entity; 3) withdrawal of the member in accordance with the com pany’s Articles of Association of company agreement; 4) withdrawal of a member in violation of the company’ s Articles of Association or company agreement; 5) withdrawal of the member in compliance with a court decision; 6) expulsion of the member in compliance with a court decision; 7) expulsion of a member in compliance with the compan y’s Articles of Association or company agreement; 8) transfer of all of the member’s share; or 9) an event agreed to in the Articles of Association o r company agreement as causing the member to cease to be a member. Section 2 Withdrawal or Expulsion of a Member Article 177 Basic Principles (1) A limited liability company’s Articles of Associati on or company agreement may state grounds, procedures and consequences of termi nation of membership of a member of the company, including contractual penalties or a r equirement for damage compensation upon expulsion or wrongful withdrawal. (2) The Articles of Association or company agreement of a limited liability company may not deny in advance the right to withdraw from the company and a member may not renounce that right in advance. The same applies wi th respect to a member’s right to make claims against the company for wrongful expulsion a nd the company’ right to make claims against the member for wrongful withdrawal. Article 178 Withdrawal of a Member for Justified Reasons (1) A member of a limited liability company may wit hdraw from the company if other company members or the company have caused damage t o the member by their actions, that the member has been prevented from exercising his rights in the company, or that the company or company members have imposed unreasonabl e obligations on him, or for other justified reasons. (2) In a case referred to in paragraph (1) of this Arti cle, the member is entitled to bring proceedings before the competent court aimed at est ablishing justified reasons for withdrawal, if his reasons for withdrawal are chall enged. (3) A member withdrawing from the company for justified reasons shall have the right to compensation based on the market value of his share , to be paid within any time period stated in the Articles of Association or company ag reement, as well as the right to compensation for any damage caused to him. (4) A member withdrawing from the company without justi fied reasons shall be obligated to compensate for any damage caused to the company. A r t i c l e 1 7 9 E x p u l s i o n o f a M e m b e r (1) A limited liability company’s members’ meeting may initiate an expulsion procedure against a individual member before the competent co urt if the member fails to make a contribution as required by the company’s Articles of Association or company agreement or if other justified reasons exist. (2) Other justified reasons refereed to in paragrap h (1) of this Article particularly exist if the member: 1) deliberately or with gross negligence inflicts dama ge to the company or members of the company; 2) deliberately or with gross negligence violates the Articles of Association or company agreement or obligations prescribed by law; 3) is involved in an undertaking which makes impossibl e the execution of business operations between the company and the member; or 4) by his actions obstructs or significantly hinders t he company’s business. (3) A claim for a member’s expulsion may be submitt ed by the company and any company member. Upon initiation of a procedure for expulsio n of the member, the court may suspend his right to vote on any matter and other r ights, if it finds that necessary and justified. (4) A limited liability company is entitled to comp ensation for damage inflicted on it by the member who is expelled due to justified reasons. Article 180 Consequences of Termination of Membership (1) Upon withdrawal or expulsion of a member of a limit ed liability company, the capacity of member and all rights deriving thereof shall cease to exist. (2) Paragraph (1) of this Article also applies with res pect to termination of member capacity on other grounds. (3) Such a person whose membership ceases to exist is e ntitled to the market value compensation of his share at the time of membership termination. (4) Paragraph (3) of this Article shall not apply to a member whose membership was terminated by his death when and his heirs are enti tled to take over his share and become the company members. (5) Paragraph (3) also shall not apply to a member who sold his share to another person who is entitled to take over his share and become a member. (6) Claims of a limited liability company for damages i n the case of expulsion of a member for justified reasons or a case of wrongful withdrawal, or other misconduct of the member, shall be offset against the claim of the sh are value of the member in question. (7) Compensation for share value may not be paid if it would violate the restrictions in this Law on payment of distributions to members of the company. (8) In order to secure the payment of claims on the bas is of a withdrawal or expulsion of a member of a limited liability company, the court ma y suspend the member from exercising his membership rights in the company. The court may also order other interim measures. Section 3 Dissolution of a Company Article 181 Events Causing Dissolution A limited liability company shall dissolve upon the occurrence of any of the following events: 1) expiration of the company’s term stated in the A rticles of Association; 2) decision of its members; 3) status change leading to termination of the company ; 4) bankruptcy; 5) a final decision of the competent court that the co mpany’s registration was null and void and ordering deletion of the company from the Registry; and 6) an event specified in the Articles of Association o r company agreement. Article 182 Single-Member Company A single-member limited liability company shall cea se to exist upon opening of bankruptcy proceedings or liquidation against its only member or by the death of the member having no legal heirs to his/her stakes. Article 183 Dissolution by a Court on Motion of Minority Member s Provisions of this Law relating to dissolution and other remedies at the request of minority shareholders of a joint stock company shall apply m utatis mutandis to a limited liability company. Part IV JOINT STOCK COMPANY Chapter 1 Definition Article 184 Definition and Liability (1) A joint stock company is a company organized by one or more legal entities and /or natural persons, as shareholders of the company, to conduct business under a common registered name, and whose basic capital is defined and divided into shares. (2) A joint stock company is liable for all of its obli gations with all of its assets. (3) A shareholder of a joint stock company is not l iable for obligations of the company solely by reason of being shareholder, except that a shareholder shall be liable up to the amount of any agreed but unpaid contribution to the company in accordance with this Law. Chapter 2 Articles of Associations and By-Laws Article 185 Articles of Association (1) The Articles of Association of a joint stock co mpany must contain: 1) the full name and residence address of each natural person founder and the registeredname and registered office of each legal entity founder; 2) the registered name and registered office of the co mpany; 3) the business purpose of the company; 4) a statement of whether the company is a closed or a n open company; 5) the amount of the company’s subscribed and paid-in basic capital and the method of payment of that capital into the company in exchang e for shares; 6) the number and the nominal value (or in the case of shares without nominal value accounting value) of shares of each type and class that the company is authorized to issue. and the rights of each class of shares. 7) the number of shares of each type and class which h ave been subscribed and which have been issued; 8) the names of any initial shareholders whose initial contribution is in kind, a description of that investment, and a statement of the number and types of shares to be issued therefor; 9) the duration of the company unless it is perpetual; 10) the total amount, or at least an estimate, of all t he costs payable by the company or chargeable to it by reason of its formation and, wh ere appropriate, before the company is authorized to commence business; and 11) any special advantage granted, at the time the company is founded or up to the time it receives authorization to commence business, to any one who has taken part in the foundation of the company or in transactions leadin g to the grant of such authorization. (2) The Articles of Association of a joint stock co mpany may also contain: 1) the names and addresses of the company’s initial di rectors; 2) any authorization given to the board of directors t o issue authorized (but unissued) shares in accordance with this Law and the company’ s by-laws; 3) restrictions on transfer of the company’s shares, i f any, in the case of a closed joint stock company; and 4) any other matter that under this Law may be set for th in the Articles of Association or by-laws. Article 186 By-Laws (1) Apart from the Articles of Association a company ma y have by-laws regulating in more detail the company’s business and governance. (2) The by-laws of a company are not required to be sub mitted to the Registry. (3) The by-laws must be in writing. (4) The by-laws and any amendments thereto shall have l egal effect as of the moment of their adoption unless provided otherwise in the by- laws themselves. (5) If the power to make or amend the by-laws is not ex plicitly given to the shareholders in the Articles of Association, the by-laws may be made or amended by the the board of directors. Article 187 Relationship of Articles of Association and By-Laws In the event of any inconsistency between a company’s Articles of Association and by- laws, the Articles of Association shall control. Chapter 3 Special Benefits and Costs Article 188 Special Benefits (1) Any special benefits for shareholders or third part ies shall be stated in the Articles of Association, which shall also state the persons to whom they are given and the period of time for which they are given if limited. (2) Special benefits shall expire with expiration of th e term for which they are awarded, subject to any amendment of the Articles of Associa tion which provides otherwise. (3) If special benefits for shareholders or third parti es are not stated in the Articles of Association, any contracts respecting them shall be null and void. An amendment to the Articles of Association made after a company has be en registered may not provide for such contracts. Article 189 Founding Costs (1) A company’s Articles of Association may provide tha t the cost of founding the company shall be borne by the company or by its fou nders. (2) The founders shall bear the cost of founding the co mpany if not provided otherwise in the Articles of Association. (3) Such costs may be reimbursed by the company to foun ders only up to an amount stated in the Articles of Association for that purp ose. (4) If the Articles of Association state that the compa ny shall bear such costs, the costs may be paid from the company’s basic capital or may be paid into the company as a contribution. Chapter 4 Contributions Article 190 Loans to Acquire Shares (1) A company may not make loans, extend credit or prov ide other financial support or security for the acquisition of its shares. (2) The provisions of paragraph (1) of this Article sha ll not apply to transactions in the normal course of business of a financial organizati on, or giving deposits, credit or security for acquisition of shares by employees or the compa ny or of a linked company as defined in this Law. (3) Any transaction referred to in paragraph (2) of thi s Article shall be subject to restrictions on distributions stated in this Law. Article 191 Valuation of Contributions in Kind (1) If there are contributions in kind, one or more ind ependent authorized appraisers shall prepare a report stating the value of such contribu tions before the company’s initial registration. (2) An appraiser referred to in paragraph (1) of this L aw may be a natural person or a company authorized to audit in accordance with the law which regulates accounting and audit. (3) The report shall describe the contributions in kind , shall state the methods used in determining their value, and shall state whether th at value represents at least the number and nominal value of the shares (or the accounting value in the case of shares without nominal value) for which the contributions in kind are to be issued and, where appropriate, the premium over nominal value for which the shares are to be issued. (4) If a contribution includes or consists of a company , its balance sheets for the two preceding business years shall be included in the a ppraisers’ report. (5) The appraisers’ report shall be submitted to the Re gistry and published in accordance with the law which regulates registration of busine ss entities. (6) As an exception to paragraphs (1) and (2) of th is Article, the valuation of contributions in kind to a closed company shall be determined as provided in Article 14 of this Law. Article 192 Form of Contributions and Payment into the Company (1) A shareholder’s contribution for the issuance of sh ares may be made in money or in kind but not in work or services, whether performed or future. (2) As an exception to paragraph (1) of this Article, a n in kind contribution for shares of a closed company may be made in labor or services per formed for the company, if the company’s Articles of Association so provide. (3) Contributions in cash must be paid up at the time o f a company’s registration at not less than 50% of their nominal value or, in the cas e of shares without nominal value, their accounting value. The remainder must be paid up in full within two years after the company’s registration. (4) All agreed contributions in kind must be paid into a company in full within two years after the company’s registration. Chapter 5 Closed and Open Companies Article 193 Forms (1) A joint stock company may be closed or open. (2) A joint stock company shall be an open company if i ts Articles of Association do not state that it is a closed company. Article 194 Closed Company (1) A closed company is a company whose shares are and may be issued only to its founders or to another limited group of persons in accordance with law. (2) A closed company may have a maximum of 100 sharehol ders. (3) If the number of shareholders of a closed company e xceeds such limit for more than one year, the company, if it remains a joint stock company, shall be an open company. (4) A closed company may not conduct an open subscripti on for shares or otherwise offer its shares to the general public. (5) A closed company may become an open company, and an open company may become a closed company, in accordance with this Law and t he law which regulates securities markets. (6) A change from a closed company to an open company, and a change from an open company to a closed company, shall require amendmen t of the company’s Articles of Association to state the change in status, but shal l not be a change of legal form of the company within the meaning of this Law. Article 195 Transfer of Shares of a Closed Company (1) The Articles of Association or by-laws of a closed company may impose restrictions on transfer of the companys shares including restri ctions of the kinds referred to in Article 126 of this Law relating to limited liability compa nies. (2) If the Articles of Association or by-laws of a clos ed company do not impose a restriction on transfer of shares, the shares shall be freely transferable. Article 196 Open Company (1) A company shall be deemed founded openly if the fou nders invite the public to subscribe and buy shares at the time of the company ’s initial registration. (2) A public offering of shares referred to in paragrap h (1) of this Article shall be made through a public offering and prospectus in accorda nce with this Law and the law which regulates securities markets. (3) An open joint stock company may be listed or unlist ed within the meaning of the law which regulates securities markets. (4) An open joint stock company may not restrict the tr ansfer of its shares to third parties. Article 197 Subscription and Payment for Shares in the Founding Offering of an Open Company (1) A founding (first) offering of shares of an open co mpany shall be deemed successful if the offered shares are subscribed in a number which is defined through the public offer and the published prospectus and if the subscribed shar es are paid in the amount specified in paragraph (3) of Article 192 of this Law. (2) If the shares in a public offering and prospectus a re not subscribed and paid in accordance with paragraph (1) of this Article, the offering shall be considered unsuccessful and the founders shall be jointly obli gated to refund without delay any amounts paid by subscribers. Chapter 6 Founding Assembly of an Open Company Article 198 Convening the Assembly (1) The founders of an open joint stock company shall, in the case of a successful offering, convene a founding assembly not later than 60 days after the expiration of the term for subscription of shares in the the public offer or t he prospectus. (2) The founding assembly shall be convened by written notice to each subscriber given in accordance with provisions of this Law relating to convening of a shareholder assembly. (3) The written notice for the founding assembly shall include copies of the company’s Articles of Association, reports of the founders an d appraisers including a report on costs of founding, a list of the distribution of shares made by the public offering and list of persons to receive the shares without subscription based on public call specifying the number and type of shares received in this manner. (4) A court in a non-contentious proceeding on request of founders who own at least 10% of the subscribed shares may extend the term for th e founding assembly by up to 30 days. Article 199 Procedures at the Founding Assembly (1) All subscribers to fully-paid shares shall have the right to participate in the founding assembly with the right to vote. (2) A simple majority of the subscribed and fully-paid shares entitled to vote on a matter shall constitute a quorum for decision of the found ing assembly on that matter. (3) The founding assembly shall be opened by the founde r in possession of the highest number of fully-paid shares, and if there is more t han one such person the person who paid earliest shall open the assembly. (4) The person referred to in paragraph (3) of this Art icle shall compile the list of shareholders present or their legal representatives and shall decide whether all the terms referred to in paragraphs (1) and (2) of this Law h ave been met for the founding assembly to proceed. (5) Should the founding assembly not have the quorum re ferred to in paragraph (2) of this Article, the founders may re-convene the assembly i n the same manner, and not less than eight and not more than 15 days shall pass between the first and second assemblies. Article 200 Consequences of Failing to Hold the Founding Assemb ly (1) If the founders of an open joint stock company do n ot convene the founding assembly within the period required by Article 198 of this L aw, or if the founding assembly is not held pursuant to this Law or does not adopt the dec isions required by this Law, the founding of the company shall be considered unsucce ssful and the founders shall be jointly obligated to refund any amounts paid by subscribers . (2) Not later than 15 days after expiration of the term for the founding assembly in accordance with Article 198 of this Law, the founde rs shall call all subscribers to make their required payments. The call shall be announce d in the same manner as the public offering. (3) Should the founders fail to act pursuant to paragra ph (2) of this Article, the competent court may do so in a non-contentious proceeding upo n the request of any subscriber. Article 201 Presiding and Minutes at the Founding Assembly (1) The founding assembly shall elect the chairman, the keeper of the minutes (recording secretary) and two counters of votes, after which r eports on founding and assessment (audit) shall be read. (2) Appendices to the reports referred to in paragraph (1) of this Article shall be read only if subscribers with no less than 10% of the votes p resent at the meeting so require. (3) The minutes of the founding assembly shall be kept by a keeper of the minutes and signed by the assembly chairman, the keeper of the minutes, the persons appointed to count the votes, and the founders of the company. Article 202 Competence of the Founding Assembly (1) The founding assembly of an open company shall: 1) determine whether the offered shares have been subs cribed and paid and whether all required contributions in kind have been made, in a ccordance with this Law and the Articles of Association; 2) elect the initial directors of the company unless t he Articles of Association has already appointed them; 3) decide on approval of any special rights of the fou nders and approval of special benefits of founders or other persons; 4) decide on approval of any valuation of investments in kind (including stocks and rights); 5) decide on approval of contracts made before registr ation of the company, and which are related to the procedure of founding; and 6) determine the costs of founding of the company. (2) If more shares than offered by the public invit ation have been subscribed, the founding assembly may decide to accept all or part of the su bscribed surplus in which case the subscribers who subscribed to shares first shall a priority right and, if more than one person subscribed the shares at the same time, the surplus shares shall be accepted in proportion to the shares subscribed by those subscribers which ar e not surplus. (3) If the founding assembly decides to accept a su rplus of subscribed shares, the subscribers to such shares shall have voting rights at the founding assembly from the time of the decision to accept them, if the shares were sub scribed in accordance with this Law. Article 203 Voting at the Founding Assembly (1) At the founding assembly each fully paid subscribed ordinary share shall be entitled to one vote. (2) The affirmative votes of a simple majority of the o rdinary shares present and entitled to vote on a matter shall be the decision of the found ing assembly on that matter, unless a larger majority is required in this Law, the Articl es of Association and the prospectus. (3) At the founding assembly decisions shall be made se parately and with separate voting for each contribution in kind and each contract or transaction. A person who has made a contribution in kind shall be disqualified from vot ing with respect thereto and his votes shall not be counted for purposes of determining th e quorum for voting or the majority required for decision. (4) Unless provided otherwise in the Articles of Associ ation and the prospectus, at the founding assembly the unanimous agreement of all su bscribers shall be required for changes in the provisions of the Articles of Associ ation on the amount of initial capital (possible acceptance of surplus shares). (5) At the founding assembly founders shall not have th e right to vote on approving founding costs of the company, and persons who have contracts with the company which are to be approved shall not have the right to vote on such approval. Chapteer 7 Shares and Other Securities of a Company Article 204 Ordinary and Preferred Shares (1) A joint stock company may issue ordinary (or common ) shares and preferred (or preference) shares. (2) A company must have at least one ordinary share. (3) A company’s ordinary stock shall always be a single class. (4) A company’s preferred stock may be divided into two or more classes with different rights (such as different dividend rates, different participating or cumulative rights to dividends, or different rights to distribution of t he company’s assets on liquidation of the company). (5) All ordinary shares shall have the same nominal val ue or shall have no nominal value. (6) All preferred shares of a single class shall have t he same nominal value. (7) A company may not issue bearer shares. Article 205 Authorized (But Not Issued) and Issued Shares (1) Besides issued shares, a joint stock company may ha ve approved and authorized (but not issued) shares. (2) The number of authorized ordinary shares and the nu mber of authorized preferred shares of each class shall be stated in a company’s Articles of Association. The number of authorized but unissued shares may not be greater t han 50% of the number of issued ordinary shares at the time that number was fixed i n the Articles of Association. (3) A company may issue all or only part of its authori zed ordinary shares. A company may issue none, part or all of its authorized prefe rred shares of any class. (4) The decision to issue shares permitted in the Artic les of Association, and the decision on the number, time and other terms of any such iss uance, may only be made by the company’s shareholders’ assembly unless the Article s of Association confers such authority on the company’s board of directors, in which case the board may make such decisions in accordance with the Articles of Association. (5) An authorization referred to in paragraph (4) of th is Article shall include issuance of shares to increase basic capital for new contributi ons in cash or in kind in accordance with provisions of this Law relating to increasing basic capital with new contributions, but shall not include issuance of shares in an increase of ca pital from the company’s assets in accordance with this Law. (6) The board of directors may be authorized to issue a ny type or class of authorized shares but may not be thus authorized for a period longer than five years from the time the number of authorized shares was established in the Articles of Association. The five-year period may be renewed one or more times by the shar eholders’ assembly, each time for a period not exceeding five years. (7) Shares of a company shall be issued in accordan ce with applicable provisions of the law which regulates securities markets. Article 206 Registration of Issuance and Access (1) The founders of an open joint stock company, and wh en appropriate the company, shall register the issuance of shares or other secu rities in a public offering with the Securities Commission in accordance with the law wh ich regulates securities markets and applicable regulations of the Securities Commission . (2) A joint stock company shall register its shares and other securities, and the identity of the owners thereof, in the Central Registry of Secu rities in accordance with the law which regulates securities markets and any applicable reg ulation of the Securities Commission. (3) A joint stock company may keep a book of shares and other securities. (4) The book of shares referred to in paragraph (3) of this Article may contain: the personal name or registered name, the place of resi dence or registered office and the tax reference number of every owner, co-owner and co-ow ners’ representative of its shares or other securities; the amount of all contracted and paid-in contributions of each shareholder; any secondary obligations and additional contributi ons beyond the initial contributions; all pledges of shares; all transfers of shares includin g the date and the name of the transferor and the transferee; and all changes in any of the foreg oing. (5) A book of shares referred to in paragraph (3) of th is Article may be kept in electronic form. (6) A book of shares referred to in paragraph (3) of th is Article may, upon approval of the company, be maintained by a financial or other inst itution. (7) Each company shall inform the Central Registry of S ecurities of the information referred to in paragraphs (3) and (4) of this Artic le, including changes thereto in accordance with the law which regulates securities markets. (8) Any shareholder of the company shall have the right to examine and make a copy of the book of shares. (9) The board of directors of a joint stock company sha ll be responsible for registering the company’s shares promptly and correctly and for mai ntaining the book of shares correctly, and all of the directors shall be personally liable for any damage caused to a shareholder or third party by the company’s failure to do so. Article 207 Registration of Shares (1) A shareholder, in relation to a company and third p arties, shall be a person who is registered as such in the Central Registry of Secur ities in accordance with the law which regulates securities markets. (2) The date on which a company has received an applica tion for registration shall be considered to be the date of a shareholder’s regist ration in the book of shares if all the information required for such registration has been provided, regardless of actual time of registration. (3) In case of a discrepancy between the Central Regist ry of Securities and the book of shares, the Registry shall control. (4) A subscription for shares and the name of the share holder shall be recorded in non- material form in the Central Registry of Securities as provided in the law which regulates securities markets. Article 208 Rights of Holders of Ordinary Shares (1) Each ordinary share gives to its holder the sam e rights as are held by each other holder under this Law, the Articles of Association and by- laws of the company and which rights particularly include: 1) the right to access to legal and other documents an d information pertaining to and in possession of the company; 2) the right to participate in the shareholders’ assem bly; 3) the right to vote at the shareholders’ assembly bas ed on the principle that one share gives the right to one vote; 4) the right to receive dividends after any dividends payable pursuant to preferential rights of preferred shares have been paid in full; 5) the right to receive a distribution on liquidation of the company after the claims of creditors and holders of any preferred shares have been satisfied; and 6) preemptive rights to acquire newly-issued shares an d other securities of the company; and 7) the right to receive distributions on shares in accordance with law. (2) Ordinary shares of a company may not be converted i nto preferred shares or other securities of the company. (3) The rights referred to in subparagraphs 4) and 5) o f paragraph (1) of this Article may be contractually transferred by a shareholder to a third party. Article 209 Rights of Holders of Preferred Shares (1) Each share of each class of a joint stock compa ny’s preferred stock gives to its holder the same rights as are held by each other holder. (2) Those rights shall be as stated in the Articles of Association. (3) Those rights shall in all cases include priorit y over ordinary shares with respect to payment of dividends (which in case of preferred sh ares may be participative or cumulative as provided in the law which regulates securities m arkets) and to distribution on liquidation of the company. (4) Those rights may also include the right to conv ert the preferred shares into ordinary shares or into shares of another class of preferred stock under terms and in cases stated in the Articles of Association, and the right of the c ompany to redeem the preferred shares at a price and on other terms stated in the Articles of Association. (5) Holders of preferred shares also have the right to one vote per share at any shareholders’ assembly on any issue requiring group voting of hol ders of such class of preferred shares in accordance with this Law. (6) A company’s Articles of Association may also pr ovide that holders of preferred shares shall have the right to vote with ordinary sharehol ders on any or all other matters at the shareholders’ assembly if but only if: 1) such preferred shares are convertible into ordinary shares (in which case they may have the number of votes of the ordinary shares they may be converted into); and 2) dividends on such preferred shares which have accru ed and are required to be paid have not been paid and remain unpaid. (7) Except in cases stated in paragraph (6) of this Article, holders of preferred shares shall have no right to vote with ordinary shareholders at the shareholders’ assembly. (8) The total number of votes of holders of preferred s hares may not at any time be the same as or higher than the total number of votes of holders of ordinary shares. (9) Holders of preferred shares shall have the right to be present and participate in discussions at a shareholder assembly. (10) Holders of preferred shares shall have the same rig hts as holders of ordinary shares to access to documents and other information in posses sion of the company. Article 210 Securities Other Than Shares; Convertible Securitie s, Options and Bonds (1) Unless provided otherwise in a company’s Articles o f Association, the company may issue securities other than shares including bonds, convertible bonds and options or warrants. (2) For purposes of this Law, an option or warrant is d eemed to be a security which gives to its owner the right to acquire a specified numbe r of shares of a specified type and class at a stated price. (3) The number of issued convertible securities and sec urities which give the right to acquire shares cannot be greater than the number of authorized (non-issued) shares. (4) Concurrently with any issuance of securities conver tible into shares or options to acquire shares, the company shall note in the Centr al Registry of Securities the number of authorized shares required to secure the rights of the holders of such securities. (5) Until the expiration of the time period of effectiv eness of those rights, the company shall maintain the number of authorized shares refe rred to in paragraph (4) of this Article of the types and classes in question which shall be su fficient to secure such rights. (6) The decision to issue securities or options referre d to in this Article, and the determination of the number, time, price and other terms of issuance shall be made by the shareholders’ assembly, unless the Articles of Asso ciation or a decision of the shareholders’ assembly in accordance with this Law authorizes the company’s board of directors to make that decision. (7) A company’s decision to issue bonds, and the determ ination of the amount and other terms of any such issuance, shall be made by the sh areholders’ assembly unless the Articles of Association or a decision by the shareholders’ a ssembly in accordance with this Law authorizes the board of directors to make that deci sion. (8) Securities convertible into shares may not be issue d at a price which is lower than the nominal value (or, in the case of shares without no minal value, the accounting value) of the shares into which they are convertible. (9) A company’s issuance of securities other than share s or options or bonds shall also be subject to applicable provisions of the law which r egulates securities markets and any regulations of the Securities Commission. (10) Holders of securities convertible into shares or op tions to acquire shares shall have the same right as shareholders to be informed and to in spect records and documents of the company, unless otherwise stated in the decision to issue such securities or options or otherwise agreed by such holders. Article 211 Dividends on Partly Paid Shares A dividend on partly paid shares shall be payable i n proportion to the amount actually paid in for the shares, calculated as of the record date for the dividend. Article 212 Amount of Consideration for Shares and Other Securi ties (1) Shares may not be issued for an amount lower than t heir nominal value or their accounting value, in the case of shares without nom inal value. (2) Shares may be issued for an amount higher than thei r nominal or accounting value and the excess amount shall represent a share premium a nd shall be treated as provided in this Law and in accordance with the law which regulates accounting and audit. (3) A joint stock company may issue shares at a price w hich is below their market value determined by the board of directors in accordance with this Law for: 1) issuance of shares at a price established by an opt ion to acquire shares or by a security convertible to shares; 2) issuance of ordinary shares following the procedure set forth in this Law for exercise of preemptive rights to acquire shares of existing sha reholders at a price that may not be less than 90% of their market value; 3) issuance of shares in a reorganization of the compa ny; or 4) issuance of shares to a broker or other intermediar y for the purpose of resale at market value, at a price that may be less than the market value by no more than the amount of brokers’ committee, set as a percentage of the issu e price of the shares, which may not exceed 10% of the market value of the shares. (4) A company shall issue options to acquire shares or securities convertible into shares at a price not less than their market value, except for: 1) issuance following the procedure set forth in this Law for exercise of preemptive rights to acquire such options or securities at a price th at may not be less than 90% of their market value; and 2) issuance to a broker or other intermediary for the purpose of resale at market at a price that may be less than the market value by no more t han the amount of brokers’ committee, set as a percentage of the issuance price, which ma y not exceed 10% of the full value of such options or other securities Article 213 Preemptive Rights to Acquire New Shares (1) Shareholders of a company shall have a preemptive r ight to acquire newly issued shares of the company’s stock, upon the issuance of such shares, in proportion to the nominal value (or, in the case of shares without no minal value, the accounting value) of already-held shares of such existing shareholders a t the time of the new issuance. (2) Shareholders referred to in paragraph (1) of this A rticle shall exercise their preemptive rights in accordance with rules and procedures stat ed in the company’s Articles of Association, by-laws, or a decision of the board of directors of the company. (3) For purposes of this Article, the term “newly-issue d” includes shares which were issued earlier and then reacquired and are being he ld by the company; and the term “shares” includes options to acquire shares and sec urities convertible into shares. (4) For purposes of this Article, an issuance of shares shall include an issuance to banks, underwriters or other financial institutions for th e purpose of resale in accordance with the law which regulates securities markets. (5) The company shall give each such existing sharehold er notice in writing in accordance with this Law of a proposed issuance referred to in paragraph (1) of this Article. (6) The notice referred to in paragraph (5) of this Art icle shall particularly state the number of shares to be issued, the proposed price o r method of determining the price of issuance, and the time period and procedure for exe rcising the preemptive rights. The time period for exercise of the preemptive rights shall not be shorter than 30 days from the day the written notice is sent. (7) Unless provided otherwise in the Articles of Associ ation, all holders of ordinary shares, options to acquire ordinary shares and secu rities convertible into ordinary shares shall have preemptive rights. (8) Persons referred to in paragraph (7) of this Articl e shall not have preemptive rights to acquire any of the following: 1) preferred shares, except for preferred shares which are convertible into ordinary shares or carry a right to subscribe for or acquire ordina ry shares; or 2) shares authorized in the Articles of Association th at are issued within six months after the date of the company’s initial registration. (9) Holders of preferred stock shall not have preemptiv e rights under this Article. (10) Shares subject to preemptive rights that are not ac quired by existing shareholders or others referred to in paragraph (7) of this Article pursuant to such rights may be issued to any person within the period of one year after the shares were offered to the existing shareholders or other persons referred to in paragr aph (7) pursuant to provisions of this Article, at a price set by the board of directors b ut not lower than 90% of the price set for the exercise of preemptive rights. (11) Any offer made after expiration of the above time p eriod of one year shall be subject to the preemptive rights of existing shareholders and other persons under this Article. (12) The preemptive rights provided for in this Article may be reduced or eliminated in a company’s Articles of Association, by-laws or decis ion of a shareholders’ assembly made upon recommendation of the board of directors. The board of directors shall submit to the assembly a written report stating the reasons for t he reduction or elimination and an explanation of the proposed issue price. The decisi on to reduce or eliminate the rights shall be registered and published in accordance with the law which regulates registration of business entities. (13) The preemptive rights provided for in this Article may also be reduced or eliminated by the board of directors for a share issuance as t o which it has been granted authority to make decisions under paragraphs (4)-(6) of Article 205 of this Law. A r t i c l e 2 1 4 C o - O w n e r s h i p o f a S h a r e (1) A share may have more than one owner (hereinaft er called “co-owners”). Co-owners of a share shall be considered to be one single shareh older. (2) Unless provided otherwise in a company’s Articles o f Association or by-laws, co- owners of a share shall exercise their voting and o ther rights in the company only through a single joint representative and shall identify that representative to the company in writing to be entered in the Registry and kept in the company’ s book of shares. (3) Any notice given by the company to such a designate d representative shall be deemed given to all of the co-owners. If the co-owners of a share fail to appoint and identify to the company such a representative, a notice given by th e company to any co-owner shall be deemed given to all of the co-owners. (4) Co-owners of a share shall be jointly and severally liable to the company for all obligations to the company respecting the share. (5) Legal action by a company against one co-owner for such obligations shall have binding effect against all co-owners. Chapter 8 Dividends and Other Distributions to Shareholders Section 1 Principles Article 215 General Principles (1) A joint stock company company may authorize and pay dividends on its shares annually in connection with its annual shareholders ’ assembly, or at any other time between those assemblies, unless provided otherwise in the company’s Articles of Association. (2) A company’s decision to authorize and pay dividends may be made only by its shareholders’ assembly, unless the power to make th at decision has been given, in whole or in part, to the board of directors in the Articles of Association or by a decision of the shareholders’ assembly made in accordance with the Articles of Association. (3) After adoption of the financial report for the prev ious year, profits from that year shall be distributed in the following order: 1) to cover losses brought forward from previous years ; 2) to fund legally prescribed reserves if such reserve s are provided for in a specific law; 3) for dividends in accordance with this Law; 4) to fund statutory and other reserves if the company determines them in the Articles of Association; (4) After a decision to pay a dividend has been made, a shareholder to whom it is to be paid becomes a creditor of the company for the amou nt of the dividend. (5) A dividend referred to in subparagraph 3) of paragr aph (3) of this Article on stock of any type or class shall be paid pro rata to all hol ders of that type or class of stock, in proportion to the nominal value (or accounting valu e in the case of shares with no nominal value), except as provided in Article 211 of this L aw in the case of partly-paid stock. (6) Any agreement or arrangement by which a company giv es some shareholders specific privileges with respect to dividends shall be null and void. Article 216 Dividends Payable in Money, Shares or Other Propert y (1) Dividends may be paid in money and in shares or oth er securities of the company or other companies or other property, unless provided otherwise in the company’s Articles of Association. (2) Dividends payable in shares of the company of any t ype or class shall be subject to the following provisions: 1) the dividends shall be paid by issuance of such sha res pro-rata; 2) if shares of a certain type or class are to be issu ed as dividends on another type or class, and there are shares already outstanding of the typ e or class to be issued, the dividend may not be paid unless it has been approved by a majori ty of the votes of the shares of the type and class that is to be issued. (3) The amount of the dividend payable in shares shall be deemed to be equal to the amount of the nominal value of the shares to be iss ued. Article 217 Restriction on Payment of Interim Dividends by an O pen Company The following conditions shall apply in the case of dividends paid by an open company during the company’s financial year: 1) interim accounts shall be prepared showing that the funds available for distribution are sufficient; and 2) the amount to be distributed may not exceed the tot al profits earned since the end of the last financial year for which annual accounts have been prepared, plus any profits brought forward and amounts drawn from reserves available f or this purpose, less losses brought forward and amounts to be placed in reserves pursua nt to a particular law or the company’s Articles of Association or by-laws. Article 218 Record Date for Dividends and Other Distributions A company’s Articles of Association may fix, or pro vide the method for fixing, the record date as of which the list of registered shareholder s entitled to receive a dividend or other distribution, including a distribution on liquidati on, shall be determined. If the Articles of Association does not fix or provide for fixing a re cord date, the board of directors shall fix that date. The dividend or other distribution shall be paid to persons who were registered shareholders of the company on the record date. Article 219 Procedures for Authorization and Payment of Dividen ds (1) Each decision to authorize a dividend shall include: 1) the amount of the dividend; and 2) the record date as of which the list of shareholder s entitled to receive the dividend shall be determined. (2) If after the record date but before the payment date, a shareholder transfers shares based on which he is entitled to receive the dividend, th e right to receive the dividend shall remain with the transferor. Section 2 Acquisition of Own Shares Article 220 Subscription to a Company’s Own Shares or Parent’s Shares Prohibited (1) A company may not subscribe to its own shares directly or indirectly through another person who would acquire them on its behalf. (2) A dependent company may not subscribe to shares of its controlling company directly or indirectly through another person who would acqu ire them on its behalf. (3) If another person has subscribed to or otherwise ac quired shares in violation of paragraph (1) or paragraph (2) of this Article, it shall be deemed that such person has taken them for his own account, and such person shall be personally liable to pay the market value for such shares regardless of any agreements with the company on whose behalf they were subscribed to or acquired. (4) Any agreement to reimburse or indemnify such person with respect thereto shall be null and void. Article 221 General Provisions for a Company’s Acquisition of i ts Own Shares (1) “Own shares” as used in this Law means shares of a company which the company has acquired from its shareholders. (2) A joint stock company may acquire shares or other s ecurities issued by it at any time with the agreement of the holders of such securitie s either directly or indirectly through a person acting on the company’s behalf, subject to a ny restriction in its Articles of Association and subject to the restrictions on dist ributions stated in this Law. (3) A company may acquire part or all of its preferred stock or other securities other than ordinary shares. (4) A company may acquire only a part of its ordinary s tock. (5) An open company may not acquire shares issued by it if and to the extent that, at the time of the acquisition, the total nominal value or accounting value of the acquired shares exceeds 10% of the company’s basic capital except: 1) if the company has sufficient reserves which may be used for the acquisition under this Law, and it uses such reserves for the acquisition; 2) in case of free of charge acquisition of shares tha t are fully paid; 3) in case of acquisition in a (enforced) collection p rocedure against shareholders if there was no other way to collect; and 4) in case of a status change. (6) An open company may not acquire its shares by agree ment with a shareholder except through an offer to all holders pro rata in accorda nce with this Law. (7) A company may pay for acquisition of its own shares or other securities in money, shares in another company, or other securities or o ther property. (8) A company shall acquire its own shares or other sec urities at their value defined in accordance with this Law, unless provided otherwise in the company’s Articles of Association or in a contract between the company an d the holder of the securities at the time the securities were issued. Article 222 Procedures for Company’s Acquisition of its Own Shares (1) A company’s decision to acquire its own shares or o ther securities shall be made by the shareholders’ assembly. (2) The decision of the shareholders’ assembly referred to in paragraph (1) of this Article shall specify: the maximum number of shares to be a cquired, the time period for which the authorization is given, which shall not exceed 18 m onths, the purchase price (or the method of determination thereof), and the names of the sha reholders whose shares are to be acquired except in the case of an acquisition of sh ares pro rata from all shareholders. (3) The decision referred to in paragraph (1) of this A rticle may authorize the board of directors to set the time of acquisition, the numbe r of shares to be acquired, the calculation of the purchase price, procedures to be followed in the acquisition and other issues, provided that such determinations by the board shal l not be inconsistent with instructions included in the decision of the shareholders’ assem bly and the shareholders are informed of such determinations at the next shareholders’ assem bly. (4) Notwithstanding the provisions of paragraph (1) of this Article, the board of directors, unless (and except to the extent that) the Articles of Association provides that this is within the exclusive competence of the shareholders’ assem bly, may make a decision to acquire: 1) options to acquire shares of the company, securitie s convertible into shares of the company, or other securities other than shares; or 2) up to 5% of any class of the company’s shares for t he sole purpose of distribution among employees of the company or linked (dependent ) company in accordance with this law; and 3) shares or other securities if the acquisition is de emed necessary to prevent serious and immediate damage to the company. (5) In any such case the board shall submit a report to the next-following shareholders’ assembly stating the reasons for the acquisition, t he number and nominal or accounting value of the acquired shares, and the percentage of shares. Article 223 Procedures for Acquisition of Shares Pro Rata From all Shareholders (1) If a company offers to acquire shares of a particul ar type or class pro rata from all holders of such shares, the company shall send a wr itten offer to all such holders in accordance with this Law. (2) The offer referred to in paragraph (1) of this Arti cle shall state the number of shares to be acquired, the purchase price (or the method of c alculating the purchase price), the procedure for payment and date of payment, and the procedure and the deadline for all shareholders to offer their shares for sale to the company. If the company has more than 500 shareholders that deadline must be at least 30 days after the date of submission of the company’s offer. (3) If the total number of shares offered for sale to t he company exceeds the number of shares the company will acquire, the company shall acquire shares from each shareholder in proportion to the number of shares the shareholder has offered for sale, except where necessary to avoid acquisition of fractional shares . (4) If the total number of shares offered for sale to t he company exceeds the number of shares the company has offered to acquire the compa ny may decide to acquire a higher number of shares up to the total number of the shar es offered for sale by shareholders. Article 224 Status of Reacquired Shares (1) After a company has acquired its own shares, a comp any shall own such shares and may reissue them to other persons in accordance wit h this Law and the law which regulates securities markets. (2) Such own shares must be disposed of within one year of the date of acquisition when they do not exceed 10% of the basic capital. In the cases in which the shares represent more than 10%, such shares must be disposed of within th ree years of the date of acquisition. (3) If the shares are not disposed of as required by pa ragraph (2) of this Article, the board of directors shall be obligated to cancel them with out decision thereon of the shareholders’ assembly (and the number of authorized shares of su ch type and class shall be accordingly reduced) in accordance with the provisions of this Law relating to a decrease of basic capital in a regular procedure. (4) In the case of cancellation of own shares the compa ny’s basic capital shall be decreased in accordance with paragraph (3) of this Article. (5) During the time such shares are owned by the co mpany: 1) the nominal or accounting value of such shares may be included in or excluded from the company’s basic capital, but if it is excluded it s hall constitute a reserve which may not be distributed to shareholders; 2) the shares will not be entitled to vote or to be co unted toward a quorum at a shareholders’ assembly; and 3) the shares will not be entitled to receive dividend s or other distributions. Article 225 Pledge of Own Shares Restricted (1) A joint stock company may not directly or indirectl y pledge its shares unless the amount secured by the pledge is less than the amoun t paid for the pledged shares. (2) The acceptance of a company’s own shares as securit y, either by the company itself or through a person acting in his own name but on the company’s behalf, shall be treated as an acquisition by the company and shall be subject to the provisions of this Law relating thereto. Article 226 Entry in Central Registry and Book of Shares of Acq uisition or Pledge of Own Shares A company shall register any acquisition or pledge of its shares in the Central Registry of Securities in accordance with the law which regulat es securities markets and shall record it in its book of shares if it has a book of shares. Section 3 Redemption and Cancellation of Preferred Stock or O ther Securities Article 227 Grounds for Redemption and Cancellation (1) A joint stock company’s Articles of Association may provide: 1) that the company shall have the obligation and/o r the right, in the presence of sufficient funds, to redeem, during a specified period or in s pecified cases, in full or in part, its preferred shares of one or more classes; and 2) that the holders of such shares shall be obligat ed to sell them to the company under the terms and conditions referred to in subparagraph 1) of this paragraph. (2) A joint stock company may issue options to acquire shares or securities other than shares under terms which provide that the company h as the obligation and/or the right, in the presence of sufficient funds; to redeem such se curities during a specified period or in specified cases, in full or in part. (3) A joint stock company shall redeem and cancel prefe rred shares, options to acquire shares, and securities other than shares in proport ion to the number of the securities in question belonging to each holder thereof, except w hen necessary to avoid redemption of fractional shares. (4) If a company lacks sufficient funds to effect a req uired redemption, the redemption shall be effected at the first point in time when t he company has such funds. (5) A company’s Articles of Association may establish a stated redemption price or a formula or model for calculating the redemption pri ce. (6) Options to acquire shares and securities other than shares shall be redeemed at the price established in the conditions of issuance of the options or securities in question. Article 228 Price for Redemption Preferred shares shall be redeemed at their market price or, if there is none, at the value of the shares determined by the company’s board of dir ectors in accordance with this Law or by an independent appraiser who is chosen from a li st kept by the competent court by either the shareholders’ assembly, the board of directors or dissenting shareholders under this Law. Article 229 Entry in Central Registry and Book of Shares A company shall register any redemption of its shar es or other securities in the Central Registry of Securities in accordance with the law w hich regulates securities markets and shall record it in its book of shares if it has a b ook of shares. Section 4 Restrictions on Distributions Article 230 Restrictions on Payment of Dividends and Other Dist ributions (1) A closed joint stock company may not make a distribution to its shareholders if, after payment of the distribution, the company’s net asse ts would be less than its basic capital, increased for reserves that may be used for distrib utions to shareholders in accordance with this Law or the law which regulates accounting and audit. (2) An open joint stock company may not make a dist ribution to its shareholders in the case of a decrease of basic capital in a regular procedu re in accordance with this Law, if: 1) after payment of the distribution the company’s net assets would be less than its basic capital, increased for reserves that may be used fo r distributions to shareholders in accordance with this Law or the law which regulates accounting and audit; or 2) in the case of a dividend, the amount of the divide nd exceeds the amount of the company’s profit in the previous business year incr eased for undistributed profit and amounts drawn from reserves, increased by amounts r equired to be entered into the amount of reserves in the current year, in accordance with by-laws of the company, this Law or the law which regulates accounting and audit. (3) In addition to the restrictions stated in parag raphs (1) and (2) of this Article, no open or closed joint stock company may make a distribution to its shareholders if: 1) after payment of the distribution the company would be incapable of paying its debts as they become due in the ordinary course of the compa ny’s business; or 2) on the payment date any matured dividends on prior preferred shares are not paid in full. (4) A company may make a distribution to its shareh olders, if based on financial reports which are in accordance with law that regulates acc ounting and audit can be concluded that the distribution is reasonable under the circumstan ces. A company’s Articles of Association or by-laws may require that certain specified finan cial statements, accounting practices or valuation methods be used for such a determination. Article 231 Personal Liability of Shareholders and Directors fo r Prohibited Distributions (1) A shareholder who receives a distribution prohibited by this Law and who knew (or should have known under the circumstances) that it was prohibited, shall be personally liable to the company for return of the amount of t he distribution. (2) A director shall also be liable as provided in provisions of this Law relating to directors’ liability. Section 5 Loans and Capital Article 232 Certain Loans for Capital to be Subordinated (1) If a shareholder of a company has granted the compa ny a loan at a time when the shareholders acting as orderly merchants would inst ead have made capital contributions (such as at a time of financial crisis), the shareh older shall be a subordinated creditor under the Law on Bankruptcy for repayment of the loan in a bankruptcy proceeding against the company. (2) If a third party has granted the company a loan at a time referred to in paragraph (1) of this Article, and a company shareholder has provide d the third party with collateral or guarantees for repayment of the loan, then in a ban kruptcy proceeding against the company the third party may assert a claim for repayment on ly of amounts that remain unpaid after exhausting his claims and remedies with respect to the collateral and the guaranty. (3) The provisions of paragraphs (1) and (2) of this Ar ticle shall apply mutatis mutandis to other actions of a company shareholder or a thir d party that are commercially equivalent to the granting of loans as described in paragraphs (1) and (2). (4) The provisions of paragraphs (1) and (2) of this Ar ticle shall not apply with respect to a shareholder of the company who holds shares repre senting less than 10% of the company’s capital and who is not a director in the company. (5 ) If the company has repaid a loan or other amou nts referred to in paragraphs (1)-(3) of this Article within a year preceding the commencing of bankruptcy proceedings against the company, then the shareholder who gave the security or was liable as guarantor shall reimburse the company the amount that was repaid. (6) This obligation shall, however, exist only up to th e amount for which the shareholder was liable as guarantor or that is equivalent to th e value of the security given by him at the time of the repayment of the loan. (7) The shareholder shall be discharged from the obliga tion if he makes available to the company, for satisfaction of the obligation, the as sets which were granted as security. (8) The foregoing provisions shall apply mutatis mu tandis to other legal transactions which are the commercial equivalent of a loan. Title 9 Basic Capital Section 1 General Provisions Article 233 Minimum Basic Capital (1) The monetary value of the basic capital of a closed joint stock company on the date of payment may not be less than 10,000 Euro in dina r countervalue calculated per mean exchange rate. (2) The monetary value of the basic capital of an open joint stock company on the date of payment may not be less than 25,000 Euro in dinar c ountervalue calculated per mean exchange rate. (3) Laws other than this Law may require higher initial capital for banks, insurance companies and companies engaging as joint stock com panies in other activities. (4) The registration of an increase or decrease of a cl osed joint stock company’s basic capital shall be conducted once every year within 3 0 days from the date of the annual shareholders’ assembly. (5) Provisions of this Law which regulate the increase, decrease and maintaining of basic capital, and convening a shareholders’ assembly whe n loss does not exceed 50% of the basic capital of a company shall apply to closed an d open joint stock companies. Article 234 Minimum Nominal Value of a Share (1) A joint stock company may issue ordinary shares wit h nominal value or without nominal value, and may issue preferred shares with nominal value. (2) The nominal value of a share shall not be lower tha n 5 Euro in dinar countervalue calculated at mean exchange rate on the date of sub mitting the application for entry of founding of the company into the Registry or applic ation for entry of change of the basic capital of the company into the Registry. (3) Shares shall not be issued in an amount lower than the lowest amount of the basic capital referred to in Article 233 of this Law. Suc h amount shall be the basis for the considered the nominal value of shares which have a nominal value, and shall be considered the accounting value of shares without n ominal value. (4) Shares shall not be issued for an amount lower than their nominal value or accounting value, as the case may be. (5) Shares without nominal value shall participate equa lly in the basic capital of a company. The amount of basic capital covering one s ingle share shall not be lower than the amount stated in paragraph (2) of this Article. Paragraph (4) of this Article shall apply accordingly to shares without nominal value. (6) Participation of shares in basic capital shall be d etermined by the ratio between the value of the shares and the total value of all paid shares. (7) The value of shares as referred to in paragraph (6) of this Article shall be equal to the sum of the nominal and accounting value of the shar es. A r t i c l e 2 3 5 S p l i t s a n d M e r g e r s o f S h a r e s (1) A joint stock company may split each share of any c lass into two or more shares, reducing at the same time the nominal value of shar es of that class, without changing the basic capital. (2) A joint stock company may merge all shares of any c lass into a lower number of shares of that class, increasing at the same time t he nominal value of shares of that class, without changing the basic capital. (3) A joint stock company may cancel shares it has acqu ired with reserves of the company, increasing at the same time the nominal va lue of other shares or reserves, without changing the basic capital of the company. (4) A joint stock company may perform the activities re ferred to in paragraphs (1)-(3) of this Article only if such activities do not dilute or otherwise adversely affecr the rights of holders of options to acquire shares or securities convertible into shares that are to be merged or split. (5) If a merger of shares results in there being fracti onal shares with nnominal value less than the value referred to in pargraph (2) of Artic le 234 of this Law, the company shall buy them at the established market value or, if there i s no established market value, at the price established by an independent appraiser in accordan ce with this law. (6) The provisions of paragraphs (1)-(4) of this Articl e shall also apply to a company which has issued shares without nominal value. (7) Merger and split of shares shall require amendment of the Articles of Association in accordance with this Law to state the resulting num ber and nominal value of the resulting shares. Article 236 Maintenance of Basic Capital (1) An joint stock company shall maintain its basic at a level equal to or greater than that required by Article 233 of this Law. (2) Should the basic capital of the company be reduced for any reason below the amount stated in paragraph (1) of this Article, the compan y shall increase it to the required level within six months, unless during that time the comp any is changed into another form to which the requirement does not apply. (3) If a company does not comply with paragraph (2) of this Article a liquidation proceeding may be opened. Title 2 Increase of Basic Capital Sub-section 1 General Provisions Article 237 Decision Making (1) The basic capital of an open joint stock company sh all be increased by decision of the shareholders’ assembly, except in a case when such a decision may be made by the board of directors in accordance with paragraphs (4)-(6) of Article 205 of this Law. (2) A decision on increase of basic capital of an open joint stock company shall be reflected in an amendment of the Articles of Associ ation. (3) A decision to increase basic capital of an open joi nt stock company shall state the amount of the increase, the method of increase, the method and time of distribution of profit among participants in the increase, the date of pay ment into the company, and other matters in accordance with the law which regulates securiti es markets. (4) A decision on a new issuance of shares on the basis of new contributions may be made only after full payment of subscribed shares from a previous issuance, unless the Articles of Association or the decision on issuance states that basic capital may be increased on the basis of 9/10 of subscribed shares. (5) The provisions of paragraph (4) of this Article sha ll not apply to an increase of basic capital in a status change, an increase on the basi s of contributions in kind, or an increase through issuance of shares to employees of the comp any or linked companies. Article 238 Method of Increase (1) The basic capital of an open joint stock company ma y be increased: 1) through new contributions; 2) by converting convertible securities into shares or issuing shares to holders of options to acquire the shares (conditional increase); or 3) from the company’s assets. (2) In an increase of basic capital of an open joint st ock company, new shares shall be issued or the nominal value of existing shares shal l be increased. Article 239 Types of Issuance (1) Shares of a joint stock company in an increase of b asic capital shall be issued through a closed issuance or an open (public) issuance. (2) For purposes of paragraph (1) of this Article an is suance is closed if the shares are issued to existing shareholders, to holders of conv ertible securities or other securities which carry the right to acquire such shares, and/or to a limited number of professional investors in accordance with this Law and the law which regul ates securities markets. (3) For purposes of paragraph (1) of this Article, an i ssuance is open if the shares are issued to persons without preemptive rights, in acc ordance with the law which regulates securities markets. (4) A closed joint stock company may conduct only a closed issuance. An open joint stock company may conduct a closed or an open issuance. Article 240 Value of Shares in a New Issue Shares in a new issue shall be issued at market val ue as defined in this Law. Subsection 2 Increase of Basic Capital with New Contributions Article 241 Increase of Basic Capital with Contributions in Mon ey and in Kind (1) The basic capital of an open joint stock company ma y be increased through new contributions which may be monetary or non-monetary (in kind), in accordance with the company’s decision on the increase. (2) If contributions are made in kind, the decision on the increase shall state the property or rights which the company thereby acquires, the p ersons from whom it is acquired, and the number and nominal or accounting value of share s which are acquired by such contributions. (3) If the information referred to in paragraph (2) of this Article is not stated in the case of an open joint stock company, contracts for the cont ributions in kind and related legal activities shall be invalid. After registration of a withdrawal of basic capital, acting contrary to paragraph (2) of this Article shall not affect t he validity of the withdrawal, and a shareholder whose contribution was not issued is ob ligated to pay in the nominal value of the share or the higher amount of the issuance, or the accounting value in the case of shares without nominal value. (4) Contributions in kind shall be valued by one or mor e independent appraisals in accordance with this Law. Article 242 Registration and Publication of the Decision (1) A decision to increase basic capital of an open joint stock company with new contributions shall be registered and published in accordance with the law which regulates registration of business entities. Subscription of shares on the basis of such a decision may not begin prior to such registration and publicatio n of the decision. (2) A decision to increase basic capital may not be submitted for registration after the expiration of six months from the date the decision was made. Article 243 Subscription of New Shares (1) Shares issued in an increase of basic capital by an open joint stock company with new contributions, shall be subscribed and issued in ac cordance with this Law and the law which regulates securities markets. (2) An issuance referred to in paragraph (1) of this Ar ticle in an increase of basic capital on the basis of new contributions, shall be deemed successful if the requirements stated in the decision on issuance and the published prospectus a re met, in accordance with the law which regulates securities markets. (3) Shares subscribed in an issuance referred to in par agraph (1) of this Article shall be paid in accordance with the decision on issuance an d this Law. (4) Shares of an open joint stock company issued on the basis of new contributions may be issued to persons taking over the issuance in ac cordance with the law which regulates securities markets. (5) If new shares in an increase of basic capital of an open joint stock company are issued for a higher price than their nominal value, the su rplus represents a share premium. (6) Such surplus must prior to entry of the increase of basic capital in the Registry. Article 244 Reporting to the Securities Commission and Entry in to the Central Registry (1) If an issuance of shares on the basis of new contri butions is deemed successful in accordance with this Law, this shall be reported to the Securities Commission in accordance with the law which regulates securities markets. (2) Upon receipt by the Securities Commission of such r eport on the successful issuance of shares on the basis of new contributions, the Ce ntral Registry of Securities shall be informed without delay for the purpose of recording the newly issued shares and their shareholders and for the purpose of recording the i ncrease of nominal or accounting value of existing shares. (3) If an open joint stock company has a book of shares , the changes referred to in paragraph (1) of this Article shall be recorded in the book of shares. Article 245 Acquisition of Shares and Issuance of Share Certifi cates (1) Shares or certificates for shares shall be issued t o subscribers for shares in proportion to the paid in contributions or to the contribution s transferred into the company assets in an increase of basic capital with such contributions. (2) New shares or share certificates for shares may be issued after entry into the Central Registry of Securities. New shares or share certifi cates issued prior to such registration shall be null and void, and the board of directors and the issuer shall be jointly and severally liable to the shareholders for the damage caused by such issuance. (3) Issuance of shares or share certificates as referre d to in paragraph (1) of this Article shall be registered in the appropriate accounts of the shareholders in the Central Registry of Securities. Article 246 Registration and Publication of Capital Increase (1) An increase in basic capital of an open joint stock company through new contributions shall be registered and published in accordance with the law which regulates registration of business entities. (2) The basic capital of an open joint stock company sh all be deemed increased as of the date of such registration and publication. Subsection 3 Conditional Increase of Basic Capital Article 247 Requirements (1) In adopting a decision on the issuance of conve rtible securities and securities with the right to acquire shares, a shareholders’ assembly m ust at the same time adopt a decision on a conditional increase of basic capital in an amoun t with which would cover the rights of holders of the securities after conversion or exerc ise of the rights to acquire shares (conditional increase of capital). (2) The amount of basic capital referred to in paragrap h (1) of this Article may not exceed one half of the basic capital of an open joint stoc k company which exists at the time of adoption of the decision. (3) A decision of a shareholders’ assembly contrary to the decision on conditional increase of basic capital shall be null and void. Article 248 Content of the Decision A decision on conditional increase of capital of an open joint stock company shall state: 1) the purpose of the conditional increase; 2) the persons who may exercise the right to receive t he shares (such as holders of securities with the right to acquire shares or conv ertible bond holders); 3) the time period and conditions for exercising the r ight; 4) the price for which the shares are issued or a meth od by which it can be determined; and 5) the distribution of the rights referred to in subpa ragraph 2) of this Article, the time period within which the rights must be exercised, a nd the waiting period before the first exercise of such this right, which may not be less than two years after the date of adoption of the decision. Article 249 Registration and Publication of the Decision (1) A decision on a conditional increase of basic capit al of an open joint stock company shall be registered and published in accordance wit h the law which regulates registration of business entities. (2) The procedure for converting convertible securities into shares and the exercise of the rights to acquire shares may not begin prior to reg istration and publication pursuant to paragraph (1) of this Article. Article 250 Statement on Exercising the Right of Registration a nd Conversion (1) The right of holders of convertible securities to c onversion into shares shall be exercised by completing a written statement that th ey have been converted into shares. Issuance of such statement constitutes subscription of shares and payment for shares. (2) The right of holders of securities with the right t o acquire shares shall be exercised by completing a written statement regarding the regist ration of shares through the first issuance for the purpose of increasing basic capita l with new contributions in accordance with this Law. (3) The statements referred to in paragraphs (1) and (2 ) of this Article shall state the number of shares and their nominal or accounting va lue, their number, and if shares of several classes are issued the specific classes, de tails referred to Article 191 of this Law in the case of contributions in kind, and the date whe n the decision on conditional increase of capital was made. (4) Statements on registration of shares that do not co ntain the information required in paragraph (3) of this Article or which contain limi tations on the liability of the person making the statement shall be null and void. (5) Regardless of nullity of the statement, a person ma king the statement may not refer to the nullity of the statement if he had previously, on the basis of the statement, exercised rights as a shareholder and fulfilled the obligatio ns of a shareholder. (6) Limitations will not be effective if they are not c ontained in the statement. Article 251 Informing the Securities Commission and Entry into the Central Registry (1) After completion of the procedure referred to in Ar ticle 250 of this Law, the Securities Commission shall be informed thereof in accordance with the law which regulates securities markets. (2) Upon the administrative decision of the Securities Commission, the Central Registry of Securities shall be informed without delay, for the purpose of entering the newly issued shares and the shareholders. (3) If the open joint stock company has a book of share s, the changes referred to in paragraph (1) of this Article shall be entered into the book of shares. Article 252 Acquisition and Confirmation of Shares (1) New shares or certificates for shares may be issued after the registration referred to in Article 260 of this Law. New shares or confirmation on shares issued prior to such registration shall be null and void, and the issuer and board of directors shall be jointly and severally liable for damages of such issuance. (2) Issuance of shares and shares certificates as refer red to in paragraph (1) of this Article shall be registered in the appropriate accounts in the Central Registry of Securities. (3) During a conditional increase of initial capital, t he board of directors of a company shall issue shares or certificates for shares in ac cordance with paragraph (1) of this Article only for the purpose of fulfilling the adopted deci sion. (4) The board of directors shall issue shares in exchan ge for convertible securities only if the difference between the amount at which the bond s have been issued and the greater amount of initial capital relating to the shares is sued for that purpose, is covered from other reserves which can be used for that purpose, or by additional payments by a person who is authorized to convert a bond for a share. This shal l not apply if the total amount for which the bonds have been issued reaches the total amount of initial capital which is required for shares issued for them or if it exceeds that amount . Article 253 Registration and Publication of Capital Increase (1) Within 30 days after the end of the business year o f an open joint stock company, authorized representatives of a company shall submi t an application to the Registry for registration of an increase of basic capital on the basis of the total number of shares issued during that year by conversion of convertible secur ities or exercise of options or other rights to acquire shares. (2) The application referred to in paragraph (1) of thi s Article shall be submitted together with other evidence and documents in accordance wit h the law which regulates registration of business entities. (3) The increase of initial capital of an open joint st ock company by converting convertible securities into shares and by issuing shares to hol ders of securities with the right to acquire shares shall be registered and published in accorda nce with the law which regulates registration of business entities. Upon such regist ration and publication, it shall be deemed that the basic capital of a joint stock company has been increased. Subsection 4 Article 254 Requirements (1) The shareholders’ assembly of an open joint stock c ompany may decide to increase the basic capital of a company by converting capital re serves and retained earnings into basic capital of the company. (2) Such a decision shall state the amount of the incre ase, the amount of the reserves to be converted into basic capital, whether new shares ar e to be issued in such an amount or the nominal or accounting value of existing shares is t o be increased, and the time limit for shareholders to exercise their rights. (3) Reserves and retained earnings of a joint stock com pany may not be converted into basic capital if losses are reported in the profit and loss account representing the basis for such a decision. Reserves intended for a specific p urpose may be converted into basic capital only if such conversion is consistent with the designated purpose. (4) A decision to increase basic capital of a company f rom company assets shall be based on annual financial statements of the company for t he preceding year, provided that they have been approved by auditors and duly adopted no more than eight months before submission of the application for entry of such dec ision into the Registry. (5) If the shareholders’ assembly fails to appoint spec ial auditors for the financial statements referred to in paragraph (4) of this Art icle, the auditors which were appointed by the shareholders’ assembly to audit the latest annu al financial statements, or auditors appointed by a court in a non-contentious proceedin g taking into account the circumstances, shall be deemed so appointed in acco rdance with the law which regulates accounting and audit. Article 255 Holders of Rights Arising from an Increase in Basic Capital from the Company’s Assets (1) The companys shareholders as identified in the Cent ral Registry of Securities at the time of making a decision to increase basic capital of the company, and/or the companys shareholders on a date specified in a decision to i ncrease basic capital of the company, shall be entitled to free shares issued as a result of th e increase in the basic capital in proportion to their share in the existing initial capital of t he company. (2) A decision of the shareholders assembly contrary to pargraph (1) of this Article shall be null and void. (3) The rights referred to in paragraph (1) of this Art icle shall belong to: 1) subscribers to shares and/or shareholders who have partly paid their shares, in proportion to the portion of their paid up shares i n the basic capital of the company; 2) holders of convertible securities or options or oth er securities entitled acquire shares, in proportion to the nominal value or accouting val ue of the shares to be converted into or acquired. (4) The rights referred to in paraagraph (1) of this Ar ticle shall also belong to own shares held by the company, in proportion to those shares’ share in the existing basic capital of the company. Article 256 Fractional Shares (1) Where a person acquires a right to a fractional sha re in an increase in basic capital of an open company from company assets, such right may be transferred and inherited. (2) The rights arising from a new whole share may be ex ercised if rights referred to in paragraph (1) of this Article, which together make up a whole share, are combined in one shareholder, or if more than one holder of such rig ht, whose rights to part of a share together make up a whole share, exercise such right s together. Article 257 The Right to Dividends and Distributions on in Liqu idation (1) New shares acquired on the basis of an increase in basic capital of an open company from the company’s assets and/or a portion of nomin al or accounting value of shares which is increased on the same basis, shall be entitled t o a dividend or to a distribution of assets of a company in liquidation for an entire business yea r in which a decision to increase initial capital of a company from its assets is made, unles s otherwise determined in the decision on the increase. (2) A decision to increase basic capital of an open com pany from the company’s assets may include new shares in the distribution of the c ompanys profits for a business year that ended before the making of such decision, where suc h decision is made before the decision to distribute profits for a business year that prec edes the year in which the decision to increase basic capital from own assets has been mad e. Article 258 Notification of the Securities Commission and Entry into Central Registry (1) Following completion of the procedure referred to i n Articles 254 and 255 of this Law, the Securities Commission shall be notified in accordance with the law which regulates securities markets. (2) Upon receipt of the decision of Securities Commissi on in the matter referred to in paragraph (1) of this Article, the Central Registry of Securities shall be promptly notified to make an entry of the new issue of shares and their holders, and/or to make an entry of an increase in the nominal or accounting value of the shares. (3) If an open joint stock company keeps a book of shar es, the entries referred to in paragraph (2) of this Article shall be recorded in the book of shares. Article 259 Acquisition of Shares and Share Certificates (1) New shares or share certificates resulting from an increase in basic capital of a company from its assets may be issued or acquired a fter the registration provided for in paragraph (2) of Article 258 of this Law. (2) New shares or share certificates issued before such registration shall be null and void, and the issuer and the board of directors shall be jointly and severally liable for damage caused by any such issuance to shareholders. (3) The issuance of shares and share certificates as pr ovided for in paragraph (1) of this Article shall be enered into the appropriate accoun ts in the Central Registry of Securities. Article 260 Registration and Publication of the Decision (1) A decision on increase in basic capital of an open joint stock company from its assets shall be registered and published in accordance wit h the law which regulates registration of business entities. (2) The decision on increase in initial capital of an o pen joint stock company from company assets shall be null and void unless entere d into the register within three months from the date of its adoption. (3) The time period referred to in paragraph (2) of thi s Article shall be suspended if coourt proceedings for contesting such decision hav e been initiated in accordance with this Law. (4) The basic capital of a company shall be increased f rom company assets as of the date of entry of such decision into the Registry. Section 3 Reduction of Basic Capital Subsection 1 Basic Principles Article 261 Decision (1) A decision to decrease basic capital of an open joi nt stock company through cancellation of own shares shall be made by the boa rd of directors of the company. The decision to decrease basic capital in every other c ase shall be made by the shareholders’ assembly, unless the Articles of Association or by- laws provide otherwise. (2) A decision to decrease basic capital of an open joi nt stock company shall specify the level, purpose, type and method of reduction of bas ic capital. (3) Such a decision shall be reflected in an amendment of the Articles of Association. Article 262 Type of Reduction (1) Reduction of basic capital of an open joint stock c ompany may be carried out through regular reduction, simple reduction or reduction fo r the purpose of conversion into reserves. (2) Basic capital of a company may be reduced simultane ously with the increase in its basic capital on another basis. Subsection 2 Regular Reduction Article 263 Methods Regular reduction of basic capital of an open compa ny shall be carried out through: 1) withdrawal and cancellation of own shares or withdr awal and cancellation of shares held by shareholders; 2) decrease in nominal or accountiing value of shares; or 3) repayment of the amount paid by shareholders for pa rtly paid shares and cancellation of such shares. Article 264 Cancellation of Own Shares and Withdrawal and Cance llation of Shares (1) When reducing the basic capital of an open company the first shares to be cancelled shall be shares owned by the company which must be cancelled pursuant to paragraphs (3) and (4) of Article 224 of this Law. (2) If a company holds none of its own shares, its basi c capital may be reduced by withdrawal and cancellation of shares held by share holders in accordance with the provisions of Article 227-229 of this Law. (3) Withdrawal and cancellation of shares held by share holders and regular reduction of basic capital resulting therefrom may only be under taken by an open joint stock company in accordance with provisions of this Law protecting c reditors’ rights. (4) Paragraph (3) of this Article shall not apply in th e following cases when initial capital is not reduced: 1) when the fully paid shares placed at the disposal o f the company free of charge are withdrawn and cancelled; 2) when the fully paid shares are withdrawn and cancel led from assets available for such purpose in accordance with restrictions in Article 230 of this Law; 3) in the case of share without nominal value, when th e assembly decides to increase the participation of the remaining shares in basic capi tal of the company by withdrawal and cancellation of shares, or in the case of shares wi th nominal value, when the withdrawn shares are cancelled and the par value of non-withd rawn issued shares is increased up to the amount that is sufficient to avoid reduction of bas ic capital, and when the withdrawn and cancelled shares have been acquired from the assets available for such purposes in accordance with Article 230 of this Law; or 4) in the event of simultaneous issuance of new sha res with nominal value equal to the nominal or accounting value of withdrawn shares in accordance with the provisions of this Law. Article 265 Applicability of Other Articles The provisions of Article 264 shall apply mutatis m utandis in the event of reduction in capital stock as a result of reduction of the nomin al value of a class of shares with nominal value or reduction of the accounting value of share s without nominal value, and in the event of reduction in capital stock as a result of paying capital for partly paid shares or not issuing such shares. Article 266 Principle of Equality (1) A resolution authorizing regular reduction in capit al stock of an open company in regular procedure shall not violate the principle o f equality of shareholders of one class of shares. (2) The principle of equality of shareholders of one cl ass of shares shall be exercised through proportionate cancellation of the sharehold ersshares, i.e. proportionate reduction of nominal value of shares with nominal value or accou nting value of shares without nominal value, as well as through cancellation of shares an d reduction in capital arising from trading at a stock exchange or other securities markets or from public offerings to interested parties, in accordance with the law which regulates securities markets, the Articles of Association or the shareholders’ decision to author ize the reduction in capital. An offer for shares for cancellation shall state the specific nu mber of shares. (3) If it has been stated in a decision authorizing red uction in capital that the reduction shall be in a fixed amount, which amount may not be achieved through tenders for cancellation through the stock exchange or other se curities markets or through public offerings, the decision must change the amount stat ed in the decision, or another method of reduction in capital stock shall be resorted to. (4) The principle of equality of shareholders of one cl ass of shares shall also be exercised through reduction in capital stock (subscribed capi tal) as a result of the company not allotting to shareholders unpaid shares which they have failed to pay when due in accordance with this Law. Article 267 Registration and Publication of the Decision to Dec rease A decision on decrease in basic capital of an open company in a regular procedure shall be registered and published in accordance with the law which regulates registration of business entities. Article 268 Notice of Decision and Protection of Creditors (1) Upon registration of such a decision it shall be pu blished two times at least 30 days apart with an invitation to creditors to file their claims. (2) Creditors whose non-matured claims have arisen prio r to the second notice of such publication may claim their rights no later than 90 days following the second notice. Such creditors may claim security or payment if the deci sion of shareholders. Within 90 days from the date of the second publication securing of claims may not be claimed by secured creditors. (4) In the event of a regular reduction of capital of a company, shareholders’ claims may be settled following a period of 90 days after the dat e of the second notice of after creditorsduly filed claims have been settled. Article 269 Filing with the Central Registry of Securities (1) Any reduction in capital of an open company sha ll be filed without delay with the Central Registry of Securities for the purpose of r egistration, in the appropriate accounts of shareholders, records on cancelled shares, and remo ving from records any partly paid shares for which the shareholders have been paid by the company. (2) If an open company keeps a book of shares the d ecrease shall be recorded in the book of shares. Article 270 Registration of Decrease, Publication and Effective ness (1) A regular reduction in basic capital of an open com pany shall be registered and published in accordance with the law which regulate s the registration of business entities. (2) Such a reduction may not be registered before the c reditors claims pursuant to Article 268 of this Law have been settled and said reductio n has been entered in the Central Registry of Securities in accordance with Article 2 69 of tis Law. (3) The reduction in basic capital of the open company shall be effective as of the date of the publication of the registration, and shall be i n the amount of the reduction in nominal and/or accounting value of the shares in question. (4) Subscribed capital of an open company corporation s hall be decreased as of the date of notice of publication of registration of the red uction. in the amount of payment to shareholders of partly paid shares. Subsection 3 Reduction through Simplified Procedure Article 271 Principle (1) The basic capital of an open company may be reduced by a simplified procedure for the purpose of equalizing reduced value of assets a nd covering losses. That purpose shall be stated in any decision authorizing reduction by sim plified procedure. (2) Such a reduction for the purpose of covering losses may be carried out only to the extent that the company does not utilize any unallo cated profits or reserves for such purposes. (3) Such a reduction shall not be subject to the provis ions of this Law relating to the invitation to creditors to file their claims and th e protection of creditors rights upon a regular reduction in capital. (4) A reduction in capital under paragraph (1) of this Article shall be subject mutatis mutandis to the provisions of Articles 263-267 and 269-270 of this Law. Subsection 4 Reduction for Purpose of Creating Reserves Article 272 Limit (1) The provisions of Article 277 with regard to the in vitation to creditors to file their claims and the protection of creditorsrights upon a regular reduction of capital shall not apply to a reduction in capital for creating reserv es for future losses or an increase in basic capital from the assets of the company in which the reduction does not exceed 10% of the capital. (2) In a reduction of basic capital referred to in para graph (1) of this Article, reserves created shall be equal to the amount of capital red uced as a result of cancellation of shares or the amount of capital reduced as a result of red uction of nominal or accounting value of shares. (3) Reduction in basic capital under paragraph (1) of t his Article shall be subject mutatis mutandis to the provisions of Articles 263-267 and 269-270 of this Law. Subsection 5 Capital Following Reduction Article 273 Rules (1) The financial statements for the business year prec eding the year in which a decision on reduction of basic capital was made shall contai n such amounts of value of capital capital gains and revenues reserves as are expected to arise following the reduction of capital. (2) Decisions authorizing reduction in basic capital an d on adopting financial statements shall be made at the same time. (3) Financial statements of an open joint stock company may be published in accordance with the law which regulates securities markets onl y after registration of the decision authorizing the reduction in capital, Subsection 6 Simultaneous Decrease and Increase Article 274 The Largest Amount of Decrease (Reduction) (1) The basic capital of an open joint stock company ma y not be decreased in a regular reduction procedure below the minimum amount of bas ic capital required under paragraph (2) of Article 233 of this Law. In a case of a decr ease below such amount, liquidation or bankruptcy proceedings shall be iniated in accordan ce with law. (2) As an exception to paragraph (1) of this Article, r egular reduction of basic capital of a joint stock company below the above minimum shall b e possible if a decision to increase the basic capital up to the required minimum is mad e at the same time as the decision on reduction, provided that such increase is not by me ans of in kind assets. (3) Decisions on regular reduction and simultaneous inc rease of basic capital of an open joint stock company shall be null and void if the i ncrease or decrease is not entered into the register within six months of the date of the decis ion. This time period shall not run during a dispute seeking to nullify the decision on decrea se or increase of the basic capital or while awaiting decisioin thereon the competent body, if s uch approval is required. (4) Provisions of Article 234 of this Law on minimu m nominal value of shares shall apply in the case of simultaneous decrease and increase o f the basic capital. Chapter 10 Shareholders’ Assembly Section 1 General Provisions Concerning the Shareholders’ Ass embly Article 275 Exercising Shareholders’ Rights (1) The shareholders’ assembly of a joint stock company consists of the company’s shareholders. (2) Every shareholder, personally or through his author ized representative, shall have the right to attend the shareholders’ assembly, vot e if his shares carry the right to vote, ask questions and receive answers regarding matters inc luded on the agenda, and make proposals for the agenda as provided in this Law. (3) Paragraphs (2)-(4) of Article 136 of this Law (rela ting to a single-member limited liability company) shall apply mutatis mutandis to a single-shareholder joint stock company. (4) Members of the board of directors and members of an y supervisory board of a joint stock company and the company’s independent auditor shall attend the shareholders’ assembly if possible regardless of whether they are shareholders. Section 2 Types of Assembly Article 276 Annual Assembly (1) The shareholders’ assembly shall be convened at least once a year (the “annual assembly”) not later than the later of three months after preparation and submission to the board of the company’s annual financial statements for each financial year or six months after the end of the company’s financial year. (2) The annual assembly shall be held on a date and at a time stated in the company’s Articles of Association or, if not there stated, sh all be fixed by the board of directors in a manner consistent with the Articles of Association and this Law. (3) The annual assembly shall be held at the registered office of the company unless the Articles of Association specify a different place. (4) Failure to hold the annual assembly at the time req uired by this Article shall not affect otherwise valid company action. Article 277 Extraordinary Assembly and Convening by Minority Sh areholders (1) Apart from the annual assembly, a company shall hold an extraordinary assembly either: 1) at the call of the board of directors or any other person who is authorized by the Articles of Association to call an extraordinary as sembly; 2) at the call of the liquidator if the company is in liquidation; or 3) upon the written demand of holders of at least 10% of all the votes entitled to be cast on an issue at the proposed extraordinary assembly. (2) A demand referred to in subparagraph 3) of para graph (1) of this Article must be dated and signed by all of such shareholders, and must id entify such shareholders and state the number of shares they each hold, must state the pur pose or purposes for which the assembly is called and the agenda for the assembly. (3) Such a demand shall be considered to have been received by the company if it has been delivered to the company’s registered office addres sed to the board of directors. (4) The record date for determining the list of sha reholders entitled to demand an extraordinary assembly shall be the date on which t he first shareholder has signed the demand. (5) The board of directors must make a decision to convene or refuse to convene such a meeting within 10 days after the demand has been re ceived. Not later than seven days after making its decision the board shall send written no tice of the decision to each of the persons demanding the assembly at the addresses sta ted in the demand. A decision to refuse to convene an extraordinary assembly must state the reasons for the refusal. (6) Such a demand may be refused: 1) if the procedure stated in subparagraph 3) of parag raph (1) of this Article and paragraphs (2)-(5) of this Article has not been ful ly complied with; 2) if the shareholders who have submitted the demand d o not hold the required number of votes; or 3) if none of the proposed issues for the extraordinar y assembly is within the competence of a shareholder assembly. (7) An extraordinary shareholders’ assembly may mak e decisions only on matters stated in the demand made pursuant to subparagraph 3) of para graph (1) of this Article and paragraphs (2)-(4) of this Article. Article 278 Court-Ordered Assembly (1) If an annual assembly has not been held within the time period required by this Law, the competent court may in a non-contentious procee ding order the assembly to be held upon the request of any shareholder who is entitled to attend and vote at an annual assembly, or any director of the company. The court shall have power to appoint an interim representative empowered to convene or preside at t he assembly, set the place and date of the assembly, and set its agenda in accordance with this Law. (2) If an extraordinary assembly has not been held at l atest within 30 days after delivery of the demand or at the day defined by the board of ma nagers in accordance with the paragraph (5) of Article 277, the competent court i n non-contentious proceeding may order the assembly to be held upon the request of any sha reholder who signed the demand. (3) In the cases referred to in paragraphs (1) and (2) of this Article, the court in non- contentious proceeding is obligated to make a decis ion within 48 hours after the receipt of the request. (4) A company shall bear the expenses of any shareholde rs’ assembly held by court order. Article 279 Extraordinary Assembly of a Closed Company An extraordinary shareholders’ assembly may be held without a proper convening of a session and without publishing the agenda in accord ance with this Law if all shareholders with a right to vote are present and if no sharehol der dissents, unless the company’s Articles of Association or by-laws provide otherwis e. Article 280 Extraordinary Assembly in Financial Crisis A company’s directors shall convene a shareholdersa ssembly without delay if it has been learned during preparation of annual or other finan cial statements that the company faces a loss which amounts to 50% or more of the company’s basic capital. Section 3 Procedure for Convening an Assembly Article 281 Notice to Shareholders (1) Written notice to each shareholder of an annual ass embly shall be given not less than 30 nor more than 60 days before the date of the ann ual assembly, and written notice to each shareholder of an extraordinary assembly shall be g iven not less than 15 nor more than 30 days before the date of the extraordinary assembly. The notice shall be given by mail or email (but only if the shareholder has agreed in wr iting to notice by email) to each shareholder of record who is entitled to vote at th e assembly. The notice shall be given by or at the direction of the chairman of the board or another director, or by another person who is authorized to call the meeting. (2) The notice referred to in paragraph (1) of this Art icle shall be sent with the company’s financial statement together with related auditors’ reports, a report of the supervisory board if the company has one, a report of the board of di rectors on the company’s operations, the text of any proposed amendments to the Articles of Association, a description of any contracts or transactions proposed for approval, an d any other matters which are required to be in the notice by the company’s Articles of Assoc iation, this Law, the law which regulates securities markets or any other law. (3) The date of delivery of the notice referred to in p aragraph (1) of this Article shall be considered to be the date of sending by post by rec orded delivery to the post office or the date of emailing, as the case may be. (4) As an exception to paragraph (1) of this Article, a n open company may, instead of sending individual notice to each shareholder, publ ish an announcement continuously on the company’s website during the applicable time pe riod referred to in paragraph (1) of this Article and shall, in addition, publish it in at le ast one daily newspaper distributed throughout Serbia with a print run of at least 100, 000 copies, not less than 30 nor more than 60 days before the date of the assembly in the case of an annual assembly, and not less than 15 nor more than 30 days before the date of the ass embly in the case of an extraordinary assembly. (5) The notice of an annual assembly referred to in par agraph (4) of this Article shall state the date, time and place of the meeting, the compan y’s proposed agenda and list of issues to be voted on at the meeting (including candidates fo r election to the board of directors and any proposal for dividends), and shall include a st atement that the company will provide copies of the documents referred to in paragraph (2 ) of this Article to any shareholder who requests them, at the company’s registered office d uring regular business hours. (6) The notice of an extraordinary assembly referred to in paragraph (4) of this Article shall state the date, time and place of the meeting , a description of the purpose for which the assembly is to be held, and the agenda which is proposed by the persons who called or demanded the meeting. Article 282 Waiver of Notice in Writing Whenever any notice to shareholders is required to be given under this Law or a company’s Articles of Association or by-laws, a waiver of suc h notice in writing signed by the person entitled to such notice shall be deemed equivalent to the giving of such notice. Article 283 Waiver by Attendance (1) A shareholder’s attendance at an assembly shall con stitute a waiver of any objection by the shareholder to a lack of notice or defective notice of the assembly. (2) As an exception to paragraph (1) of this Article, a shareholder may file an objection in written form at the beginning of the assembly to the holding of the assembly or taking action at the assembly because proper notice was no t given. (3) The objection referred to in paragraph (2) of this Article shall be decided in a form specified by the company’s by-laws and the assembly ’s operating procedures and rules. Article 284 Agenda for an Assembly (1) At a shareholdersassembly, decisions may be mad e only on matters within the scope of the applicable notice and agenda referred to in thi s Law, but this restriction shall not prevent discussion of other matters. (2) A shareholder or shareholders holding at least 10% of all the votes entitled to be cast for the board of directors of a company shall have the right to propose and require that a maximum of two new issues be included on the agenda . (3) Any proposal referred to in paragraph (2) of this A rticle must be submitted in writing within seven days from the date at which the conven ing of an annual shareholders’ assembly has been announced, or within five days in the event of an extraordinary shareholdersassembly. (4) Each proposal referred to in paragraphs (2) and (3) of this Article shall include the names of the shareholders making the proposal, the number of votes they have (to the extent known to the proposer), and shall be submitt ed to the company, addressed to the board of directors at the company’s registered offi ce. (5) For purposes of this Article, no shareholder shall be counted in more than one group holding a stated percentage of votes. (6) If the board fails to respond to a shareholders’ re quest made pursuant to paragraph (2) of this Article, or if it rejects the request, the competent court in a non-contentious proceeding shall have the power, on request of any submitting shareholder, to order that the shareholders’ request must be granted. The court sh all make its decision within 48 hours after receipt of the request. Article 285 Chairman at an Assembly (1) A chairman shall preside at each shareholders’ asse mbly. (2) The chairman shall be elected at the beginning of t he assembly if the agenda properly provides for that. (3) The chairman may also be designated or appointed as provided in the company’s by- laws. (4) The chairman may establish rules and regulations fo r the conduct of the assembly which are fair to the shareholders. Article 286 List of Shareholders and Record Date for an Assembl y (1) A company’s Articles of Association may specify or provide the method for setting the record date for determining the list of shareholder s who are entitled to notice of an Assembly, to demand convening of an extraordinary a ssembly, to vote, to submit minority shareholders’ proposals in accordance with this Law, and to take any other action (herein called a “record date”). (2) If the Articles of Association does not specify or provide the method for setting the date referred to in paragraph (1) of this Article, the b oard of directors may do so. If the board of directors does not do so: 1) in the case of an assembly other than an extraordin ary assembly, the record date shall be the date on which the notice of the meeting is firs t given; and 2) in the case of an extraordinary assembly, the recor d date shall be the date on which the first demand was signed and dated by a shareholder. (3) A record date may not, in any event, be more th an 60 nor less than 10 days before the assembly at which action is to be taken. (4) The list of shareholders for an assembly shall be compiled as of the record date from the shareholder list in the Central Registry of Securit ies and shall be available at the company’s registered office to all shareholders entitled to v ote at the assembly for inspection and copying at their own cost and for the opportunity t o object to any irregularities in the list. (5) Such list of shareholders shall contain the nam e and address of each shareholder and the number of voting shares held by each shareholder. A r t i c l e 2 8 7 V o t i n g i n P e r s o n o r b y P r o x y (1) A shareholder may vote his shares in person or by a n authorized representative (a “proxy”) in accordance with this Law or the company ’s by-laws. (2) A shareholder may appoint a proxy only by power of attorney in writing which names the person who shall be the proxy and states the nu mber, type and class of shares for which the proxy is given. If so provided in the company’s Articles of Association or by-laws, the power of attorney may be given in electronic format if its authenticity can be assured. (3) Signed copies of the power of attorney shall be del ivered both to the proxy and the company. (4) A power of attorney shall be valid for only one ass embly, which for this purpose includes any reconvening of an assembly which was a djourned for reasons of lack of time, lack of quorum or otherwise. (5) If the power of attorney contains instructions on h ow to vote on a particular matter, the proxy must vote in accordance with those instructio ns. If the power of attorney does not contain instructions on how to vote on a matter, th e proxy shall exercise the right to vote on that matter only in good faith with the purpose of serving the shareholder’s own best interest. (6) A person (or a related person to a person under thi s Law) who is a director or management body member of a company or of a control ling shareholder of a company may not be a proxy for an employee or a related person of an employee of the company. (7) If a shareholder who is entitled to vote at an asse mbly transfers his shares to another person before the assembly, he shall retain the rig ht to attend the assembly and vote but may grant that right to his transferee by a power o f attorney referred to in Article 286 of this Law. (8) A proxy is obligated to inform a shareholder who ap pointed him about his voting at the assembly. (9) The responsibility of a proxy for exercising the ri ght to vote as provided in paragraphs (5) and (8) this Article may not be released or lim ited in advance. (10) A shareholder who has given the power of attorney m ay revoke it at any time prior to voting at the assembly meeting by a written revocat ion delivered to the company and the proxy, or by attending the meeting and voting in pe rson. A r t i c l e 2 8 8 V o t i n g C o m m i t t e e (1) Unless provided otherwise in a company’s Articles o f Association or by-laws, the chairman of a shareholders’ assembly shall appoint a keeper of the minutes, two shareholders to review and approve the minutes, and a voting committee. (2) The voting committee shall be composed of at least three members who shall: 1) verify the list of shareholders present in person o r by proxy and verify the identities of the proxies; 2) verify the number of shares and number of votes of each shareholder and each proxy; 3) verify the validity of each power of attorney appoi nting a proxy and the instructions in each power of attorney; 4) count votes; 5) verify and announce results of voting; 6) transfer the ballots to the company’s archive for s afekeeping; and 7) perform other activities in accordance with any rul es of procedure of the assembly. (3) The voting committee shall be obligated to act in a n impartial and fair manner towards all shareholders and to submit a signed, written re port about its work which shall serve as evidence of the voting results at the assembly but which shall not be free from challenge by any shareholder acting in good faith. (4) In the case of a company with more than 50 sharehol ders, a member of the voting committee may not be a director, a management body member, a candidate for either body, or a related person of any thereof. Section 4 Informing Shareholders and Competence Article 289 Right of Shareholders to Information at Assembly (1) At each annual shareholdersassembly the company’s b oard of directors shall make an accurate and complete report to the shareholders on the state and operations of the company including its financial condition. (2) If the company has acquired its own shares, the boa rd shall state in its report on the state of the company the reasons for the acquisitio n, the number and nominal or accounting value of the acquired shares, whether they were acq uired without consideration or were paid for, the amount paid, the number of its own sh ares the company holds and the number of shares which it has reissued. (3) If a shareholder is denied information requested pu rsuant to this Article, he may request that this denial be recorded in the minutes of the assembly together with the reasons for the denial. (4) A shareholder may ask the competent court to or der that such information be provided. Such request shall be made not later than 15 days a fter the date of the assembly meeting at which the information in question was denied. Article 290 Competence and Book of Decisions of the Assembly (1) The following matters are to be decided by the shar eholders’ assembly: 1) amendment of the Articles of Association, including but not limited to amendments that establish, increase or decrease the authorized numb er of shares of, or change the rights or preferences of, any type or class of stock, or incr ease or decrease the company’s basic capital (but not including amendments which may be made by the board under this Law); 2) authorization and concluding of a status change or transformation into another form of company or an acquisition or disposition of major a ssets in accordance with this Law; 3) decision on distribution of profit and covering of losses, if the Articles of Association or by-laws of the company do not provide otherwise; 4) adoption of the company’s annual financial statemen ts including reports of the board of directors, auditors and supervisory board (if there is a supervisory board) relating to those financial statements; 5) policies on compensation and bonuses of directors; 6) election or removal of directors; 7) termination of the company; 8) appointment and removal of the company’s auditors; 9) matters submitted to the assembly by the company’s board of directors for decision in accordance with this Law; 10) expenditures relating to bonuses for the company’s directors by issuing shares, options financial or in-kind grants; 11) other matters stated in this Law or the company’s A rticles of Association to be within the exclusive competence of the shareholders’ assem bly; (2) All decisions made by the shareholder assembly shal l be entered without delay into a company book of decisions. Article 291 Adoption of Annual Financial Reports and Reports on Business Activities (1) The board of directors shall submit to the annual s hareholders’ assembly the financial statements and statements on business activities to gether with the statement by the auditor thereon, and other reports in accordance with this Law for inspection and adoption. (2) Any adoption by the shareholders’ assembly of a com pany’s annual or other financial statements or any other statements shall not affect any right or remedy available to the shareholders if such statements are later found to be incorrect or misleading. Section 5 Method of Work and Voting Procedures Article 292 Quorum (1) A simple majority of the total number of votes of t he shares entitled to vote on a matter (a “simple quorum”) shall constitute a quoru m for action of an assembly on that matter, unless the company’s Articles of Associatio n requires a greater quorum. The votes of those shares which may, in accordance with this Law, vote in writing shall also constitute part of the quorum. (2) If an assembly is adjourned because of lack of quor um it may be reconvened with the same proposed agenda but not later than 15 days fro m the date of the adjournment. The quorum required at such a reconvened assembly shall be one-third of the votes of the shares entitled to vote, unless the Articles of Associatio n require a greater quorum. (3) If there is no quorum at such reconvened assembly o r it is not held within such time period, another assembly must be convened and held in accordance with this Law. (4) The presence or absence of a quorum at an assembly shall be determined prior to beginning deliberations on the agenda items at the assembly. (5) Any amendment of a company’s Articles of Associatio n that adds, changes or deletes a greater quorum or voting requirement must meet th e same quorum requirement and be adopted by the same vote required under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater. (6) If at an assembly the required quorum is present fo r action on some but not all of the matters to be considered, action may still be taken on the matters as to which a quorum is present. In any event, a properly convened meeting may decide on the time and place for a reconvened meeting as referred to in paragraphs (2) and (3) of this Article. (7) If a company’s Articles of Association or this Law requires group voting by a single type or class of shares on a matter, the quorum for such voting shall be as provided in paragraphs (1)-(6) of this Article. Article 293 Vote Required for a Decision (1) If a quorum is present, the affirmative vote of a s imple majority of the votes of the shares present in person or by proxy and entitled t o vote on that matter shall be the decision of the assembly on that matter, unless a greater nu mber of votes or voting by classes is required by this Law or the company’s Articles of A ssociation. (2) Whenever this Law states that a qualified majority of votes is required on a matter, the term “qualified majority” shall mean the affirmativ e votes of at least two-thirds of the votes of all of the shares entitled to vote on that matte r. (3) The Articles of Association or by-laws of any compa ny may supersede the two-thirds vote requirement of paragraph (2) of this Article a s to that company by specifying any smaller or larger vote requirement not less than a simple majority of the votes of all of the shares entitled to vote on the matter and not less than a simple majority of all of the shares of each class of shares entitled to separate group voting on the matter. Article 294 Voting Rights of a Share (1) Except as provided in this Article, each outstandin g ordinary share shall be entitled to one vote on every matter voted on at an assembly, a nd each outstanding preferred share shall have only the voting rights stated in the com pany’s Articles of Association, which shall be subject to the restrictions stated in para graph (6) of Article 209 of this Law. (2) Shares held by the company may not be voted. Securi ties other than shares may not vote. (3) A company’s shares may not be voted at an assembly if the shares are owned, directly or indirectly, by another entity and the company ow ns, directly or indirectly, shares or other interests in that other subordinated entity which e ntitle the company to control the voting by that other entity of that other controlled entity’s shares of the company. Article 295 Certain Voting Agreements Prohibited (1) An agreement by a shareholder or a proxy to vote fo llowing instructions of the company or any director or management body member o f the company shall be null and void. (2) An agreement by a shareholder to vote, or to refrai n from voting, in return for privileges or other consideration provided to him b y the company or any director or management body member of the company, shall be nul l and void. Article 296 Meeting by Conference Telephone An assembly in a joint stock company with not more than ten shareholders may be held through conference telephone or other audio or visu al communication equipment if all of the participants can listen and talk to each other. The persons participating in such an assembly shall be considered to be personally prese nt at the assembly. Article 297 Form of Voting (1) Voting at an assembly shall be by secret ballot (wh ich may be in form for computer processing) if the company has more than 100 shareh olders or when so requested by shareholders with a minimum of 10% attending or rep resented shares with right to vote on the matter in the following cases: 1) when voting for election or removal of a director, an independent auditor or liquidator; and 2) when voting on financial reports, operation reports and on the system of compensation for company directors. (2) A ballot shall in any case contain the following: 1) the company’s registered name and the date and time of the assembly; 2) the issues subject to voting as items of the agenda ; 3) provision for voting “in favor,” “against” or “abst ain” on every issue, 4) for voting for directors, a clear statement of all the candidate’s names and statement of the body (board of directors or supervisory board) voted for. (3) If the voting is conducted by ballot: 1) a vote on matters other than election of directors shall be counted only if the shareholder marked one and only one of the three op tions stated in subparagraph 3) of paragraph (2) of this Article; 2) a vote on election or removal of a director without cumulative voting in accordance with this Law shall be counted only if the sharehol der votes for a number of candidates not exceeding the total number of directors to be elect ed; and 3) a vote on election or removal of a director with cu mulative voting shall be counted only if the shareholder’s total number of votes for all candidates does not exceed the total number of votes of the shareholder. (4) If the ballot contains more than one issue for voting, invalid voting on one shall not adversely affect validity of voting on any other is sue. (5) Voting in other cases than described in paragra ph (1) of this Article shall be by show of hands or another open procedure. Article 298 Voting Rights of Holders of Specific Types (1) The right to vote shares which are pledged shall be in the pledgor. (2) The shares held of record by another company or leg al entity, domestic or foreign, may be voted only by a proxy or other legal representat ive of that other company or entity. (3) In the case of shares held in the name of a decease d person, minor or other person not having legal capacity, the voting may be done throu gh a legal representative as provided by law without transfer of the shares to the represent ative. (4) In the case of shares held by a bankruptcy administ rator or liquidator, the voting is done by such person without transferring the shares into such person’s name if the power for such voting is contained in an appropriate cour t decision authorizing such person. Article 299 Effective Date of Assembly Decisions A decision of an assembly shall be legally effectiv e as of the time it is made except in following cases: 1) if the decision itself specifies that another effec tive time than that time shall be the effective time; or 2) if the law expressly provides that a decision becom es effective upon the date of entering it into the Registry and publication, then the time of registration and publication shall be the effective time. Article 300 Disqualification to Vote in Certain Cases (1) A shareholder may not vote at an assembly in the fo llowing cases: 1) when relieving that shareholder from an obligation to the company or satisfying the company’s claims against that shareholder; 2) when initiating or terminating a lawsuit against th at shareholder; or 3) when approving an act or transaction in which that shareholder has a personal conflict of interest with the company in accordance with thi s Law. (2) Limitations stated in paragraph (1) of this Article to a shareholder apply also to related persons as defined in this Law. (3) There shall be no limitation on the right of a shar eholder or his proxy to vote when deciding on his election or removal as a member of the board of directors, supervisory board, executive body or as a liquidator. (4) The votes of a shareholder who is disqualified unde r this Article shall also not be counted in determining the quorum for decision maki ng. Article 301 Record of an Assembly (1) Every decision of an assembly shall be recorded in minutes of the assembly by a recording clerk. (2) The chairman of the assembly shall be responsible f or assuring that proper minutes are made. (3) The minutes shall be prepared not later than 15 day s after the date of the assembly. (4) The minutes shall state: the place and time of the assembly, the agenda, the name of the recording clerk, the chairperson and voting com mittee members, the quorum, a summary of the discussions and speeches, the votes for, against and abstained on each decision, the manner of voting, and a list of decis ions made. (5) The list of persons present and evidence of proper convening of the assembly shall also be included in the minutes. (6) The minutes shall be signed by the chairman of the assembly, two appointed shareholders and the recording clerk. (7) A failure to comply fully with paragraphs (1)-(6) o f this Article shall not affect the validity of a decision of the assembly or otherwise valid company action, if its authenticity can be proved in another way. Section 6 Invalidity of an Assembly Decision Subsection 1 General Grounds for Invalidity Article 302 Grounds for Invalidity (1) The competent court may hold that a decision of a shareholders’ assembly is invalid if the decision: 1) was adopted at an assembly which was not convened i n accordance with this Law or the company’s Articles of Association or by-laws; 2) was adopted contrary to this Law or the company’s A rticles of Association or by-laws; 3) is contrary to law or the company’s Articles of Ass ociation or by-laws; or 4) in other cases prescribed by this Law. (2) A complaint seeking such a court decision may b e brought by a shareholder who voted against the decision at the assembly, or a sharehol der who was not been properly invited to the assembly or was prevented from attending the as sembly. (3) Such a complaint may also be brought by any mem ber of the board of directors or a supervisory board. (4) If the assembly decision is required to be register ed in the Registry, the complaint shall not in itself prevent such registration, but the Registry may postpone registration should it find it justified. (5) If such assembly decision is already registered, it shall be subject to deregistration by the court at the request of a person referred to in paragraphs (2) and (3) of this Article. Subsection 2 Special Grounds for Invalidity Article 303 Invalidity of Election of Director or Board Members (1) Except for cases referred to in Article 302 of this Law, the election of a member of the board of directors is invalid if: 1) the board was established contrary to this Law or t he company’s Articles of Association or by-laws; 2) the person elected was not nominated or elected in accordance with this Law or the company’s Articles of Association or by-laws; 3) the shareholders’ assembly elected more members to the board than prescribed by this Law of the company’s Articles of Association or by- laws; or 4) the person elected does not meet qualifications req uired for his election. (2) The provisions of paragraph (1) of this Article sha ll apply mutatis mutandis to appointment or election of members of the managemen t body, or any supervisory board or audit committee or an internal auditor. Article 304 Invalidity of Decision on Adoption of Annual Financ ial Reports (1) Except in cases referred to in Article 302 of this Law, a shareholders’ assembly decision on adoption of annual financial reports can be held invalid if: 1) the contents of the report does not comply with the laws or regulations which exclusively or predominantly protect the interests of the company’s creditors; or 2) the auditing of the report was not performed in acc ordance with law or persons authorized to perform the audit failed to perform i t. (2) The invalidity of the assembly decision or a bo ard of directors’ decision on the annual financial reports may result in invalidity of an as sembly decision on profit distribution based on the invalid decision. Subsection 3 Rules on Invalidity Not Applied Article 305 Exceptions An assembly decision shall not be held invalid if: 1) the defect was minor and the claimant or other pers ons suffered no significant legal consequences; 2) invalidity would adversely affect the rights of thi rd parties acquired in good faith; or 3) in a case where the decision was made contrary to t he Law, the Articles of Association or by-laws, the defect was waived or cured in accor dance with Articles 282 or 283 of this Law. Subsection 4 Invalidity Procedure Article 306 Complaint and Procedure (1) A complaint for holding an assembly decision to be invalid shall be brought against the company. (2) The complaint shall be brought within 30 days after the date of learning of the decision and not in any event later than six months (and thr ee months in the case of a listed company) from date of adoption of the decision. (3) If the claimant was present at the meeting when the decision was adopted, this count shall start the next day after the meeting was held . If the claimant was not present at the meeting, this count shall start with the first day after the date he knew or under the circumstances should have known of the decision. (4) The company may be represented by a special represe ntative designated by the shareholders’ assembly in accordance with the Artic les of Association or the company’s by-laws taking into consideration the circumstances of the case into account, or the competent court in a non-contentious proceeding. (5) The court may, at the company’s request, order the claimant to deposit collateral in case the charges made cause damage to the company. (6) The court may order a temporary measure aimed at pr eventing the implementation of the decision, which is subject to establishing its invalidity, if it deems it likely thast its execution may cause irreparable damage to the compa ny. (7) If more than one proceeding is conducted for establ ishing the invalidity of the assembly decision, they shall be combined into one. The proceeding for establishing the invalidity of the assembly decision is urgent. (8) The court may set a reasonable deadline for harmoni zing the decision which initiated proceedings under this Law, Articles of Association or the by-laws, should it find this to be necessary and possible. In case of expiration of su ch a time period, the court may extend the time period. (9) In a case where the company claims that Article 305 applies, the court may allow a time period for the board of directors to provide p roof to support that claim. In a case where the board of directors does not meet the deadline t he court may reject the complaint. (10) All shareholders may be involved in the dispute. (11) A court decision which establishes invalidity of th e assembly decision shall be effective in favor of and against all shareholders and binding with respect to the relationships among the shareholders and the compan y, the company and the members of the company bodies. (12) If the complaint is rejected on theground that ther e was no basis for the complaint, the claimants shall be jointly and severally liable for damages if they filed the complaint in bad faith or due to gross negligence. (13) If an invalidated assembly decision was registered in the Registry, the court shall, ex officio, send the decision on invalidity to the Reg istry for its registration and publication. The entering of the decision shall be published in the same manner that the invalidated decision was publicized. (14) If an invalidated assembly decision relates to an a mendments of the Articles of Association, the full text of the Articles of Assoc iation together with the decision shall be sent to the Registry with a duly verified signature of an authorized person, taking into consideration the court decision and relevant amend ments of the Articles of Association. Chapter 11 Board of Directors and Management Body Section 1 General Provisions Concerning the Board of Director s Article 307 General Requirements (1) A closed joint stock company must have a single dir ector or a board of directors. (2) An open joint stock company must have a board of di rectors. (3) The provisions of this Law relating to a board of d irectors of an open company shall apply also to a single director of a closed company which does not have a board consisting of more than one director. Section 2 Status Issues Concerning the Board of Directors Article 308 Number of Directors (1) The number of members of the board of directors of an open company shall be stated in the company’s Articles of Association. (2) The board of an open company shall have not less th an three members and not more than 15 members. Article 309 Election of Directors and Cumulative Voting (1) All of the members of a company’s board of dire ctors: 1) shall be elected by the shareholders at each annual shareholders’ assembly; and 2) may be elected by the shareholders at any extraordi nary shareholder assembly which has been convened for that purpose. (2) Candidates for election to the board may be nominat ed by the incumbent (existing) board, by shareholders, or by a nominating committe e of the board if such exists (herein called “nominators”). (3) In all elections of directors, every shareholder sh all have the right to vote the number of shares held by such shareholder for as many pers ons as there are directors to be elected. (4) Unless provided otherwise in the Articles of Associ ation or bylaws, in all open companies the directors will be elected with cumula tive voting. (5) With cumulative voting as referred to in paragraph (4) of this Article, every shareholder shall have the right to cumulate his vo tes and give one candidate a number of votes which equals the number of directors to be el ected multiplied by the number of the shareholder’s shares, or to distribute such cumulat ed votes in any proportion he wishes among any number of the candidates for election. (6) The Articles of Association of any closed company m ay provide for cumulative voting for election of directors. Article 310 Independent and Non-Executive Directors (1) In a listed open joint stock company a majority of the members of the board of directors shall be non-executive directors and, of them, at least two members shall be independent directors. (2) Nominators referred to paragraph (2) of Article 309 shall nominate at least three candidates for non-executive board positions. (3) For purposes of this Law, “independent director” of a company means, as of any point in time, a director of a company who, or whose fami ly members either separately or together with him or each other, during the two pre ceding years: 1) was or were not an employee or employees of the com pany; 2) did not make to or receive from the company payment s of more than 10,000 Euro or equivalent; 3) did not own more than a 10% stock or other ownershi p interest, directly or indirectly, in an entity that made to or received from the company payments of more than such amount; 4) did not act as a director or manager of an entity t hat made to or received from the company payments of more than such amount; 5) did not own directly or indirectly (including for t his purpose ownership by any family member or related person) stock of the company repr esenting more than 10% of the company’s capital; and 6) was not an auditor for the company. (4) For purposes of this Law, “non-executive direct or” means a person who is not a member of the management body of the company. Article 311 Term of Office of Directors (1) The term of office of all directors, including directors elected to fill a vacancy, shall expire at the next annual shareholders’ assembly fo llowing their election. (2) A vacancy in a board shall be filled by electio n at the next shareholders’ assembly at which directors are to be elected, except that a co mpany’s Articles of Association or by- laws may provide that the board may fill such vacan cy until such time. (3) If the number of directors falls below half of the number fixed in the company’s Articles of Association or by-laws and the board do es not fill the vacancies pursuant to authorization referred to in paragraph (2) of this Article, the remaining directors shall call a shareholders’ meeting for the purpose of filling th e vacancies. Article 312 Chairman of the Board (1) A chairman of the board shall be elected by the boa rd from among themselves, by simple majority of the total number of directors, u nless the Articles of Association or by- laws prescribes a different majority. (2) The board may remove and replace the chairman at an y time. (3) The chairman of the board may also have the title o f president of the company, unless provided otherwise in the Articles of Association o r by-laws. (4) The chairman of the board may also be the chief exe cutive officer of the company, unless provided otherwise in the Articles of Associ ation or by-laws. (5) The chairman of the board shall convene and preside at meetings of the board and shall be responsible for taking and maintaining min utes of all board meetings. (6) Until a chairman is elected and if he is absent from a meeting, another director chosen by a majority of the directors present shall presid e at any meeting. Section 3 Method of Work and Competence Article 313 Competence of the Board (1) The competence of a company’s board of director s shall include the making of decisions relating to: 1) monitoring the accuracy of financial information; 2) guiding the company’s development and strategies an d overseeing its management and administration; 3) determining or approving business plans for the com pany; 4) convening shareholders’ assemblies and establishing the initial agenda; 5) appointing and removing procura; 6) preparing draft decisions for an assembly and monit oring their implementation; 7) fixing the record date for determining the list of shareholders entitled to participate in an assembly; 8) issuing shares within the limits prescribed by the Articles of Association and this Law; 9) issuing bonds, options to acquire shares and other securities within the limits prescribed by the Articles of Association and this Law; 10) determining the value of shares and other property in accordance with this Law; 11) appointing the members of the company’s management body, approving contracts between them and the company, establishing their re muneration, and deciding on termination of their term of office or their employ ment on any grounds; 12) determining the amounts, record dates, payment date s and procedures for dividends when the Articles of Association give the board suc h authority; and 13) deciding other matters which are referred to th e competence of the board in the company’s Articles of Association. (2) Activities which are included within the compet ence of the board of directors may be transferred to the shareholders by decision of the board of directors, unless the Articles of Association or by-laws provide otherwise or decided by other persons or bodies of the company, except the shareholders at a shareholders’ assembly. Article 314 Liability for Business Books Directors of a joint stock company shall be respons ible for keeping the business books and internal supervision of the business in accordance with law. Article 315 Meetings of the Board (1) The board shall hold at least four regular meetings a year, one of which shall be at least two months prior to the annual shareholders’ assemb ly. (2) Apart from its regular meetings the board may conve ne extraordinary meetings at the call of the chairman, and the chairman shall do so or at the request of at least one-third of the members of the board. If the chairman fails to convene a meeting at the written request of at least one-third of the directors, the meeting may be convened by those directors. (3) Written notice shall be sent to all the members not later than 8 days prior to the date of an extraordinary meeting except in urgent cases whe re that is not practicable. Attendance of a director at any meeting shall constitute waiver o f any required notice of the meeting except where a director attends for the purpose of objecting to the meeting as not lawfully convened and states that purpose at the meeting. (4) The board may adopt procedural rules for regulating its meetings to the extent that that is not done in the company’s Articles of Associatio n or by-laws. Article 316 Meeting by Conference Telephone and Actions Without a Meeting (1) Unless specifically prohibited by a company’s Articles of Association or by-laws, a meeting of a company’s board may be held by confere nce telephone or other audio or visual communications equipment in all participants can hear and talk to each other. The persons attending a meeting in this way shall be co nsidered to be present at the meeting. (2) Unless a company’s Articles of Association or b y-laws require that action by the board must be taken at a meeting, any action which may be taken at a meeting may be taken without a meeting if a consent in writing, stating the action so taken, is signed by all of the directors entitled to vote on such matter. The acti on shall come into effect when the consent is signed by all the directors. Article 317 Committees of the Board (1) A board of an open company shall create at least tw o committees, each consisting of at least three directors, to review, study, make recom mendations on, or take other action on matters which are within the competence of the boar d. (2) All decisions of a committee of a board of director s shall be subject to approval by the entire board. (3) The committees referred to in paragraph (1) of this Article shall include: 1) a nominating committee, which shall identify person s qualified to become board of directors or management body members, and make reco mmendations to the whole board of directors including recommendations of candidates f or board membership to be included by the board of directors on the agenda for the next a nnual shareholders’ assembly; and 2) a remuneration committee, which shall review the co mpany’s remuneration policies for board of directors, management body members and aud itor, make recommendations regarding remuneration policies and amounts for spe cific persons to the whole board, taking account of total remuneration including sala ries, fees, expenses and employee benefits, and taking into consideration standards f or remuneration in accordance with law. (4) Provisions for election, number of members, removal , term, meeting procedures and other matters shall be determined by the board or t he company’s by-laws. Article 318 Corporate Governance Guidelines (1) The board of a listed company may establish or adopt written corporate governance guidelines covering matters such as standards for q ualification and independence of a director, ethical standards directors’ responsibili ties including meeting attendance, diligence in reviewing materials, and rules for dis closure and review of potential conflicts of interest with the company, director compensation policy, succession planning for both directors and management body members, and other co rporate governance matters deemed appropriate. (2) The company shall publish such guidelines on its we bsite and make them available in print to any shareholder who requests it. (3) At each annual shareholders’ assembly the company’s board of directors may report to the assembly on the company’s compliance with its g uidelines and explain the extent if any to which it has varied them or believes that any no ncompliance was justified. Section 4 Decision Making Article 319 Quorum and Vote Required for Decisions (1) The quorum for decision-making and transaction of b usiness by a company’s board shall be a majority of the total number of director s fixed in the company’s Articles of Association, unless the Articles of Association or by-laws requires a greater number. (2) The affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act and decision of the board, unless the Articles of Association or by-laws requires a greater number of directors. (3) All decisions of the board shall be entered into th e company’s book of decisions without delay. (4) A decision of the board shall be effective at the t ime it is made. (5) If the votes of the board members are equally divid ed, the chairman of the board shall have a tie-breaking vote, unless provided otherwise in the company’s Articles of Association or by-laws. Article 320 Disqualification to Vote in Certain Cases The provisions of of this Law on disqualification o f a shareholders’ right to vote at an assembly shall apply mutatis mutandis to voting by directors at a board meeting. Article 321 Records of Meetings (1) Minutes of the meeting shall be taken at every meet ing of the board and the minutes of each meeting shall be submitted to the board for it s review and approval at the next meeting. The minutes shall be signed by the chairma n of the board or other person who presided at the meeting and any recording clerk who took them. (2) The minutes of a meeting shall be prepared no later than 10 days following the meeting. (3) The minutes shall include the time and place of the meeting, the names of those attending, the agenda, the issues that were subject to voting, the voting results including the names of those who voted in favor, against, or who abstained and the decisions adopted at the meeting, and a summary of the discussions on th ose decisions. (4) Failure to act in accordance with the provisions of pargraphs (1)-(3) of this Article shall not affect otherwise valid actions and decisi ons by the board of directors. Section 5 Management Body of a Company Article 322 Definition (1) An open joint stock company shall have a management body. (2) A closed joint stock company may have a management body. (3) A company’s board of directors shall elect the memb ers of the management body. (4) The members of a management body may be called mana ging directors. (5) A person may be both a member of the board of direc tors and the management body, but in an open company no more than half of the boa rd of directors may be management body members. (6) The competence of the management body shall include implementation of decisions of the board of directors and all matters associated w ith management and operation of the current activities of the company except matters wi thin the exclusive competence of the board of directors or the shareholders’ assembly. (7) Members of the management body shall be obligated t o observe all limitations on their authority prescribed by this Law, the Article s of Association, or any decision of the shareholders’ assembly or the board of directors pr escribing such limitations. (8) A company’s Articles of Association or by-laws, or a decision of the board of directors, may prescribe specific functions, author ities, duties and titles for other members of the management body, and may prescribe specific procedures for convening and holding meetings and making decisions of the management bod y. (9) Any member of the management body may be removed by the board of directors at any time, with or without specific cause, whenever in the board’s judgment the best interests of the company would be served by such re moval, but such removal shall not prejudice contract rights, if any, of the person so removed. Article 323 President of the Management Body and Representation of the Company (1) A president of a company’s management body shall be elected by the company’s board of directors. (2) The board of directors may designate the president as the general manager or chief executive officer of the company. (3) The president of the management body shall convene and preside at meetings of the management body, shall organize its work, and cause a record of such meetings to be prepared. (4) The president shall have authority to represent the company, after registration and publication of the registration, generally without any specific power of attorney. (5) A company may also grant such authority to other me mbers of the management body if consistent with the Articles of Association of the company. (6) If more than one person referred to in paragraphs ( 4) and (5) of this Article represents the company they may act independently unless other wise specified in the Articles of Association and filed in the Registry and published in accordance with this Law and the law which regulates registration of business entiti es. Section 6 Special Duties of the Board of Directors and Manage ment Body Article 324 Reporting by the Board to the Shareholders’ Assembl y and by the Management Body to the Board (1) The board of directors shall report to the sharehol ders on the following matters: 1) not less than once each year, on the intended busin ess policy and other general matters regarding the future conduct of the company’s busin ess, including any deviations from previously-set goals and the reasons for such devia tions; 2) at each annual shareholders’ assembly, on the profi tability, economic condition and solvency of the company; 3) not less than every six months, on the state of the business, in particular revenues, and the condition of the company; and 4) promptly, on business transactions that may have a material impact on the company’s profitability and solvency, so that the shareholder s may be aware of such matters. (2) The reports referred to in paragraph (1) of this Ar ticle shall include the above items with respect to any controlled companies and depend ent companies in the sense of this Law. (3) The shareholders’ assembly may request the board to report on other issues significant for the company’s operations and its status. (4) The reports of the board to the shareholders shall be in writing and shall be accurate and complete. (5) The board of directors may at any time ask the mana gement body to report on business operations which may significantly influence the co mpany’s status, business relations with other companies, and any other matter referred to a bove in this Article. Any director may request such report which shall be given, however, to the board of directors as a body. (6) The members of the management body of the company s hall have a duty to keep the board of directors regularly and fully informed reg arding the matters referred to in paragraph (5) of this Article. Section 7 Remuneration of Directors and Management Body Membe rs Article 325 Remuneration Principles (1) Independent members of the board of directors shall not have employment with the company. (2) Members of the management body are in employment by the company. (3) A non-executive member of the board of directors ma y be in employment with the company. (4) A director who is not in employment with the compan y may perform his duties pursuant to a separately concluded contract with th e company which states his remuneration and other terms of service. (5) A contract referred to in paragraph (4) of this Art icle must be approved by the shareholders’ assembly. (6) The shareholders assembly shall approve a contract with the members of the board which contains elements reffered to in paragraph (4 ) of this Article. In the case of open joint stock, the remuneration paid to members of th e board of directors and members of the management body may be included in the financial re ports submitted to the annual shareholders’ assembly may be published in accordan ce with the Law on Securities. Section 8 Resignation, Removal and Certain Liabilities of a D irector or Management Body Member Subsection 1 Status and Liablity Article 326 Resignation (1) A member of the board of directors may resign a t any time by giving written notice to the board of directors or the chairman. (2) The resignation becomes effective when the notice i s given unless the notice specifies a future date. (3) A resignation of a director terminates the resignin g person’s membership of the board of directors. Such termination does not require a s eparate company decision. (4) A resignation may be revoked only with the consent of the board of directors. (5) The provisions of paragraphs (1)-(4) of this Articl e shall also apply to resignation by a member of the management body. A r t i c l e 3 2 7 R e m o v a l o f a D i r e c t o r (1) A member of the board of directors may be remov ed by a shareholders’ assembly decision at any time, with or without a stated reas on, if the shareholders believe that that is in the best interest of the company. (2) Any such removal shall be effective if approved by the vote of at least a majority of the votes of shares entitled to vote on the election of directors at the assembly, except that: 1) no director may be removed at an assembly unless th e notice of the assembly given in accordance with Article paragraph (5) of Article 28 1 of this Law states that a purpose of the assembly was to vote on the removal of such directo r at the assembly; and 2) if the company has cumulative voting for directors and less than the entire board is to be removed, no director may be removed if the votes ca st against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors. (3) The removal of a director shall not, in itself, prejudice any right to compensation upon removal which the director may have under a contrac t with the company. However, the election or status of a person as a director shall not, in itself, create any such rights. (4) A member of the management body may be removed by decision of the board of directors at any time, with or without a stated rea son, if the board believes that that is in the best interest of the company. Paragraph (3) of this Article shall apply mutatis mutandis in the case of any such removal. Subsection 2 Personal Liability of Directors in Certain Cases Article 328 Certain Cases (1) A member of the board of directors who is present a t a meeting of the board at which action is taken shall be deemed to have agreed to s uch action unless he has stated his disagreement and his disagreement has been entered into the minutes of the meeting or sent by him in writing immediately after the meeting to the person who presided or kept minutes of the meeting. A person who is absent from the mee ting shall be deemed to have agreed to such action unless he files his disagreement in the same manner immediately after he has notice of the action. (2) Members of the board and management body shall, in particular, be liable to the company for damages resulting from breach of their obligations to the company if they have in violation of this Law: 1) returned capital to a shareholder; 2) paid interest or dividends to a shareholder; 3) caused the company to subscribe to, pledge, acquire or cancel its own shares; 4) approved a loan or credit; 5) made payments during liquidation; 6) caused the company after its termination to conduct business other than business which is necessary for liquidation and winding up of the company’s business and assets; or 7) violated their duties to the company stated in Arti cles 32-34 and 36-38 of this Law. (3) Violation of duties as stated in paragraph (2) of t his Article shall be a basis for removal of members of the board and management body . Chapter 12 Supervision Section 1 Basic Principles Article 329 Supervisory Board, Internal Auditor or Audit Commit tee (1) The Articles of Association or by-laws of an open c ompany may, and of a listed company must, provide that the company shall have a supervisory board, an internal auditor or an audit committee. (2) A company must have a supervisory board if a law ot her than this Law requires that it have a supervisory board because of the activities which it conducts. (3) The Articles of Association or by-laws of a closed company may provide that the company shall have an internal auditor or an audit committee. (4) A supervisory board or an audit committee shall hav e at least three members and its total number of members shall be odd. (5) An internal auditor shall be a natural person. Article 330 Membership, Election and Removal of Supervisory Board (1) A member of a supervisory board may not be a member of the company’s board of directors. All of the members of a supervisory boar d must be persons who qualify under the definition of independent director in this Law. (2) The members and the chairman of a supervisory board shall be elected by the shareholders’ assembly, except that the initial mem bers may be appointed in the initial Articles of Association or by a decision of the fou nders of the company. (3) The procedures for election and removal of members of a supervisory board shall be as provided in Articles 309, paragraphs (4) and (5) an d 327 of this Law. Article 331 Membership, Election and Removal of Internal Audito r and Audit Committee (1) An internal auditor and the members of an audit com mittee shall be elected by the company’s board of directors from among its members who are independent directors if there are such persons. If their number is not suff icient, the missing members shall be elected by the shareholders’ assembly. (2) The initial internal auditor or audit committee mem bers may be appointed in the initial Articles of Association or by a decision of the fou nders of the company. (3) Such persons may be removed at any time by the same persons who can elect them at that time, with or without a stated reason. (4) Any such removal shall not, in itself, prejudice an y right to compensation which the person may have under a contract with the company, but his status as an internal auditor or member of the audit committee shall not in itself c reate any such rights. (5) A person elected as an auditor must meet the requir ements prescribed by law. Article 332 Competence and Method of Work (1) The supervisory board, internal auditor or audi t committee shall report to the shareholders’ assembly on the following: 1) the accounting, reporting and financial practices o f the company and its related companies; 2) the company’s compliance with legal and regulatory requirements; 3) the qualifications, independence and performance of the company’s independent auditor; and 4) contracts between the company and members of the bo ard of directors and related persons to members of the board of directors as def ined in this Law. (2) In performing its functions the supervisory boa rd, internal auditor or audit committee shall review and discuss with the board of director s, and also with the company’s outside auditor when thought appropriate, the matters refer red to in paragraph (1) of this Article and specifically the following: 1) the selection, compensation and oversight of the work of the outside auditor; 2) the adequacy and completeness of the annual and oth er financial statements of the company and the basis for proposals for distributio n of profit and other distributions to shareholders; 3) the adequacy and completeness of the company’s disc losure of financial and other information to the shareholders; 4) conformity of the organization and activities of th e company with the corporate governance guidelines; 5) the adequacy of the company’s policies and procedur es for compliance with this Law; and 6) procedures for handling any complaints from shareho lders, governmental bodies or other persons concerning the foregoing. (3) The supervisory board, internal auditor or audit co mmittee shall present a report to the shareholders on the foregoing at each annual shareh olders’ assembly and at any extraordinary shareholders’ assembly when it consid ers a report to be appropriate or necessary. (4) In carrying out their duties the supervisory board, internal auditor or audit committee may inspect all documents of the company, request s tatements and explanations of members of the board of directors or employees and inspect the state of the company’s assets. (5) They shall also have the authority to hire legal or other experts to assist in carrying out their duties and to pay reasonable compensation to such experts as determined by the supervisory board, internal auditor or audit commit tee. (6) The procedures for meeting and other action of such bodies shall be as stated in Articles 315-317 and Articles 319-321 of this Law. A r t i c l e 3 3 3 A u d i t o r (1) A joint stock company shall have an auditor in acco rdance with the law which regulates accounting and audit with supervisory aut horizations as determined by that law. (2) The auditor of a joint stock company shall be notif ied and invited at the same time as the company’s shareholders for a shareholders assem bly or a decision in writing without a meeting so that he can participate in the decision- making procedure in accordance with the law or the company’s by-laws. A r t i c l e 3 3 4 F i d u c i a r y A g e n t – E x p e r t (1) If requested by shareholders holding shares represe nting at least 20% of a company’s basic capital, the shareholders’ assembly may appoi nt a fiduciary agent-expert to review the company’s financial reports and business books for the previous three years. If such review is related to assessment of work of members of the board of directors or the supervisory board, or if it is related to instigation of a disp ute in court between the company and members of the board of directors or the supervisor y board, such members may not participate in voting on the decision on appointmen t of such expert. (2) If the shareholders’ assembly, after the request of shareholders referred to in paragraph (1) of this Article, does not decide to appoint a f iduciary expert, the competent court upon request filed by such shareholders may, in a non-co ntentious proceeding, appoint one or more fiduciary agent-experts if the court finds it likely that violations of the law or the companys Articles of Association have occurred. (3) The request referred to in paragraph (2) of this Ar ticle must be submitted to the court within 15 days after the shareholders’ assembly mee ting at which the proposal to appoint a fiduciary expert was rejected. (4) Prior to appointment of the fiduciary agent-expert the court shall gather statements on the matter from the members of the board of directo rs and the supervisory board. (5) The court may order the shareholders who made the r equest to pledge collateral which the court finds reasonably adequate. (6) Only a person who meets the requirements prescribed by law to qualify as an external auditor and accountant for the company may be appoi nted as the fiduciary agent-expert. (7) The term, rights, obligations and responsibilities as well as other issues related to status of the fiduciary agent-expert shall be stated in th e by-laws of the company or n the decision on appointment of the expert. (8) If shareholders have initiated a non-contentious pr ocedure in court for appointment of a fiduciary agent-expert, the court may issue an or der to the Central Registry of Securities that such shareholders may not transfer their share s until completion of the fiduciary agent- expert’s review. Article 335 Authorization of Fiduciary Agent–Expert (1) A fiduciary agent–expert shall have the right to in spect the business books and documents of the company and to demand information and statements from members of the board of directors and the supervisory board as wel l as from employees of the company in order to determine the state of business of the com pany. All persons the fiduciary agent- expert asks to give information and/or statements m ust give them truthfully and without delay. (2) The compensation to be paid to a fiduciary agent-ex pert appointed by the shareholders’ assembly shall be determined by the a ssembly, while the compensation of a fiduciary agent-expert appointed by the court shall be determined by the court. Article 336 Report of Fiduciary Agent–Expert (1) A fiduciary agent-expert shall submit his report wi thout delay to the board of directors and the supervisory board in compliance with the la w which regulates accounting and audit. (2) Shareholders who made a request for appointment of the fiduciary agent-expert by a court shall have the right to inspect the audit rep ort and the attached documentation. (3) The report and documentation referred to in paragra ph (2) of this Article shall be made available to all interested persons who have t he right to inspect it, at the company’s business office. (4) The board of directors and a supervisory board of t he company shall, at the next shareholders’ assembly, submit the report prepared by the expert and ask the assembly to make any appropriate decisions after considering th e report. (5) If the report shows that serious violations of the law, the Articles of Association or the by-laws occurred, an extraordinary shareholders’ as sembly shall be convened without delay. Based upon the expert’s findings a court may also, on request of minority shareholders referred to in paragraphs (1), subpara graph (3) of Article 277 of this Law, order the company to convene a shareholders’ assemb ly within a period of time determined by the court. (6) At an assembly convened to consider findings of the fiduciary agent-expert, the board of directors and a supervisory board shall make sta tements on any irregularities and shall state any measures that the fiduciary agent-expert proposes or that they propose need to be taken. The supervisory board shall also state its o pinion on the issue of the right of the company to recover damages. (7) An request for a special audit by a fiduciary agent -expert shall be deemed to have been unjustified if the validity and accuracy of th e financial reports are confirmed in their entirety, i.e. if the business books are proved to have been kept in orderly manner. (8) In a case referred to in paragraph (7) of this Arti cle, shareholders of the company who, in bad faith or through gross negligence demanded t he special audit may be held liable to the company for damages suffered by the company due to their demand. Chapter 13 Corporate Secretary Article 337 Appointment and Status (1) An open joint stock company shall have a secretary elected by the board of directors. (2) The term of office of the secretary shall be stated in the by-laws. (3) Compensation and other rights of the secretary shal l be determined by an agreement between the secretary and the board of directors, u pon the proposal of the chairman. (4) The secretary shall be responsible for keeping the book of shares, preparing for and keeping minutes of a shareholders’ assembly and mee tings of the board of directors, any supervisory board and the management body, keeping the registry of the minutes of a shareholders’ assembly, meetings of the board of di rectors and any supervisory board, and keeping documents as required by this Law and the b y-laws of the company, other than financial reports. (5) The secretary of an open company shall be responsib le for organizing work and implementing decisions of the shareholders’ assembl y, the board of directors and any supervisory board. Chapter 14 Amendments to the Articles of Association Section 1 Article 338 Amendment by the Board of Directors A company’s Articles of Association may be amended by the company’s board of directors without shareholders’ assembly decision: 1) if the amendment is to change the persons authorize d to represent the company or to make other changes which do not affect the rights o f any shareholder; or 2) if the amendment is to state an increase in the num ber of issued shares and capital to reflect the issuance of shares by the board of dire ctors pursuant to authority granted to it referred to in paragraphs (4)-(6) of Article 205 of this Law. Article 339 Amendment by the Shareholders’ Assembly (1) A company’s Articles of Association may be amended by a qualified 2/3 majority of votes of shareholders with voting rights upon propo sal of the board of directors. (2) With the proposal of the board of directors referre d to in paragraph (1) of this Article, the board shall submit written notice and explanati on of the proposed amendment, a statement that it will be included on the assembly agenda, and if appropriate notice of dissenting shareholders’ right to payment for their shares in accordance with this Law. (3) If any type or class of shares is entitled to group voting on the amendment, the proposed amendment shall be adopted upon receiving the affirmative votes of a qualified majority of the votes of the shares of each group e ntitled to group voting on the amendment and of the total number of votes of the s hares entitled to vote on the amendment. Article 340 Registration of an Amendment to the Articles of Ass ociation (1) An amendment shall be deemed adopted on the date of its adoption. (2) An amendment shall be registered and published in a ccordance with the law which regulates registration of business entities. Chapter 15 Matters for Voting by Holders of Preferred Stock Article 341 Group Voting The holders of any type or class of shares shall be entitled to vote as a group on matters which: 1) increase or decrease the total number of authorized shares of such group; 2) change any of the rights or preferences of the shar es of such group; 3) create a right of the holders of any other shares t o exchange or convert their shares into shares of the type or class held by such group; 4) change the shares held by such group into a differe nt number of shares or into shares of another type or class; 5) result in issuance of a new type or class of shares having rights or preferences superior or substantially equal to those of such group, or i ncrease the rights and preferences of any type or class of stock having rights and preference s substantially equal to or superior to those of such group, or increase the rights and pre ferences of any type or class of stock having rights and preferences subordinate to those of such group if such increase would then make them substantially equal or superior to t hose of such group; 6) limit or deny the existing preemptive rights of the shares of such group; 7) cancel or otherwise affect accumulated dividends on the shares of such group; 8) limit or deny the voting rights of such group; or 9) otherwise change the rights or preferences of the s hares held by such group so as to affect them adversely. Chapter 16 Company Documents Types Article 342 (1) A joint stock company shall keep the following: 1) its Articles of Association including all amendment s thereto; 2) its by-laws, if it has by-laws, including all amend ments thereto; 3) the decision on its registration; 4) internal documents approved by its shareholders’ as sembly and other bodies of the company; 5) foundation documents of every branch and representa tive office; 6) documents proving the ownership and other rights of the company over its assets; 7) minutes and decisions of all shareholders’ assembli es, board ofdirectors’meetings and supervisory board meetings; 8) written orders and decisions of its management body ; 9) minutes of any auditors’ committee and their writte n orders and conclusions; 10) financial reports, reports on business operations a nd auditors’ reports; 11) any prospectus for shares and other securities; 12) accounting files and accounts; 13) a list of related companies under this Law; 14) the book of shares; 15) a list of full names and addresses of all members o f the board of directors and all persons authorized to represent the company, with i nformation as to whether they represent the company individually or jointly; 16) a list of full names and addresses of all members o f the supervisory board, audit committee, internal auditor and auditor, if the com pany has such; 17) a list of all transfers of shares including pledges and any other transfers to a person by which he does not become a shareholder; and 18) a list of contracts between the company and members of the board of directors, management body and any supervisory board. (2) A company must keep the documents referred to in pa ragraph (1) of this Article at its registered office or another place known to and acc essible to all of the company’s shareholders. (3) A joint stock company shall keep its Articles of As sociation and all amendments permanently, and shall keep the remaining documents referred to in paragraph (1) of this Article at least five years, after which such docum ents shall be kept in accordance with regulations regulating archiving. Article 343 Access to Documents (1) A company must make the documents referred to in Ar ticle 342 available to any shareholder, and any previous shareholder with resp ect to the period when he was a shareholder, for inspection and copying at the comp any’s office during regular business hours of the company, except in cases regulated by a separate law. (2) A company may take any necessary steps to require a person requesting information to identify himself and his status as a shareholder or former shareholder before the information is provided. Article 344 Access by Court Order (1) If a company refuses to provide information require d by Article 343 of this Law to be provided for a period exceeding five days after rec eiving a proper request in writing therefore, the person making the request may reques t the competent court in a non- contentious proceeding to order the company to prov ide the information. (2) The court shall make its decision on such request w ithin three days after its receipt of the request. (3) A person receiving non-public information from a co mpany shall be obligated to maintain its confidentiality and not publish it in a way which would cause damage to the company. (4) As an exception to paragraph (3) of this Article, t he publication shall be allowed if so prescribed by law. Chapter 17 Dissolution and Related Court Matters Article 345 Events Causing Dissolution A joint stock company shall dissolve upon the occur rence of any of the following events: 1) expiration of the company’s term; 2) a final decision to dissolve of its shareholders’ a ssembly by qualified majority vote; 3) a final decision of the competent court that the co mpany’s registration was null and void and ordering deletion of the company from the Registry ex officio; 4) a decision of the bankruptcy panel in bankruptcy pr oceedings based on inability to cover the costs of the bankruptcy proceedings from the company’s bankruptcy estate; 5) liquidation in bankruptcy; 6) in other cases defined by law or specified in the A rticles of Association as causing dissolution of the company. Article 346 Dissolution and Other Court Remedies on Shareholder Request (1) On request by shareholders who represent 20% or more of the capital of a company, the competent court may order the dissolution of the co mpany or may order other remedies in this Article if: 1) the directors are deadlocked in the management of t he company, whether because of even division in the number of directors or for oth er reasons; the shareholders are unable to break the deadlock; and the company’s business can no longer be conducted to the shareholders’ general advantage; 2) the shareholders are deadlocked in voting power and have failed for a period that includes at least two annual assembly dates to elec t successors to directors; and the company’s business can no longer be conducted to th e shareholders’ general advantage; 3) the directors or other persons in control of the co mpany have acted illegally, oppressively or fraudulently toward the requesting shareholders; or 4) the company’s assets are being wasted or misappl ied. (2) In a case referred to in paragraph (1) of this Arti cle the court may order that the company be dissolved immediately or, if it finds th at the grounds stated above are curable, it may set a time period not longer than one year f or cure. (3) If the grounds are not cured within that time a pro cedure for liquidation shall be initiated in accordance with this Law, and the cour t shall have the power appoint the liquidators. (4) As an alternative to dissolution the court shall al so have the power to order one or more of the following remedies: 1) the removal from office of any director or manageme nt body member; 2) the appointment of a person as a director or manage ment body member; 3) the appointment of a temporary representative of th e company; 4) an audit or accounting of the company’s funds or ot her property; 5) the payment of dividends; 6) the purchase by the company of the minority shareho lders’ shares for their value determined by the court with the assistance of inde pendent appraisers; or 7) the award of damages to any party suffering damages . (5) The request of shareholders referred to in paragrap h (1) of this Article shall be brought against the company. PART FOUR LIQUIDATION OF BUSINESS COMPANIES Chapter 1 General Provisions and Initiating Proceedings Article 347 General Provisions Liquidation of a company shall be conducted in acco rdance with this Law when the company has sufficient assets to cover all of its l iabilities, including in the following situations: 1) an order forbidding the company from conducting its business because necessary conditions for conducting the business are not met and the company fails to fulfil such conditions within the period stated in the order or does not change the business activity; 2) natural or other conditions necessary for the condu ct of its business do not exist; 3) the period for which the company was founded has ex pired; 4) in the case of a partnership, the number of partner s decreases to one and is not increased within six months, unless otherwise provi ded in this Law; 5) the company is not organized as required by this La w; 6) the company has not conducted any business for a co ntinuous period of more than two years; 7) the companys founding is declared null and void und er the Law. A r t i c l e 3 4 8 D e c i s i o n t o L i q u i d a t e (1) A liquidation shall be authorized by the compan ys partners, members or shareholders as follows: 1) in the case of a general partnership, by unanimous decision of the partners, unless the Articles of Association specifies a lower vote not less than a majority; 2) in the case of a limited partnership, by unanimous decision of the general and limited partners, unless the Articles of Association specif ies a lower vote not less than amajority; 3) in the case of a limited liability company, by memb ersdecision as provided in paragraph (2) of Article 146 of this Law; and 4) in the case of a joint stock company, by decision o f a qualified majority of shareholders as defined in paragraph (2) of Article 293 of this Law. (2) In all cases, the provisions of this Law and th e companys Articles of Assocation, partnership agreement, company agreement or by-laws regarding notice and voting procedures shall apply with respect to the decision to liquidate. Article 349 Entry into the Registry and Publication A companys decision to liquidate shall be entered i nto the Registry and published in accordance with the law regulating registration of business entitites. Chapter 2 Liquidation and Creditors Article 350 Individual Notice to Known Creditors (1) The company shall deliver written notice to its known creditors enclosing a copy of the entry into the Registry of its decision to liquidat e. (2) The notice referred to in paragraph (1) of this Article shall particularly state: 1) a mailing address where a claim by the claimant mus t be sent; 2) the deadline, which must not be earlier than 120 da ys from the date of delivery of the written notice, by which the company in liquidation must receive the claim; and 3) a warning that the claim will be barred if the clai m is not received by the company at that address by that deadline. (3) A claim against the company shall be barred if the claimant did not deliver the claim to the company in liquidation by the deadline referred to in subparagraph 2) of paragraph (2) of this Article, or if a claimant whose claim was r ejected by the company in liquidation does not begin court proceedings to enforce the cla im within 30 days after the rejection was received by the claimant. (4) A claim referred to in paragraph (3) of this Ar ticle does not include a claim based on an event occurring after the effective date of the com pany’s decision to liquidate. Article 351 Published Notice to All Creditors (1) The company shall publish notice of its liquidation referred to in Article 349 of this Law. (2) The notice referred to in paragraph (1) of this Art icle: 1) must be published at least three times at intervals not less than 15 nor more than 30 days apart; 2) must refer to this Article of this Law; 3) must provide a mailing address where a claim by any creditor must be sent; and 4) must contain a warning that a claim against the com pany will be barred if the claimant does not begin court proceedings in accordance with this Law. (3) A claim against the company shall be barred if: 1) the creditor does not submit the claim within 30 da ys after the last date of publication of the notice referred to in subparagraph 1) paragraph (2) of this Article; or 2) a claimant whose claim was rejected by the company in liquidation does not begin court proceedings to enforce the claim within 30 days aft er the rejection was received by the claimant. Chapter 3 Status of Company and Liquidators Article 352 Status of a Company During Liquidation (1) During liquidation a company may not conduct any bu siness except business which is necessary for the process of liquidation, such as s elling its assets, paying creditors, assembling claims and other activities necessary fo r liquidation. (2) During liquidation a company shall not pay dividend s or make other distributions to partners, members or shareholders prior to the paym ent of all creditors. Article 353 The Liquidators (1) During liquidation a companys activities and busine ss shall be conducted by the same company persons exercising the same authority as th ey had before, unless the company appoints another person or persons to conduct such activities and business. (2) The person or persons who have such authority durin g liquidation are called the “liquidators.” (3) On request of any person referred to in paragra ph (1) of this Article, the competent court may for justified reasons appoint a liquidato r to replace a liquidator appointed by the company or to act together with such liquidator. Article 354 Removal of Liquidators Any liquidator may be removed in the same manner in which he was appointed. Article 355 Entry of the Appointment and Removal of the Liquida tors into the Registry The appointment or removal of a liquidator shall be entered into the Registry and published in accordance with the law which regulates registra tion of business entities. Article 356 Activities of the Liquidators (1) The liquidators of a company shall close the operat ions of a company, collect claims, pay liabilities and liquidate the company’s assets. (2) Within their competences the liquidators of a compa ny shall be responsible for conducting the operations of the company. (3) The liquidators shall represent a company in liquid ation. Chapter 4 Liquidation Balance Sheet Article 357 Liquidation Balance Sheet and Financial Statements (1) The liquidators of a company shall prepare a ba lance sheet not later than three months after the date of initiation of liquidation proceed ings (the “initial liquidation balance sheet”). Such balance sheet shall be delivered by t he liquidators to the partners, members or shareholdersassembly of the company for approval. T he assets and liabilities of the company, measures necessary to carry out liquidatio n, and the period of time needed for the liquidation procedure to be completed, shall be sta ted in the balance sheet. (2) All the assets of the company referred to in paragr aph (1) of this Article shall be shown in the balance sheet with their sale or estimated s ale value. (3) Not later than three months after expiration of any business year, if the liquidation lasts for more than one year, the liquidators shall submi t a temporary report on their activities, with the explanation as to why liquidation has cont inued without being completed, and a financial report. Article 358 Termination of Liquidation and Commencement of Bank ruptcy (1) If the liquidators establish that the assets of a c ompany are not sufficient to cover all the claims of creditors they shall terminate the li quidation procedure under this Law and initiate bankruptcy liquidation proceedings under t he law which regulates benkruptcy procedure. (2) If liquidation is terminated as referred to in para graph (1) of this Article the liquidators shall submit the termination to the Reg istry for registration and publication in accordance with the law which regulates registratio n of business entities. Article 359 Liquidation Report and Proposal for Distribution of Assets (1) After settlement of a companys debts, the liquidato rs shall prepare a report on the completed liquidation with a final liquidation bala nce sheet and proposal for distribution of the company’s assets. (2) The final liquidation balance sheet shall include a report on the sources of income and disposition of income, a list of assets disposed of and income generated a statement of whether there are other open issues and proposed so lutions for any such open issues, the amount of liquidation costs, and the liquidator’s c ompensation. (3) The report and the final liquidation balance sheet shall be adopted by the partners, members or shareholders of the company, unless prov ided otherwise in a company decision or in a decision of the competent court. Chapter 5 Payments to Company Owners and Completion of Liquid ation Article 360 Distribution to Partners, Members or Shareholders (1) The assets of a company which remain after settlement of its liabilities to creditors and other claims shall be distributed by the liquidator s among the partners, members or shareholders of the company. (2) Unless provided otherwise in a companys Article s of Association, partnership agreement, company agreement or by-laws, or in a de cision of the competent court, the distribution referred to in paragraph (1) of this A rticle shall be in the following order of priority: 1) to payment of any partners, members or holders of p referred stocks which have preferential rights to distributions on liquidation as stated in the companys Articles of Association or agreement of partners, members or sh areholders; and 2) to partners (in case of a general or limited partne rship) or members (in the case of a limited liability company) in proportion to their p aid-in contributions to the company, and shareholders (in the case of a joint stock company) in proportion to the number of shares held by them. (3) Limited partners of a limited partnership, memb ers of a limited liability company, and shareholders of a joint stock company who received distributions in good faith after the company has complied fully with the procedures stat ed in Articles 350 and/or 351 as applicable are obligated to return what they receiv ed if it is necessary to pay creditors. (4) If there is a dispute regarding distribution of company’s assets among partners, members of shareholders of a company, the liquidato rs may postpone distribution until final settlement of the dispute, unless otherwise o rdered by the competent court. Article 361 Compensation of Liquidators (1) Liquidators shall be entitled to be reimbursed for the costs they incur and to be paid for their work. The amount of the costs and fees shall be determined by the partners, members or shareholders of the company and may be determine d by a competent court in the case of dispute. (2) The liquidators shall be creditors of the company w ith respect to such reimbursement and compensation. (3) Such costs and compensation may be paid during the liquidation if it is evident that such payment will not affect the meeting of the company’ s obligations to other creditors. Article 362 Finalization of the Liquidation (1) When the liquidation of a company is completed, and upon the approval by the partners, members’ meeting or shareholders’ assembl y of the financial report prepared as of the date of the completion of the liquidation and t he report on the conduct of liquidation, the liquidators shall without delay submit such rep orts and appropriate decisions to the company and the Registry, together with a request f or deleting the company from the Registry in accordance with the law which regulates registration of business entities. (2) If after completion of the liquidation a meeting of the company’s partners, members or shareholders is not held for the approval referred to in paragraph (1) of this Article due to lack of quorum, the liquidators shall bring the pro ceedings to an end for purposes of paragraph (1) of this Article without the approval of the financial report and of the report on the conduct of the liquidation by the partners, mem bers’ meeting or shareholders’ assembly. (3) Business books and documents of the company that wa s liquidated shall be kept in accordance with regulations concerning archives mat erial. (4) Information as to where the business books and docu mentation of the company are held shall be entered in the Registry in accordance with the law which regulates registration of business entities. (5) All persons having a legal interest may inspect suc h books and documents of the liquidated company, in accordance with the law rela ting to publicly available documents. (6) If it later becomes necessary to carry out further measures after the companys liquidation, the competent court may at the proposa l of a person having a legal interest therein reappoint the liquidators or appoint new li quidators. Article 363 Accountability of Liquidators for Damage (1) Liquidators shall be accountable to the company s partners, members, shareholders and creditors for damages caused to them by the liquida tors in accordance with Articles 32-34, 36 and 37 of this Law. (2) Liquidators shall not be accountable to creditors, partners, members or shareholders of the company for any losses, obligations or reductio n in the value of property which resulted from the making of conscientious and reasonable bus iness decisions in connection with the conduct of the companys liquidation. (3) A claim against liquidators under paragraph (1) of this Article shall be barred if not made within one year from the date of deletion of t he company from the Registry. (4) If more than one liquidator is liable for the same damage, they shall be liable jointly and severally. Article 364 Accountability of Partners, Members and Shareholder s After Liquidation (1) General partners of a general partnership or a limi ted partnership shall be liable jointly and severally for any obligations in the liquidatio n procedure after completion of that process and the company’s deletion from the Registr y. (2) A limited partner of a limited partnership, a membe r of a limited liability company, and a shareholder of a joint stock company shall be jointly liable for any obligations of the company in the liquidation process after completion of that process and a company’s deletion from the Registry up to the amount of the assets received from the liquidation. Article 365 Notifying the Tax Administration The liquidators of a company shall notify the prope r tax authorities of the liquidation by submitting to them the report on liquidation and an y other reports or documents required by law. PART FIVE LINKED BUSINESS COMPANIES Chapter 1 Linked Companies Article 366 Definition and Types of Linked Companies (1) ”Linked companies” in this Law means two or mor e companies which are linked either: 1) by ownership of shares or partnership interests (co mpanies linked by share in capital); 2) by contract (companies linked by contract); or 3) by both capital and contract (mixed linked companie s). (2) Linked companies as defined in paragraph (1) of thi s Article include one controlling (dominant) company and one or more dependent compan ies. (3) Linked companies (by capital, contract or mixed) ar e organized as concerns, holdings, business groups or other organizational forms in ac cordance with provisions of this Law. (4) Linked companies are organized as concerns when the dominant business activity of the controlling company is other than management or control of the dependent companies. (5) Linked companies are organized as holdings when the dominant company’s exclusive business activity is management and financing of th e dependent companies. (6) Linked companies organized as business groups when the controlling company’s business activity includes activities referred to i n both paragraphs (4) and (5) of this Article. (7) Linking of companies in violation of laws governing protection of competition is prohibited. A r t i c l e 3 6 7 C o n t r o l b y S h a r e i n C a p i t a l (1) “Controlling member or shareholder” of a limited li ability company or a joint stock company means a person who, either alone or togethe r with one or more other persons (“acting in concert”): 1) has more than 50% of the voting power in the compan y, which in a joint stock company shall mean ownership and power to vote more than 50% of the ordinary shares (majority vote); or 2) otherwise exercises a controlling influence over th e management of the company by virtue of his position as a member or shareholder ( or on the basis of a contract in accordance with this Law). (2) A person who, alone or with one or more other perso ns, has more than 20% of the votes of a company shall be presumed to exercise a controlling influence under this Law. Article 368 Acting in Concert (1) “Acting in concert” means: 1) action taken by two or more persons based on a join t agreement with the aim to acquire or relinquish or exercise voting rights of a person ; or 2) use of voting rights for the purpose of executing j oint effort on the management or business operations of that person or the election of bodies of a company (or a majority of its members) or otherwise having influence on the condu ct of business of that person. (2) Persons acting as stated in paragraph (1) of this A rticle are: 1) a company and its board of directors or a member of its board of directors, individuals who are directly subordinated to the board of direc tors or management body of the company, and a representative or liquidator of that company or related entities; and 2) persons who comprise linked companies. (3) Individuals who act in concert as defined in paragr aph (1) of this Article are: 1) a limited liability company and its members or only its members; 2) a partnership and its partners or only its partners ; 3) a limited partnership and its general partners, or only its partners; 4) linked entities in accordance with this Law; or 5) other persons or entities in accordance with the la w governing their legal status. Chapter 2 Special Provisions for Companies Linked by Capital Share Article 369 Disclosure to Dependent Company (1) A company or other person that becomes or cease s to be a controlling member or shareholder of a company is obligated to inform tha t company, the Securities Commission and the body regulating protection of competition i n accordance with the law governing protection of competition. (2) The obligation referred to in paragraph (1) of this Article is also applicable with respect to the law which regulates securities markets. Article 370 Business Name A dependent company shall also identify its control ling company in its name, memorandum or other business documents. Article 371 Liability of Controlling Company and Directors (1) A controlling company shall be liable to a dependen t company as provided in Articles 32-34 , 36 and 37 of this Law. (2) Directors of a controlling company shall be liable to a dependent company as provided in Articles 32-34, 36 and 37 of this Law. Article 372 Reports to Members or Shareholders of a Dependent C ompany (1) The board of directors of a dependent company shall present a written report to the annual shareholders’ assembly or members’ meeting o f the company on the company’s relations during at least the previous fiscal year with all other companies to which it is linked by share in capital, as part of the board’s report on business activities of the company. (2) If audit of financial reports of a dependent compan y is mandatory under the law which regulates accounting and audit, the audit obligatio n shall also apply with respect to the report referred to in paragraph (1) of this Article . (3) A member or shareholder of companies linked by capi tal shall be fully informed of the structure of the group, the management system, the management, business transactions within the group, as well as of the principles rela ting to conflict of interest of a company with other companies. Chapter 3 Provisions for Companies Linked by Contract Article 373 Contract on Relations between Controlling and Depen dent Company and Transfer of Profit (1) If a controlling company and a dependent company en ter into a contract for management of the dependent company by the controll ing company or on transfer of profit of the dependent company to the controlling company , the controlling company shall be liable for damage caused to the dependent company b y wrongful activities or omissions under the contract as provided in this Law. (2) A contract referred to in paragraph (1) of this Art icle shall be registered with the dependent company and published in accordance with the law regulating registration of business entities, for the contract to be effective . (3) A contract referred to in paragraph (1) of this Art icle shall be effective after registration and publication of the registration in accordance with this Law. Article 374 Contents of and Liabilities Under the Contract (1) A contract of the kind referred to in Article 373 o f this Law must be in writing and must particularly state rights and liabilities of t he controlling company, measures for protection of the dependent company, the scope of a ny transfer of profit, measures for compensation to the dependent company or covering o f the dependent company’s losses by the controlling company, measures for protection of any minority members or shareholders of the dependent company, and measures for and prot ection of the dependent company’s creditors after termination of the contract. (2) Article 371 of this Law shall apply with respect to liability of the controlling company for damage caused to the dependent company, and lia bility of directors of the controlling and dependent companies, and any persons who act in concert with them for damage caused to the dependent company, but this shall not limit or exclude any other legal remedies for breach of the contract under law which regulates contractual obligations. Article 375 Approval of the Contract (1) A contract of the kind referred to in Article 3 73 of this Law shall be adopted by the members’ meeting or shareholders’ assembly of the c ontrolling company and all dependent companies by a qualified majority as defi ned in paragraph (2) of Article 293 of this Law. (2) If the contracting party is a partnership or a limi ted partnership, the contract must be approved by all partners with unlimited liability, unless provided otherwise in the Articles of Association or partnership agreement. (3) The shareholders or members must be given sufficien t time before or during the assembly or meeting at which approval is to be give n, to review the following: 1) the text of the contract, which shall also be avail able at the session; and 2) other material information concerning the contract and the business operations of all other companies who are parties to the contract. (4) A copy of the contract referred to in Article 373 o f this Law shall be attached to the minutes of the assembly or meeting. Article 376 Termination and Registration of Termination (1) A contract of the kind referred to in Article 3 73 of this Law shall be terminated by agreement, expiration of term, or otherwise in acco rdance with the contract and law which regulates contractual obligations. (3) The termination of a contract referred to in Ar ticle 373 of this Law shall be registered and published in accordance with the law which regu lates registration of business entities. PART SIX REORGANIZATION OF BUSINESS COMPANIES Title 1 STATUS CHANGE Chapter 1 Basie Principles Article 377 Definition of Reorganization A reorganization of a business company under this Law means a status change of the company or a change of legal form of the company. Article 378 Definition of Status Change (1) A status change under this Law means a merger, a di vision or a separation. (2) A merger and a division may be combined, and a merg er and a separation may be combined. (3) A company’s decision on a status change in accordan ce with this Law may not be nullified on the basis of a challenge to the share exchange proportions. (4) If companies with different legal forms participate in a stastus change, the provisions of this Law relating to change of legal form shall apply as appropriate to the status change. (5) A business company may not undergo a status change which is in violation of the law which regulates competition. Article 379 Financial Report (1) Each company participating in a status change s hall prepare a financial statement stating its financial condition on an agreed date relating to the merger, division or separation in accordance with the law which regulates accounting and audit. (2) The entry of the status change into the Registr y shall be not later than eight months following the date of the financial statement refer red to in paragraph (1) of this Article. Article 380 Status Change During a Liquidation A company may carry out a status change while it is in liquidation so long as it has not begun distributing its assets to its shareholders, members or partners in the liquidation. Chapter 2 Types of Status Change Article 381 Merger (1) A merger of business companies under this law may b e either: 1) a merger by acquisition; or 2) a merger by formation of a new company. (2) A “merger by acquisition” is a status change whereb y a company (an “acquired company”) ceases to exist without being liquidated and simultaneously transfers to an already-existing company (an “acquiring company”) a ll its assets and liabilities in exchange for the issuance to its shareholders or members of shares in the acquiring company and possibly also a cash payment, which may not exceed 10% of the nominal or accounting value of the shares so issued. (3) A “merger by formation of a new company” is a statu s change whereby two or more companies (“companies terminated by merger”) cease to exist without being liquidated and simultaneously transfer to a newly-founded company (a “new company”) all their assets and liabilities in exchange for the issuance to the ir shareholders or members of shares of the newly-founded company and possibly also a cash paym ent which may not exceed 10 % of the nominal or accounting value of the shares so is sued. Article 382 Division (1) A division of business companies under this Law may be either: 1) a division by acquisition; 2) a division by formation of two or more new companie s; or 3) a division by acquisition and formation of two of m ore companies. (2) A “division by acquisition” is a status change wher eby a company (a “company terminated by division”) ceases to exist without be ing liquidated and simultaneously transfers to two or more already-existing acquiring companies (“acquiring companies”) all its assets and liabilities in exchange for the issu ance to its shareholders or members of shares in the acquiring companies and possibly also a cash payment, which may not exceed 10 % of the nominal or accounting value of the shar es so issued. (3) A “division by formation of two or more new compani es” is a status change whereby a company ceases to exist without being liquidated and simultaneously transfers to two or more new companies (or two or more companies with w hich it is merged into a new company) all its assets and liabilities in exchange for the issuance of shares of the acquiring companies and possibly also a cash payment which ma y not exceed 10 % of the nominal or accounting value of the shares so issued. A r t i c l e 3 8 3 S e p a r a t i o n (1) A separation of business companies under this Law m ay be either: 1) a separation by acquisition; 2) a separation by formation of one or more new compan ies; or 3) a separation by acquisition and formation of one or more new companies. (2) A “separation by acquisition” is a status change wh ereby the separated company transfers one or more parts or its assets and accom panying liabilities to one or more existing companies, while the company remains in ex istence as a legal entity, and all or part of its shareholders or members, while adhering to t he principle of equality, become shareholders or members of the acquiring company in exchange for shares of the separated company (and the reduction of its initial capital i n that amount without application of the rule or regular decrease) for shares of the acquiri ng company and possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of the shares so issued. (3) A “separation by formation of one or more new compa nies” is a status change whereby the separated company transfers one or more parts o f its assets and accompanying liabilities to one or more newly founded companies in exchange for shares of the separated company (and the reduction of its initial capital in that a mount without application of the rule of regular decrease) for issuance to its shareholders or members of shares in the newly founded companies and, possibly also a cash payment which may not exceed 10 % of the nominal or accounting value of t he shares so issued. (4) The provisions of this law on division by acqui sition and division by formation of one or more new companies shall apply as appropriate to separation by acquisition and separation by formation of one or more new companie s, unless provided otherwise in this Law. Chapter 3 Regular Merger by Acquisition of Joint Stock Compan ies Section 1 Preparation Article 384 Contract for Merger by Acquisition (1) The board of directors of each company participatin g in a merger by acquisition shall prepare a draft contract for merger by acquisition in written form. (2) The contract shall include: 1) the form, type, registered name and registered offi ce of each company in the merger; 2) the share exchange ratio and the amount of any cash payment; 3) the terms of the allocation of shares in the acquir ing company to shareholders of each acquired company; 4) the date from which the holding of such shares enti tles the holders to participate in profits of the acquiring company on the bases if ex change of shares and any special conditions affecting that entitlement; 5) the date from which the transactions of each acquir ed company shall be treated for accounting purposes as being those of the acquiring company (the “merger date”); 6) the rights conferred by the acquiring company on th e holders of shares to which special rights are attached and the holders of securities o ther than shares, or the measures proposed concerning them; 7) any special advantage or preference given to indepe ndent financial advisers or directors of any company in the merger; and 8) the Articles of Association and by-laws of the a cquiring company as they will be in effect immediately following the merger. (3) The contract referred to in paragraph (1) of th is Article shall include drafts of amendments to the Articles of Association and by-la ws of the company to be made. Article 385 Board of Directors Report (1) The board of directors of each company participatin g in the merger shall also prepare a detailed written report including an explanation of the draft contract of merger and an analysis of profitability and markets of each compa ny with reference to the legal and economic grounds of the merger and exchange ratio o f shares. (2) The report referred to in paragraph (1) of this Art icle shall particularly include a description of any difficulties encountered in the process of evaluation of companies participating in the merger, if such difficulties o ccurred. (3) The board of directors of each company which partic ipates in a merger must inform the shareholders’ assembly of any material or financial changes in assets and liabilities between the date of signing of the merger contract and the date of the assemblies of meetings of the companies in the merger. Article 386 Auditor’s Report (1) The draft contract for merger and the report of the board of each participating company shall be reviewed by one or more independent audito rs appointed by the competent court in a non-contentious proceeding initiated by joint app lication of the companies. (2) The auditors shall prepare and submit to each c ompany which participates in the merger by acquisition a written report on auditing of the merger not later than two months after the date of their appointment, which shall particularly state: 1) the method of valuation of all companies participat ing in the merger by acquisition used to establish the exchange ratio of shares proposed in the draft plan of merger; 2) reasons for use of application of that particular v aluation method, including reasons why that particular method is considered adequate i n that particular case; and 3) any particular difficulties the auditor encountered in the process of valuation of the participating companies, if such difficulties occur red. (3) The auditors shall be authorized to demand and receive from all of the companies in the merger all required data and documents necessary fo r successful completion of the audit, as well as to take any actions necessary for checking the accuracy and credibility of data and documents received from the companies, pursuant to the Law on Accounting. Article 387 Supervisory Board Report If any company in the merger by acquisition has a s upervisory board, the board of directors report and the auditor’s report on the merger shall be reviewed by the supervisory board and it shall issue its own report on the subject. Section 2 Decision Making Article 388 Announcement of the Contract The draft contract for merger shall be submitted to the Registry and published in accordance with the law which regulates registratio n of business entities by each participating company at least 30 days prior to the date set for the assembly or meetingat which the merger is to be voted on. Article 389 Examination of Documents (1) Each company participating in a merger by acqui sition shall, for at least one month prior to the assembly at which the merger is to be voted on, make available at its registered office for their shareholders to examine the follow ing documents: 1) the draft contract for merger by acquisition; 2) amendments to be made to the Articles of Associatio n and by-laws of the acquiring company; 3) the annual financial statements of all the particip ating companies for the previous three years; 4) a special accounting statement which reflects the f inancial condition of each company as of a date not more than three months before of t he date of the contract for merger, if the latest annual financial statement was as of a date more than six months before the date of the contract for merger; 5) the reports of the boards of directors of all compa nies in participating in the merger by acquisition or their joint report on the subject; 6) the audit reports of all participating companies or their joint audit report; and 7) the report of the supervisory board of each partici pating company which has a supervisory board. (2) The special accounting statement referred to in sub paragraph 4) of paragraph (1) of this Article shall be prepared applying the same method and in the same form as the latest annual financial statement. (3) Assessments of value in the special accounting repo rt may be based only on changes in the accounting of the participating company compare d to the situation stated in the latest annual financial statement, without need to make an inventory of its assets. (4) The special accounting report shall, however, state the accounting decreases and increases of the company’s asset value occurring af ter the latest annual report, as well as all significant changes in the real asset value of the participating company which have not been stated in the company’s books. (5) Each company participating in a merger by acquisiti on shall provide to every shareholder at their request, a copy free of charge of each document referred to in paragraph (1) of this Article. Article 390 Shareholders’ Approval of the Contract for Merger (1) The draft contract for merger shall be adopted by t he shareholders’ assembly of each company participating in the merger by acquisition by a qualified majority as defined in paragraph (2) of Article 293 of this Law. (2) If a company participating in the merger by acquisi tion has more than one type or class of shares, the contract for merger shall be adopted by a qualified majority of shareholders of each class of shares whose rights are to be affe cted by the decision, in accordance with paragraph (1) of this Article. (3) The draft contract for merger shall be adopted with out variation by the assemblies of all companies participating in the merger by acquis ition. (4) Signatures of authorized representatives of each pa rticipating company on the draft contract for merger shall be certified. (5) All required changes in the Articles of Association and by-laws of the acquiring company shall be adopted together with the contract for merger and in the same manner as the decision adopting the contract for merger. (6) The contract for merger shall be filed with the min utes of the assembly meeting of each company participating in the merger by acquisi tion. Article 391 Merger by Acquisition Without Decision of the Acqui ring Company’s Assembly (1) A merger by acquisition may be carried out based solely on a decision of the board of directors of the acquiring company, without action by the shareholders’ assembly, provided that: 1) the draft contract for merger is published in accor dance with the law which regulates registration of business entities at least 30 days prior to the shareholders’ assembly of each company to be merged at which the decision on merge r is to be adopted; 2) the shareholders of the acquiring company are able to examine at its registered office the contract for merger, the annual financial state ments of all participating companies for the previous three years, the special accounting st atement for the current year, the board of director’s report, the audit report on the merger b y acquisition and any supervisory board’s report, at least 30 days prior to the shareholders’ assembly of each company at which the decision on merger is to be adopted; and 3) one or more acquiring company’s shareholders whose participation in the basic capital of the company is at least 5% have not requested wi thin 30 days after the date of the draft contract for merger that an extraordinary sharehold ers’ assembly of the acquiring company be held to decide on the merger. (2) All the conditions stated in paragraph (1) of t his Article must be fulfilled. Section 3 Execution of Merger by Acquisition Article 392 Capital Increase (1) If in a merger by acquisition the basic capital of the acquiring company is to be increased, the increase shall be realized pursuant to the provisions of this Law on increase of capital of a company by new contributions, and t he following provisions shall not apply to issuance of shares of the acquiring company to s hareholders of an acquired company: 1) the provisions on prohibition of increase of the in itial capital before the subscribed shares are fully entered into basic capital; 2) the provisions on terms and conditions for subscrip tion of new shares, on permission of the Securities Commission to issue shares, in a pub lic offering and prospectus, on the evidence that the cash or in kind contributions are paid into the company’s basic capital as an attachment to the application for entry into the Registry, and other provisions incompatible with share replacement (exchange) in t he merger; and 3) the provisions on preemptive rights of shareholders of participating companies to acquire new shares. (2) Shareholders who subscribed to shares in an acq uired company before the merger but did not pay for them in full before the exchange fo r the acquiring company’s shares, shall continue to be obligated to pay for those shares af ter the merger, under terms identical to those before the merger, unless provided otherwise in the plan of merger. Article 393 Prohibition of Creating Phantom Capital (1) If a company to be merged by acquisition owns s hares directly or indirectly in the acquiring company or vice versa, an increase of the basic capital of the acquiring company by the amount of shares it owns in the companies to be acquired as well as by the amount these companies own in the acquiring company, is pr ohibited. (2) Shares of a company to be acquired by merger an d vice versa shall be considered as own shares of the company to be acquired upon the r egistration of the merger by acquisition. (3) The acquiring company shall not in the merger i ssue its shares for: 1) shares of a company to be acquired which are owned by the acquiring company, whether directly or through third parties holding t he shares in favor of the acquiring company; or 2) shares of companies merged whether owned directly o r indirectly through third parties in favor of these companies. (4) Shares referred to in paragraph (2) of this Art icle shall be shares of the acquiring company pursuant to paragraph (2) of Article 224 of this Law. (5) The acquiring company may, with the consent of the companies to be acquired, exchange their own shares for shares of the acquiri ng company instead of issuing new shares in the process of exchange pursuant to propo rtion of exchange stated in the contract for merger by acquisition. Article 394 The Acquiring Company’s Basic Capital The values shown in the financial report closing st atement balance sheet of the merged companies shall be shown in the balance sheet of th e acquiring company after the merger in accordance with the las which regulates accounting and audit. Section 4 Protection of Creditors Article 395 Right to Security and Payment for Claims (1) All creditors whose debts originated before the pub lication of the draft contract of merger shall have a right within 30 days from the d ate of publication to demand in written form payment or guaranties of payment of the debts of a company in the merger, both debts debts then due and debts to be due in the future. (2) Creditors who have not demanded payment or guaranti es within the term stated in paragraph (1) of this Article shall have a right wi thin six months from the date of publication to demand written guarantees of outstan ding debts which are not due, if they can shoe that the merger puts payment at risk. (3) Creditors who have outstanding debts sufficiently s ecured and creditors who would have preferential claims in a bankruptcy shall not have the rights provided in paragraphs (1) and (2) of this Article. (4) Creditors shall be notified of the above rights to payment or guaranties at the time of the publication referred to in paragraphs (1) and ( 2) of this Article. (5) Guarantees of debts can be provided to creditors us ing assets of an acquired company and the acquiring company. (6) The board of directors of the acquiring company sha ll manage the assets of each acquired company separately until the outstanding d ebts are paid or sufficiently secured for the creditors as provided in paragraphs (1) and (2) of this Article. (7) A creditor of each acquired company and the acquiri ng company shall have a preference in debt settlement from the assets of th e company which was their original debtor, in relation to creditors of other companies merged in the merger. (8) Creditors who consider that their claims are placed at risk by the merger may file a complaint with the competent court requesting an or der that the merger by acquisition shall not ntake place. (9) If the board of directors of the acquiring company does not act for protection of creditors in accordance with paragraphs (1)-(7) of this Article, the competent court may order that the merger shall not take place if the c ourt finds that the merger would seriously affect the creditors. Article 396 Protection of Bondholders The provisions of Article 395 of this Law shall app ly also to holders of bonds and other debt securities of a company to be acquired, unless provided otherwise in the instruments governing the issuance of their securities or other wise agreed by the holders in accordance with in paragraph (10) of Article 210 of this Law. Article 397 Protection of Special Rights Holders (1) The acquiring company shall secure to holders of se curities other than shares of an acquired company, including convertible bonds, opti ons, warrants, and other securities, the same rights after the merger, unless provided provi ded otherwise in the instruments governing the issuance of their securities or other wise agreed by the holders as referred to in paragraph (10) of Article 210 of this Law. (2) If the acquiring company does not act in accordance with paragraph (1) of this Article, it shall be liable to reimburse such holders of spe cial rights for the loss or modification of these rights based on their public market value and , if they do not have a public market value, according to the value approved by the audit ors of the merger by acquisition. Section 5 Finalization of the Merger Article 398 Application for Registration (1) Each acquired and acquiring company in a merger shall apply for registration of the merger in the Registry in accordance with the law w hich regulates registration of business entities. (2) If a decision on merger by acquisition is contested , the Registry shall not terminate the registration procedure for the merger if it finds t hat there is a need for urgent decision- making and that other preconditions to register the merger by acquisition have been accomplished. (3) In deciding whether a registration is urgent, the R egistry shall take into consideration the safeguarding of rights in the contest proceedin gs, the probability of the complaining party’s success, and the damage to the companies wh ich would arise from postponement of the merger by acquisition. Article 399 Registration and Publication (1) The registration of a merger and its publication sh all be in accordance with the law which regulates registration of business entities. (2) If an acquiring company increases its basic capital on the basis of the merger, that increase shall be submitted for registration togeth er the application for registration of the merger. (3) An acquiring company shall enter the acquired compa nies’ shareholdersshares into the Central Registry of Securities in the names of thos e companies’ former shareholders. Article 400 Effect of Merger Upon registration of a merger by acquisition: 1) all of the acquired company’s assets and claims are transferred to the acquiring company including the acquired company’s claims aga inst third parties; 2) the acquired company’s debts and other obligations to third parties are transferred to the acquiring company, which becomes the debtor; 3) any debts between an acquired company and the acqui ring company which are unpaid are annulled since the creditor and the debtor are merged into one entity; 4) the acquired company’s shareholders become sharehol ders of the acquiring company; 5) the acquired company ceases to exist, without liqui dation; 6) shares issued by the acquired company are cancelled and exchanged for shares of the acquiring company and cash if the contract for merg er so provides; 7) third parties’ rights, such as liens and other righ ts, which encumber acquired company’s shares, shall be passed onto the shares i ssued by the acquiring company to the same shareholders in exchange for encumbered shares , or they shall be realized as a cash settlement recognized together with or instead of t he above share exchange as provided in the contract for merger; 8) permits, concessions, other benefits and exemptions provided for or accrued to the acquired company are transferred to the acquiring c ompany, unless provided otherwise by the regulations governing issuance of licenses, con cessions, benefits and exemptions; 9) functions of authorized representatives of sharehol ders of each company to be merged by acquisition, as well as functions of members of its board of directors and any supervisory board and its auditor, shall be continu ed only in accordance with the contract for merger by acquisition; and 10) persons employed by an acquired company shall conti nue to work in the acquiring company in accordance with employment regulations a nd the contract for merger. Chapter 4 Simplified Merger by Acquisition Article 401 Definition (1) A “simplified merger by acquisition” is a merger in which the acquiring company holds at least 90% of the voting shares of the acqu ired company, and is based only on the decision of the assembly of the company to be acqui red and without the decision of the acquiring company’s shareholdersassembly and withou t a merger audit. (2) In a simplified merger by acquisition, a decision o f the acquiring company’s assembly and reports of the board of directors and any super visory board and a merger audit are not necessary if: 1) the draft contract of merger is published at least 30 days before the date of the dependent company’s assembly at which the merger is to be decided upon and, if the company is an open company, the announcement is pub lished in at least one daily newspaper sold throughout Serbia with a circulation of at least 100,000 copies; 2) copies of the draft contract of merger, the annual financial statements of all acquired companies for the preceding three years, and a sepa rate accounting statement for the current year are made available free of charge to the acqui ring company’s shareholders at the company’s registered office at least 30 days before the acquired company’s assembly at which the merger is to be decided on. 3) one or more shareholders of the acquiring compan y holding at least 5% of the votes of shares entitled to vote on the merger, does not dem and an assembly of the company in order to decide on the merger within 30 days after the acquired company’s assembly has adopted the draft contract of merger. (3) It shall be considered that the acquiring company h olds 90% of the dependent company if one or more other persons hold it in the ir name(s) but in favor of the acquiring company. (4) Except for the matters stated in paragraphs (1)–(3) of this Article, the provisions of this Law on the regular merger by acquisition shall apply to a simplified merger by acquisition. Article 402 Merger by Acquisition of a Wholly-Owned Dependent C ompany (1) A wholly-owned dependent company may, by decision o f its assembly, merge by acquisition with its parent company as its sole sha reholder and acquiring company, pursuant to the Article 401 of this Law on simplifi ed merger by acquisition. (2) In the case of a merger by acquisition of a wholly- owned dependent company with its parent company, the provisions of this Law on liabi lity of members of the board of directors, supervisory board and auditor shall not apply since the acquiring company, as the sole shareholder of the company to be acquired by a cquisition, shall not become its own shareholder by the merger. Chapter 5 Merger by Acquisition of Limited Liability Companie s Article 403 Applicability of Other Articles (1) The provisions of this Law relating to merger by ac quisition of joint stock companies shall apply mutatis mutandis to a merger by acquisi tion of limited liability companies, unless provided otherwise in this Law. (2) For purposes of paragraph (1) of this Article, a me mber of a limited liability company is considered to be a shareholder; his share in the company is considered to be the total of all shares the shareholder holds in a joint stock c ompany; and a members’ meeting is considered to be a shareholders’ assembly. Article 404 Preparation for Members’ Meeting (1) The board of directors or a director of a limited l iability company participating in a merger by acquisition shall not be required to subm it to the Registry or publish the contract of merger pursuant to the law which regulates the r egistration of business entities. (2) The board of directors or a single director of a li mited liability company participating in a merger by acquisition shall send to each membe r of the company, at least 15 days prior to the meeting at which the decision on the merger is to be approved, the following documents: 1) the draft contract of merger by acquisition; 2) the annual financial statements of the companies wh ich participate in the merger by acquisition for the preceding three years; 3) a special accounting statement which reflects the s tate of the company to be acquired and the acquiring company on, or not more than thre e months before, the date on which the draft contract of merger by acquisition was prepare d, if the latest financial report of the companies refers to the business year which ended m ore than six months prior to the date of the contract for merger by acquisition; 4) the reports on the merger by acquisition of the dir ectors of each company to be acquired and the acquiring company and their joint report; a nd 5) an auditor’s report, if an auditor’s report is requ ired and under the law on accounting and audit for that particular company. Chapter 6 Merger by Acquisition of Joint Stock Company and Limited Liability Company Article 405 Applicability of Other Articles (1) One or more joint stock companies may merge by acquisition into a limited liability company as the acquiring company and one or more li mited liability companies may merge by acquisition into a joint stock company as the ac quiring company. (2) The provisions of this Law on merger by acquisi tion of joint stock companies and merger by acquisition of limited liability companie s shall apply mutatis mutandis to mergers referred to in paragraph (1) of this Articl e. Article 406 Joint Stock Company as the Company to be Acquired b y Merger (1) If a limited liability company is the acquiring com pany and a joint stock company is a company to be acquired by merger, the contract for merger by acquisition shall state the nominal value of the shares to be provided to each shareholder of the joint stock company as a new member of the limited liability company. (2) If an open joint stock company is to be acquired by a limited liability company, it must convert into a closed joint stock company under thi s Law and the law which regulates securities markets, for the purpose of protection o f shareholders and holders of other securities issued by the open joint stock company. (3) If a limited liability company as the acquiring com pany intends to replace shares owned by shareholders of the acquired joint stock c ompany by assignment of shares held by it rather than new shares, the limited liability company shall list all shareholders in the contract for merger by acquisition, as new members to be assigned its own shares, as well as the nominal value of each such assigned share. Article 407 Limited Liability Company as the Company to be Acqu ired by Merger If a joint stock company is the acquiring company and a limited liability company is a company to be acquired, the contract for merger sha ll state the nominal value of the shares of each member of the company and the number of sha res of the joint stock company to be provided to him in accordance with the proportion s pecified in the plan. Chapter 7 Merger by Formation of a New Company Article 408 Merger of Joint Stock Companies by Formation of a N ew Company (1) The provisions of this Law on merger by acquisition of joint stock companies shall apply mutatis mutandis to merger of joint stock com panies by formation of a new company, unless provided otherwise in this Article. (2) For this purpose, the merging companies referred to in paragraph (1) of this Article shall be considered to be companies to be acquired by merger, the new company shall be considered to be the acquiring company and the cont ract of merger by formation of a new company shall be considered to be the contract of m erger by acquisition. (3) A merger by formation of a new company may not be c arried out without decision of the shareholders’ assembly of the companies to be a cquired, and a merger by formation of a new company may not be carried out under the provis ions for simplified acquisition. (4) The contract for merger by formation of a new compa ny shall serve as the Articles of Association of the new company. (5) The contract for merger by formation of a new compa ny shall include, as parties to the contract, the merged companies, and shall state the ir registered names, registered offices, forms of organization and business purposes, regard less of the fact that they will cease to exist by the merger by formation of a new company a nd that their shareholders shall become shareholders of the new company. (6) Besides the elements envisaged by this Law for cont racts for merger by acquisition, the contract for merger by formation of a new company s hall also include the items required for the Articles of Association of a joint stock co mpany. (7) The contract for merger by formation of a new compa ny, as the Articles of Association of the new company, shall also include provisions o n special rights, founding costs, participation stakes in assets and rights and manne r of bringing those into possession of the new company from the Articles of Association of eac h company to be acquired by formation of a new company. (8) The provisions of this Law on founding of a joint s tock company shall apply mutatis mutandis to founding of the new company, except tha t in case of founding of the new company no permission of the Securities Commission shall be required with respect to exchange of shares of the merged companies with sha res of the new company, unless, at the time of merger by formation of a new company, such shares are publicly offered for sale for the first time. (9) The companies to be merged by formation of a new co mpany shall apply for entry of founding of the new company into the Registry. (10) By entering of the new company into the Registry, t he merged companies shall be deleted from the Registry. Article 409 Merger of Limited Liability Companies by Formation of a New Company The provisions of this Law on merger by acquisition of limited liability companies, and the provisions of this Law on merger by formation of a new company shall apply mutatis mutandis to merger of limited liability companies b y formation of a new company. Article 410 Merger by Formation of a New Company with Joint Sto ck Companies and Limited Liability Companies (1) One or more joint stock companies and one or more l imited liability companies may merge by formation of a new company. (2) The provisions of this Law on merger by acquisition between joint stock companies and limited liability companies shall apply mutatis mutandis to merger by formation of a new company referred to in paragraph (1) of this Ar ticle. (3) For the purpose of paragraph (2) of this Article, m erged companies shall be considered to be companies that cease to exist by acquisition, the new company shall be considered to be the acquiring company and the contract of merger by formation of a new company shall be deemed to be the plan of merger by acquisition, unless provided otherwise in this Article. (4) If the new company is a limited liability company, the provisions of this Law on merger by acquisition of joint stock companies shal l apply mutatis mutandis to participation of the joint stock company in the merger by formati on of a new company. If the new company is a joint stock company, the provisions of this Law on merger by acquisition of limited liability companies shall apply mutatis mut andis to participation of the limited liability company in the merger by formation of a n ew company. (5) Merger by formation of a new company may not be car ried out without decision of the shareholders’ assembly of the companies that are to cease to exist in the merger, and mat nnot be carried out under the provisions for simpli fied acquisition. (6) The contract for merger by formation of a new compa ny shall serve as the Articles of Association of the new company. (7) The contract for merger by formation of a new compa ny shall include, as founders of the new company, the companies that have ceased to exist in the merger, including their registered names, registered offices, forms of orga nization and business purposes, although they cease to exist in the merger by formation of a new company and their shareholders will become shareholders or members of the new company. (8) Besides the elements of the contract for merger by acquisition envisaged by this Law, the contract for merger by formation of a new compa ny shall also include elements envisaged by the Articles of Association of a joint stock company or a limited liability company. (10) The provisions of this Law on founding of joint sto ck companies apply accordingly to founding of the new joint stock company, except tha t in case of founding of the new joint stock company, no permission of the Securities Comm ission is required with respect to replacement of shares of the merged companies with shares of the new company, unless, at the time of merger by foundation of a new company t hese shares are publicly offered for sale for the first time. (11) Besides the elements envisaged by this Law for plan s of merger by acquisition, the plan of merger by fotmation of a new company of the new limited liability company shall also include elements envisaged for the Articles of Association of a limited liability company. (12) The provisions of this Law on registration and publ ication of mergers by acquisition of joint stock companies and limited liability comp anies shall apply mutatis mutandis to registration and publication of mergers by formatio n of a new company of joint stock companies and limited liability companies. Chapter 8 Division by Acquisition of Joint Stock Companies Section 1 Basic Principles Article 411 Applicability of Other Articles The provisions of this Law relating to merger by ac quisition of joint stock companies shall apply mutatis mutandis to a division by acquisition , except as provided otherwise in this Law. Section 2 Draft Contract for Division by Acquisition Article 412 Form and Content of Contract (1) The board of directors of each company participatin g in a division by acquisition shall prepare a draft contract for division in writ ten form. (2) The draft contract referred to in paragraph (1) of this Article shall include: 1) the registered name, form and registered office of each company in the division; 2) the share exchange ratio and the amount of any cash payment; 3) the terms relating to the allocation of shares in t he recipient companies; 4) the date from which the holding of such shares enti tles the holders to participate in profits and any special conditions affecting the en titlement; 5) the date from which the transactions of the company being divided shall be treated for accounting purposes as being those of one or other of the recipient companies; 6) any special rights granted to holders of shares or other securities of recipient companies, and any measures proposed concerning the m; 7) any special rights given to financial advisers or d irectors of any company in the division; 8) the precise description and allocation of the asset s and liabilities to be transferred to each of the recipient companies; and 9) the allocation to the shareholders of the company b eing divided of shares in the recipient companies and the criteria on which such allocation is based. (3) The contract referred to in paragraph (1) of this A rticle shall include all proposed changes to the Articles of Association or by-laws o f the companies in the division. Article 413 Unallocated Assets and Liabilities (1) Where an asset is not allocated by the contract of division and where interpretation of the contract does not make a decision on its alloca tion possible, the asset or the consideration therefor shall be allocated to all of the recipient companies in proportion to the share of the net assets allocated to each of th ose companies under the contract of division. (2) Where a liability is not allocated by the contr act of division and where interpretation of the contract does not make a decision on its alloca tion possible, each of the recipient companies shall be jointly and severally liable for it. Section 3 Decision Making Article 414 Decision (1) The contract for division shall be adopted by the s hareholders’ assembly of each company participating in the division by a qualifie d majority as defined in paragraph (2) of Article 293 of this Law. (2) If a company participating in the division has more than one type or class of shares, the contract for division shall be adopted by share holders of each class of shares whose rights will be affected by the division at a voting session held for holders of that particular class of shares, in accordance with paragraph (1) o f this Article. (3) The signatures on the contract for division of auth orized representatives of each participating company shall be certified. (4) The contract for division shall be filed with the m inutes of the assembly meeting of each company at which the contract was adopted. Article 415 Division Without Decision of a Recipient Company’s Assembly (1) A division may be carried out based solely on a decision of the board of directors of a recipient company, without action by the recipient company’s shareholders’ assembly, provided that: 1) the contract is announced pursuant to Article 388 o f this Law at least one month prior to the date of the shareholders’ assembly of the divid ing company at which the decision on division is to be made; 2) the shareholders of each recipient company are able to examine all of the documents referred to in Article 401 of this Law; and 3) one or more shareholders of a recipient company whose participation in the capital of the company is at least 5% have not requested, within 3 0 days after the date of the assembly of the dividing company at which the contract was appr oved, that a shareholders’ assembly be held to decide on the division. (2) All the conditions referred to in paragraph (1) of this Article must be fulfilled. Section 4 Implementation Article 416 Share Exchange The provisions of subparagraph 6) of paragraph (1) of Article 400 of this Law, relating to share exchange and withdrawal and cancellation of s hares in a merger by acquisition, shall apply mutatis mutandis to the share exchange in the division. Section 5 Protection of Creditors Article 417 Joint and Several Liability All of the recipient companies in a division shall be jointly and severally liable for all of the obligations and liabilities of the dividing company following the registration and effectiveness of the division, except as may be oth erwise agreed by any particular creditor. Section 6 Completion of Division Article 418 Application for Registration (1) Each company in a division shall apply for regi stration of the division in the Registry in accordance with the law which regulates registratio n of business entities. (2) If a decision on a division is contested, the Regis try shall not terminate the registration procedure for the division if it finds that there is a need for urgent decision- making and that other preconditions to register the division have been accomplished. (3) In deciding whether a registration is urgent, the R egistry shall take into consideration the safeguarding of rights in the contest proceedin gs, the probability of the complaining party’s success, and the damage to the companies wh ich would arise from the postponement of the division. Article 419 Registration and Publication The registration of a division and its publication shall be in accordance with the law which regulates registration of business entities. Article 420 Effect of Division Upon registration of a division: 1) the assets of the dividing company including outsta nding claims and other rights, and the liabilities of he dividing company including li abilities to third parties, are transferred to the recipient companies, divided in accordance with the allocation laid down in the contract for division; 2) the shareholders of dividing company are shareholde rs of one or more of the recipient companies in accordance with the allocation laid do wn in the contract for division; 3) persons employed by the divided company shall conti nue to work in a recipient company in accordance with employment regulatinos a nd the contract for division; and; and 4) the dividing company ceases to exist. Chapter 9 Division by Formation of a New Joint Stock Company Article 421 General Provisions (1) The provisions of this Law relating to division by acquisition, forming an appropriate form of company and merger by formation of a new co mpany shall apply mutatis mutandis to division by formation of new companies and to a division in which both an already-existing company and a newly-founded compan y are recipient companies. (2) The contract for division by formation of a new com pany and the Articles of Association of each new company shall be approved a t a shareholders’ assembly of the dividing company. (3) The contract for division by formation of a new com pany shall include, as parties to the contract, the dividing and recipient companies with the dividing company being the founder of the new company, and shall state the com panies’ registered names, registered offices, forms of organization and business purpose s, and shall state that shareholders of the dividing company will become shareholders of the ne w company. Chapter 10 Separation by Acquisition and Separation by Formati on of a New Joint Stock Company Article 422 Application of Other Articles (1) The provisions of this Law relating to division by acquisition and division by formation of a new company shall apply mutatis muta ndis to separation by acquisition of joint stock companies, and the provisions of this L aw relating to division by formation cof a new company shall apply mutatis mutandis to separat ion separation by formation of new joint stock companies, unless provided otherwise in this Law. (2) The contract for separation shall state the method for decrease of basic capital of the dividing company and its shares resulting from the separation. (3) The final balance sheet of the divided company and the initial balance sheet of each new recipient company, as well as the initial balan ce sheet of the divided company showing its assets and liabilities after the separation, mu st be included in the contract for separation. (4) The time period between the dates of the balance sh eets specified in paragraph (3) of this Article and the date on which an application f or registration of the separation is made shall not exceed eight months. (5) The Articles of Association of the divided joint st ock company shall be amended in accordance with the provisions of this Law relating to amendments to Articles of Association of a company. (6) Separation by formation or separation by acquis ition of a joint stock company shall be entered into the Registry only after the decrease o f basic capital of the divided company has been registered. Chapter 11 Division and Separation of a Limited Liability Comp any Article 423 Application of Other Articles The provisions of this Law relating to division of a joint stock company shall apply mutatis mutandis to division and separation of a limited li ability company. Chapter 12 Division of a Joint Stock Company and Separation of Part of a Joint Stock Company and Limited Liability Company Article 424 Combined Division and Separation (1) Division of a joint stock company and separation of part of a joint stock company into two or more limited liability companies, or into a combination of those two legal forms, as well as division and separation of part of a limite d liability company into two or more joint stock companies or into a combination of both of th ose forms, are permitted in accordance with this Law. (2) The provisions of this Law on division and separati on of joint stock companies and limited liability companies shall apply mutatis mut andis to a transaction referred to in paragraph (1) of this Article. Chapter 13 Status Changes of General and Limited Partnership Article 425 Merger, Division and Separation Involving General a nd Limited Partnership (1) A general or a limited partnership may merge with a limited liability company or a limited liability company. (2) The merger of a general or limited partnership with a limited liability company or a joint stock company shall be subject, mutatis mutan dis, to the provisions of this Law on merger of limited liability companies, unless provi ded otherwise in this Law. (3) A merger of a joint stock company, whether it is an acquired or an acquiring company, and a general or limited partnership shall be subje ct to the provisions of this Law on mergers of joint stock companies, unless provided o therwise in this Law. (4) If an open joint stock company merges through acqui sition or through formation of a new company with a general or limited partnership, the joint stock company shall meet any requirements with respect to going private containe d in this Law or the law which regulates securities markets. (5) A decision to carry out a merger involving a genera l or a limited partnership shall be adopted by all company parties to the merger and mu st also be consented to by all persons who upon the merger shall have unlimited liability to third parties for obligations of the surviving company in the merger. (6) A division or separation involving a general or lim ited partnership, limited liability company, or joint-stock company which results in on e or more general or limited partnerships being a surviving entity shall be subj ect to the provisions of paragraphs (1)-(6) of this Article and the provisions of this Law rela ting to status change by division or separation of limited liability companies and joint stock companies. Title 2 Change of Legal Form Chapter 1 Basic Principles Article 426 Definition The change of a company’s legal form is the convers ion of the company from one form of company into another form of company in in accordan ce with this Law. Article 427 Change of Legal Form in the Process of Liquidation (1) A business company may carry out a conversion while it is in liquidation so long as it has not begun distributing to its partners, members or shareholders its assets remaining after satisfaction of creditors. (2) In making a decision to convert referred to in para graph (1) of this Article, a company is obligated to suspend or terminate the liquidatio n procedure and register and publish its decision. Article 428 Registration and Publication (1) A company’s change of legal form shall be registere d and published in accordance with the law regulating registration of business entitie s. (2) Upon a change of legal form a business company shal l continue its operations as a company with another legal form. Article 429 Applicability of Other Articles and Exemption from Court Annulment (1) Upon conversion of a company the provisions of this Law relating to formation of a company in the new form shall apply mutatis mutandi s, unless provided otherwise in this Law. (2) A company’s decision to change legal form articles of conversion may not be nullified on the grounds of disproportionate share exchange r atio or contribution under this Law. Chapter 2 Types of Changes of Legal Form Section 1 Article 430 Conversion of Joint Stock Company into Limited Liab ility Company (1) A joint stock company may be converted into a limited liability company in the following manner: 1) The board of directors of the joint stock company s hall adopt a resolution proposing a conversion, meeting the requirements of this Law. T he decision to convert shall be made by the shareholders’ assembly. 2) The company shall give notice of such assembly to a ll shareholders in accordance with Article 281 of this Law at least 30 days before the convening of the assembly. (2) A notice referred to in paragraph (1) of this Artic le shall state that the reason for convening the assembly and the location where the s hareholders will have access to the following documents: 1) a draft of the decision on conversion together with a report of the board of directors explaining the terms and conditions and the legal a nd the economic basis for conversion and a description of any problems encountered durin g the assessment regarding the conversion; 2) any recommendations by the board of directors regar ding the decision on conversion and the reasons for such recommendations; and 3) information on the right of the shareholders to dis sent from the decision on conversion and their right to require valuation and payment fo r their shares in accordance with this Law. (3) The decision on conversion shall be put to a vote a t the shareholders’ assembly. The decision shall be considered approved and adopted i f it receives the affirmative vote of a qualified majority as defined in paragraph (3) of A rticle 293 of this Law. (4) If the company has more than one class of shares, t he decision on conversion shall be adopted by a qualified majority of shareholders as referred to in paragraph (3) of this Article of each class whose rights are decreased by the conversion voting as a group. (5) Approval and adoption by such shareholders must als o include adoption of changes of the Articles of Association in accordance with para graphs (3) and (4) of this Article. Article 431 Contents of the Decision on Conversion A decision on conversion shall particularly contain the following: 1) the company name and registered office of a joint s tock company to be converted and of the limited liability company into which the joi nt stock company will be converted; 2) the conditions of the conversion; 3) the manner and the terms of converting the shares o f the joint stock company into shares of the limited liability company or into cash or ot her property; and the method by which such shares or other forms of payment are paid to t he shareholders of the joint stock company; and 4) other details and information in accordance with la w, the Articles of Association, by- laws or company agreement. Article 432 Registration and Publication (1) Following the completion of the conversion in accor dance with Article 430 of this Law, the limited liability company shall submit an application to the Registry in accordance with the law which regulates registration of busine ss entities for the purpose of registration and publication of the conversion. (2) Once the requirements of paragraph (1) of this Arti cle are met, the Registry shall immediately register the decision on of conversion and the Articles of Association of the limited liability company in the Registry. Article 433 Legal Effect of Conversion When the registration is effective the following le gal consequences come into effect: 1) the companies participating in the shall be a singl e company, being the limited liability company identified in the conversion decision, and the joint stock company shall cease to exist as a legal entity; 2) the limited liability company shall have all assets and be liable for all obligations of the joint stock company; 3) all court and other proceedings and all claims agai nst the joint stock company shall continue against the limited liability company, whi ch, in every case, shall be the legal successor of the joint stock company; and 4) the shares of the joint stock company shall be conv erted into shares of the limited liability company, options, money or other assets i n accordance with Article 431 of this Law; and 5) the holders of convertible bonds, securities with p urchase rights, other securities other than shares, shall be entitled to at least the same rights after the change of legal form, unless provided otherwise in the decision on issuance of s uch securities or if otherwise agreed with their owners in accordance with paragraph (10) of Article 210 of this Law. Section 2 Conversion of a Joint Stock Company into General or Limited Partnership Article 434 Requirements (1) A joint stock company may change legal form into a partnership or limited partnership by a unanimous decision of all sharehol ders who will be general partners in the partnership. (2) The decision of the joint stock company on change o f legal form of that company shall state which shareholders shall be general par tners and which shall be limited partners. Article 435 Effect of Registration and Publication When the registration of the conversion of a joint stock company into a general partnership is effective, the following legal consequences come into effect: 1) the joint stock company continues as a partnership or limited partnership and thereby ceases to exist as a joint stock company; 2) a partnership or limited partnership is the legal s uccessor to the joint stock company; 3) all powers of the joint stock company bodies are te rminated; and 4) other legal consequences shall be in accordance wit h the nature of the general partnership or limited partnership formed by change of legal form of the joint stock company. Section 3 Conversion of Limited Liability Company into Joint Stock Company Article 436 Decision on Conversion of Limited Liability Company into Joint Stock Company (1) The provisions of this Law pertaining to the conversion of a joint stock company into a limited liability company shall apply mutatis mutan dis to the conversion of a limited liability company into a joint stock company, unles s provided otherwise by the provisions of this Law relating to limited liability companies . (2) The provisions of this Law relating to minimum basic capital of a joint stock company and nominal value of shares of a joint stock compan y shall apply after the conversion of a limited liability company to a joint stock company. Article 437 Appointment of the Bodies and Registration (1) The appointment of the members of the board of dire ctors of the joint stock company shall be reported together with the resolution on c onversion of the limited liability company into a joint stock company. (2) Registration of the conversion of a limited liabili ty company into a joint stock company shall be published in accordance with the l aw which regulates regsistration of business entities. Article 438 Conversion of Shares (1) Upon registration of the conversion, the limited li ability company shall continue operating as a joint stock company. Shares of the l imited liability company shall be converted into shares of the joint stock company. R ights of third parties relating to a share of the limited liability company will be converted to rights relating to shares of the joint stock company. (2) The shares of a limited liability company shall be converted into shares of the joint stock company by deletion from the book of shares a nd recording in the Central Registry of Securities. (3) Conversion of shares of the limited liability compa ny into shares of the joint stock company shall not require approval by the Securitie s Commission. Article 439 Conversion of Limited Liability Company into Genera l or Limited Partnership Conversion of a limited liability company into a general or limited partnership shall be subject to the provisions of this Law relating to c onversion of a joint stock company into a general or limited partnership. Section 4 Conversion of General or Limited Partnership into J oint Stock Company or Limited Liability Company Article 440 Requirements (1) A general or limited partnership may be converted i nto a joint stock company or a limited liability company by unanimous decision of all partners in the case of a general partnership and all limited partners in the case of a limited partnership. (2) General partners of the general or limited partners hip shall remain jointly and severally liable as before for the converted entitys debts un til registration and publication of the conversion in accordance with this Law. (3) Conversion of a general or limited partnership into a joint stock company or a limited liability company shall be subject to the provision s of this Law relating to conversion such types of companies. Article 441 Conversion of General Partnership into Limited Part nership and Vice Versa (1) Conversion of a general partnership into a limited partnership or vice versa shall be deemed effective if approved by all partners and pr ovided that general requirements for this conversion pursuant to this Act have been met. (2) The effect of conversion of a general partnership i nto a limited partnership and vice versa shall be subject to the provisions of this La w relating to conversion of such types of companies. PART SEVEN ACQUISITION AND DISPOSAL OF MAJOR ASSETS Article 442 Definition (1) As used in this Law, “acquistion and disposal o f major assets” of a company means any transaction or related series of transactions which results in an acquisition or disposal of assets of the company the market value of which, at the time the company decided to complete the transaction, amounted to at least 30% of the book value of the company’s assets as shown in the last annual balance sheet. (2) As used in this Law, »acquisition and disposal« mea ns the acquistion or disposal by any means, including but not limited to sale, lease , exchange, pledge or mortgage. (3) As used in paragraphs (1) and (2) of this Article, “assets” includes any property of the company which has monetary value including but not limited to real estate, movables, property or other rights including intellectual pro perty or contract rights, shares or other interests in another company, or money. Article 443 Procedure for Approval of Acquisition and Disposal of Major Assets of a Joint Stock Company (1) Any acquisition or disposal of major assets by a jo int stock company shall be conducted in the following manner: 1) the board of directors of the joint stock company s hall adopt a decision recommending the transaction; and 2) the company shall send notice of such assembly to a ll shareholders in accordance with Article 281 of this Law. Such notice shall be sent not less than 30 days prior to the day determined for the meeting to be held. (2) The notice for convening the assembly referred to i n subparagraph 2) of Article (1) of this Article shall state that the reason or a reaso n for convening the assembly is to consider the proposed transaction. (3) Such notice also contain the following: 1) a report explaining the terms and conditions of the transaction; 2) the recommendations by the board of directors regar ding the transaction and the reasons for such recommendations; and 3) information of the right of the shareholders to dis sent from the transaction and their right to appraisal and payment for their shares as provided in this Law. (4) The decision on acquisition and disposal of major a ssets shall be put to a vote at the shareholders’ assembly. Only those shareholders who have the right to vote on that matter may vote. The transaction shall be approved by a qu alified majority and, if a particular class of shares is entitled to group voting, the tr ansaction shall be approved if it receives the affirmative vote of a qualified majority of the vot es of the shares of each group entitled to group voting on the plan and at least a qualified m ajority of the total sum of votes of the voting shares for the plan. (5) A copy of agreements for the acquisition and di sposal of major assets shall be filed with the minutes of the assembly referred to in paragrap h (4) of this Article. PART EIGHT SPECIFIC RIGHTS OF SHAREHOLDERS AND MEMBERS TO DISS ENT Article 444 Right of Shareholders to Dissent and Require Paymen t from a Joint Stock Company (1) A shareholder of a joint stock company may require payment from the company in an amount equal to the market value of his shares if h e voted against or otherwise refrained from voting for: 1) an amendment to the Articles of Association of the company that adversely affects his rights in the manner stated in Article 341 of this Law and on which he had a right to vote; 2) a reorganization of the company in a status change on which he had the right to vote; 3) a reorganization of the company in a conversion on which he had the right to vote; 4) an acquisition or disposal of major assets on which he had a right to vote; or 5) any other company action that reduces the sharehold er’s rights and is taken pursuant to a shareholder vote if the company’s Articles of Ass ociation provides that shareholders are entitled to dissent and obtain payment for their sh ares at market price under this Article. (2) A shareholder who is entitled to payment pursuant t o this Article may not challenge the above-mentioned action which creates his rights und er this Article, unless the action is fraudulent, illegal or constitutes a violation of A rticle 32 of this Law. (3) For purposes of paragraph (1) of this Article, mark et value shall be calculated as of the date the decision approving the company action in q uestion was adopted by the shareholders assembly, not taking into consideratio n any expected increase or decrease in value as a result of the action. (4) If the action on the basis of which the rights aros e under paragraph (1) of this Article is subject to voting by the shareholders the written i nvitation for the voting shall contain information that the shareholders have or may have such rights, and the notification shall also include reference to such rights. (5) A shareholder who wishes to exercise rights under t his Article shall send to the company, prior to the voting at the assembly, a wri tten notification of his intention to exercise such rights if the proposed action is unde rtaken. The shareholder who fails to satisfy these requirements within 30 days or votes in favor of the proposed actions shall not be entitled to payment pursuant to this Article. (6) If the decision on the basis of which the rights ar ose pursuant to this Article is approved by the shareholders’ assembly, the shareho lder who submitted written notification of his intention to request payment pursuant to par agraph (5) of this Article shall, within 30 days following the voting, send the company a writt en request for payment for the purchase of the shares that belong to him, stating his name and address, and the number and type of shares for which payment is requested. (7) The company shall, within 30 days following the rec eipt of the request referred to in paragraph (6) of this Article, pay each shareholder satisfying the requirements of this Article an amount that the company believes to be t he market value of his shares. (8) If the shareholder satisfies the requirements refer red to in this Article but believes that the amount paid is lower than the market value of h is shares determined pursuant to this Law or if the company fails to make the payment, he shall be entitled, within 30 days following the date or due date of such payment, to request an appraisal of the share value by the competent court by filing a request to the c ourt within this 30-day period. (9) In his complaint to the competent court the shareho lder must state his estimate of the market value of his shares for purposes of this Art icle, and the company must without delay give notice of the request in accordance with Artic le 281 of this Law to all other shareholders who have properly dissented under this Article. (10) In response to the filed complaint referred to in p aragraph (9) of this Article the court shall have the power to determine the market value and to hire appraisers or other experts to advise on the relation between the prices offered a nd requested and the market value. The court shall also have the power to order the compan y to pay its determined market value and to pay the fees and expenses of the dissenting shareholder or shareholders and the appraisal. (11) A court decision under paragraph (10) of this Artic le shall apply to all properly dissenting shareholders if the value determined by the court is higher than the amount the company offered under paragraph (7) of this Article , and shall be published in accordance with Article 281 of this Law. A r t i c l e 4 4 5 D e t e r m i n i n g M a r k e t V a l u e (1) For purposes of this Law, the term “market valu e” means the average value which is announced or published on the stock exchange or oth er appropriate market, for the period which closely precedes the date that is relevant an d which is not shorter than three nor longer than six months. In a case where shares are not regularly traded or an appropriate market does not exist, the market value shall be de termined through valuation of the capital of the company with the application of appropriate methods of valuation. (2) The market value shall be determined through valuat ion of the capital of the company with application of appropriate methods of valuatio n. (3) The market value of shares and interests shall be d etermined by decision of the board of directors of the company unless, pursuant to the company’s Articles of Association or this Law, the determination is made by the competen t court through the use of an independent appraiser or other person or body. (4) If one or more members of the board of directors of a joint stock company has a personal interest in executing the transaction on t he basis of which market value is paid to a shareholder, the determination shall be performed b y the members of the board of directors not having such interest in accordance with Article 34 of this Law. (5) The persons determining the market value referred t o in paragraphs (1) and (2) of this Article may engage an authorized appraiser to assis t them in the determination and shall engage an independent appraiser in the event that p ayment is required pursuant to Article 444 of this Law. Article 446 Rights of Members of a Limited Liability Company or Partnership to Dissent and Receive Payment from the Company (1) The specific rights of shareholders stated in Artic les 444 and 445 of this Law may be adopted in the Articles of Association, company agr eement or partnership agreement of a limited liability company or a general or limited p artnership or in a contract for reorganizations of companies (merger, division, sep aration and change of legal form). (2) In a case referred to in paragraph (1) of this Arti cle, the provisions of Articles 444 and 445 shall apply mutatis mutandis to the members or partners and to their shares and reimbursement for such shares, or partnership inter ests, except to the extent that the Articles of Association or other agreement provides otherwise. Article 447 Mandatory Sale (1) A person who through takeover acquires at least 95% of the shares of a target company through a public offer in accordance with the law w hich regulates securities markets, shall have the right to purchase the remaining shares whi ch were part of the public offering from the shareholders who did not accept sale through th e public offer (non-accepting shareholders) on the terms of the public offer (man datory purchase). (2) If the acquirer does not acquire the shares as refe rred to in paragraph (1) of this Article, then within 180 days from the last date of the public offer, the acquirer shall lose such right. (3) For the purpose of exercising the right referred to in paragraph (1) of this Article, the acquirer shall send a written request for the manda tory sale to the non-accepting shareholders within 120 days after the last date of the public offer, which request shall state the terms and conditions for the purchase in the pu blic offer. A copy of the request shall be sent to the board of directors of the target compan y. If the acquirer he acts contrary to this paragraph, the acquirer shall lose the right for ma ndatory sale. (4) If in the public offer the acquirer offered selling shareholders a choice between payment in money and payment in other property as c onsideration for their shares, that choice must also be given to the non-accepting shar eholders in writing. (5) If the acquirer referred to in paragraph (1) of thi s Article does not receive an answer within 30 days after the request, the acquirer shal l have the right to pay the money or transfer the other property offered to the non-acce pting shareholders who must then sell their shares for that. (6) Upon receipt of written information as referred to in paragraph (5) of this Article, the acquirer shall be obligated to enter it in the Cent ral Registry of Securities and to submt it for registration in the Registry in accordance with the law which regulates registration of business entities. The amount shall be held on beha lf non-accepting shareholders until paid to them. A r t i c l e 4 4 8 M a n d a t o r y P u r c h a s e (1) Shareholders who acquire 95% of the shares of a com pany (“major shareholder”) shall be obligated to purchase the shares of the remainin g shareholders (minority shareholders) on their demand. (2) A minority shareholder referred to in paragraph (1) of this Article may submit a written request to the major shareholder at the lat est within six months after the date of acquisition of the 95%, informing him about the typ e, class and number of shares offered. (3) A major shareholder as referred to in paragraph (1) of this Article is obligated at the latest within 30 days from the day of receipt of th e written request, send his answer to the minority. (4) A major shareholder as referred to in paragraph (1) of this Article is obligated to purchase shares from the minority shareholder at th e price as of the last shares that were acquired to get to the 95%. (5) The forced purchase shall be registered in acco rdance with the law which regulates registration of business entities and entered into the Central Registry of Securities in accordance with the law which regulates securities markets. Article 449 Court Protection Upon request of a refusing shareholder submitted within 30 days after the date of receipt of written request for the forces sale, the competent court in a con-contentious proceeding shall within 30 days for the date of the request to prohibit the offeror from the public offer to proceed with the purchase or sale under terms di fferent from those stated in the public offer. PART NINE PENALTY PROVISIONS Article 450 Commercial Offences of the Company and Responsible Persons in the Company (1) A company shall be fined for conducting a commercial offense in an amount of 10,000 to 3,000,000 CSD if the company: 1) conducts business in violation of paragraph (2) of Article 5 of this Law; 2) abuses the legal personality of the company in viol ation of paragraph (1) of Article 15 of this Law; 3) uses its abbreviated or modified business name in v iolation of Article 19 of this Law; 4) through a representative concludes an agreement tha t is not within business activities of the company stated in the Articles of Association o f the company as provided in paragraph (4) of Article 25 of this Law; 5) violates the provisions of this Law governing the d uty not to compete with the company (Article 36); 6) violates the provisions of this Law governing the d uty to pay at least half of monetary part of the basic capital of the company (paragraph (1) of Article 112 and paragraph (3) of Article 192); 7) decreases basic capital in violation of this Law (A rticle 113, paragraph (5) of Article 233, Articles 261-274); 8) maintains the value of basic capital in violation o f this Law (Article 113, paragraph (5) of Article 233 and Article 236); 9) does not keep a book of shares and book of decision s as required by this Law (Article 119, paragraphs (3) and (4) of Article 136, Article 151, paragraph (2) of Article 290); 10) gives financial support for acquiring shares of the company in violation of this Law (paragraph (1) of Article 123 and pargraph (1) of A rticle 190); 11) makes payments to its members or shareholders in vi olation of this Law (Articles 133 and 230); 12) does not keep business books as required by this La w (Articles 158 and 314); 13) issues shares in the amount less than the amount pr escribed by this Law (Article 234); 14) does not keep and maintain documents as required by this Law (Articles 174 and 342); 15) during a liquidation procedure undertakes business activities or pays dividends to partners, members or shareholders in violation of t his Law (Article 352); 16) does not make reports about liquidation, final liqu idation balance sheet and proposal on distribution of liquidation assets as required by t his Law (Article 357); 17) does not make written reports about relations betwe en company and its members attached to the report on business operations of th e company (Article 372); 18) violates the provisions of this Law that regulate p rohibition of creating phantom capital (Article 393); 19) acquires or disposes of major assets in violation o f this Law (Article 443); 20) violates the rights of shareholders to dissent and receive payment for shares in violation of this Law (Article 444 and 446); 21) violates the rights of shareholders for compulsory sale of shares in violation of this Law (Article 447); 22) does not comply with the provisions of this Law or does not settle within the prescribed deadline, unless provided otherwise stipulated in t his Law (Article 452). (2) For cunducting the activities referred to in pa ragraph (1) of this Article, the responsible person in the company shall be fined up to the amou nt of 2,000-200,000 CSD. Article 451 Petty Offences of a Company and Responsible Persons (1) A company shall be fined in an amount from 10,000 t o 1,000,000 CSD if: 1) the Articles of Association does not have the conte nts required by this Law (paragraph (5) of Article 7, pargraph (1) of Article 55, parag raph (1) of Article 92, paragraph (1) of Article 106 and pargraph (1) of Article 185); 2) a representative of the company does not respect th e restrictions of the authorization to represent stated in this law (paragraph (1) of Arti cle 25); 3) a contract or any other legal actions are made or t aken in cases where there is a conflict of interest (Article 34); 4) the company does not keep business secrets (Article 38); 5) the company violates the prohibition of disqualific ation provisions of this Law (Article 45); 6) the company does not select a person to represent i t in violation of this Law (Article 73, 91, 159 and 323); 7) the company amends its Articles of Association in v iolation of this Law (paragraph (3) of Article 55, Articles 93, 173, 338 and 339); 8) the company does not return to shareholders the amo unts they paid in case the foundation was unsuccessful (Article 200); 9) the company does not convene the foundation assembl y as required by this Law (Article 198); 10) the company does not convene the Assembly as requir ed by this Law (Articles 138, 139, 276, 277 and 280). (2) For violations referred to in paragraph (1) of this Article the responsible person in the company will be fined in an amount from 500 to 50,0 00 CSD. PART TEN TRANSITIONAL AND FINAL PROVISIONS Article 452 Existing Companies and Entrepreneurs and Duty to Harmonize with this Law (1) Existing companies and other forms of organization for performing economic activity as well as entrepreneurs shall on the effective dat e of this Law continue to work in the manner and under the conditions under which they we re entered into the Registry. (2) Entities and entrepreneurs referred to in paragraph (1) of this Article shall harmonize their legal form, the bodies, shareholders and memb ers, capital, shares and other securities or interests, business name, memoranda, parts of en terprises with special authorities in legal transactions, as well as their Articles of Associat ion and other founding agreements, with the provisions of this Law within two years after t he effective date of this Law, unless provided otherwise in this Law. (3) A limited liability company or joint stock company referred to in paragraph (1) of this Law shall not, during re-registration, be required to submit evidence of compliance with the requirements of this Law respecting basic capital. (4) Entities and entrepreneurs who fail to comply with the requirements of paragraph (2) of this Article shall cease to operate and shall be terminated upon completion of liquidation proceedings which shall be carried out at the expen se of the person being liquidated and shall be instituted by the Registry ex officio. Article 453 Existing Public Companies (1) Existing public companies shall on the effective da te of this Law continue work in accordance with regulations that were in force up t o the date of the effectiveness of this Law. (2) Harmonizing the organization of public companies wi th the provisions of this Law shall be in accordance with regulations referred to in paragraph (1) of this Law. Article 454 Pending Proceedings If filings or proceedings for establishment or chan ges of founders, shareholders or company members, or for the election of bodies and other ma tters, were commenced prior to the time this Law became effective and are pending at such time, they will be completed pursuant to the regulations in force at t he time they were submitted to the Registry. Article 455 Limitations on Founding of Companies (1) The following may not be founders or partners of a partnership or general partners of a limited partnership: 1) socially-owned companies; 2) companies with majority state or socially-owned cap ital; 3) privatized companies without at least one sharehold er or member who has significant capital participation in accordance with this Law. (2) From the day of effectiveness of this law, founders of the company and partners of the partnership and limited partners of limited partner ship cannot be business companies whose founders are companies nor business companies as re ffered to in subparagraph 3) of paragraph (1) of this Article. Article 456 Termination of Existing Law The Enterprise Law ("The Official Gazette SRJ", Nos . 29/96, 33/96, 29/97, 59/98, 74/99, 9/01 and 36/02), except provisions of Articles 392 - 399 and 400A, 400B, 400V and 421A which shall remain in force until the expiration of deadlines for privatization established by the law that regulates privatization, shall be repl aced by this Law. Article 457 Effectiveness of This Law This Law shall be effective eight days after its pu blication in the "Official Gazette of the Republic of Serbia."